1. Sports Gear Manufacture decided five years ago to pay for its products liability losses out...

1. Sports Gear Manufacture decided five years ago to pay for its products liability losses out of its earnings. Products liability losses are now significantly diminishing earnings. How may Sports Gear’s risk manager more economically fund the following types of losses? (a) Existing losses (b) Future losses.

Expert Solution

Liability losses pose a major problem for product companies as these have enormous effect on the company profits and margins. Liability losses generally arise of product failures and non-compliance to specifications which increase cost of replacement, repair, returns management etc., This happens majorly due to improper quality control, transportation and packaging problems, poor workmanship etc., As a risk manager following strategies can be designed to protect the company from losses.

a)Existing losses are generally for the products already shipped and returned or are process of getting returned. Therfore there is limited control the company has on the product quality. As a risk manager, we should focus on following to reduce the impact of existing lossse.

i. Improving the customer experience by continuously coordinating for returns and customer feedback on quality issues or problems.

ii. Designing an innovative maintainance and warranty extension programs to generate operational revenue to cover for the cost of returns.

iii. On-site repair of products wherever possible to avoid cost of returns and transportation.

b) Future Losses: Following aspects are to be implemented to reduce th risk of future losses.

i. Comprehensive quality audit and quality assurance programs to be implemented across the comapny.

ii. Reducing returns by implementing structured approach for inspections before despatch.

iii. Increasing customer satisfaction by engaging with customers and taking feedback on areas of improvement.

iv. Ensuring quality control for the vendors and suppliers for the company.

v. Designing innovative maintainance and warranty extension programs to generate revenue to cover possible defects.

vi. Protecting the business by taking proper insurance cover against the claims that may arise out of business uncertainities.

keosha answered 6 months ago

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