Question

Baby-Proof Corporation provides child safety devices and customized consultation and installation services for parents with young children. Innovative products include synthetic bumpers that attach to furniture with a new, non-toxic adhesive that is promised to remove easily with hot water without damaging furniture; electronic cabinet and door locks that are guaranteed to keep children out of kitchen cabinets and draws, and are unlocked using a signal from an adult’s cell phone; and wireless audio and video monitors promising to provide high definition video and sound of children either on cell phones or computers anywhere in the world. Baby-Proof has tested their products in model homes for one month, and is now going to begin a nationwide sales and marketing campaign. Although the products are much more expensive than traditional child safety devices, the company is so optimistic that they have already manufactured and warehoused a large supply of their products for distribution and sale. Because the owners want to maintain strict control of the company, they borrowed the money necessary to finance the testing, inventory buildup, and marketing campaign.

i. Identify the major risk exposures facing Baby-Proof Corp.

ii. Explain 3 specific procedures or practices that Baby-Proof may use to help reduce its risk exposures. Include how each procedure impacts either risk control or risk financing.

Answer 1