Employee Insurance- Health, Dental And Key Persons Life Insurance Assessment Answer

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Question :

Research/group project questions 

  • What type of risks does your chosen firm face?  
  • Based on your analysis and findings of the company, what kind of insurance(s) would you recommend to mitigate the identified risks? Why? Please justify your recommendations by providing a high-quality argument. Nonye, given to work on Employee insurance. It is in greater details if you scroll down in 2.2 recommendations

   Nonye: Employee insurance (health & dental, EI/CCPP, workers   comp, Key person’s life insurance)

    Robin: Causality 

   Tyler: creditor 

    Brett: property & equipment

  • What factors can cause a firm to be underinsured or uninsured? For example, a firm may not purchase enough professional liability insurance to cover losses from litigation(s) because of the reduced cash inflow.      

Guideline to complete a group project

consider the following guideline/questions/information:

1. Introduction (three to five pages)

In the introduction section, please start with the company description (For example, Canadian Tire Corporation Limited provides a range of retail goods and services in Canada) consider the followings information:

● What is the nature and scope of the firm? That is, how large the firm is? 

  • What are the annual revenue, operating expenses, and profitability?
  • What is the number of employees? 
  • Who are board members and the CEO and his/her qualifications? 
  • How many members of the board of directors? 
  • What type of assets (e.g., buildings, equipment, inventory, etc.) your chosen firm owns? 
  • Does the company operate domestically or internationally? 
  • What are the new trends that are causing risk for firms? 
  • Discuss the most recent news that can increase the risk for the company (e.g., risk of a lawsuit). 
  • Discuss the quality of the management team since the poor quality of the management team increase corporate risk.
  • Please explore the company website, look at the financial statements, Management’s Discussion and Analysis (MD&A) section, and other necessary information. MD&A section shows a future plan and cash flow forecasting of the firm, which will help you to analyze insurance needs.

Table 1: Company Balance Sheet and Income Statement Items

Company Name (e.g., Canadian Tire): Year 20XX

Balance Sheet Items




Current assets (CA)CashShort-term investmentAccounts receivablesInventoryTotal CA
Dollar amount ($)




Long-term assets (LA)Net property, plant & EquipmentIntangible assetsOther long-term assets
Total LA
Dollar amount ($)




Current liabilities (CL)Accounts payablesShort-term loanDeferred revenueOther CL
Dollar amount ($)




Long-term Liabilities (LL)Long-term DebtDeferred revenueOther long-term liabilities
Total LL
Dollar amount ($)










Income Statement Items




RevenueCost of good soldSelling, general & admin exp.Int. ExpensesNet incomeCash Flow
Dollar amount ($)




Other information: Company Beta; Names of intangible assets (e.g., copyright, patents, etc.) 

● Fundamental ratios that help insurance coverage decision

  • Net profit margin = Net income ÷ Net sales (revenue)
  • Return on assets = Net income ÷ Total assets  
  • Return on equity = Net income ÷ Shareholders’ equity
  • Debt to capital ratio = Total debt ÷ (Shareholders’ equity + Total debt)
  • Debt to equity ratio = Total debt ÷ Shareholders’ equity 
  • Current ratio = Current assets ÷ Current liabilities 
  • Cash Ratio = Cash and cash equivalent ÷ Total current liabilities 
  • Cash flow per share = Total cash flow from operating activities ÷ Number of shares outstanding 

● What types of risks the firm faces or can face? (Read chapter 1 and chapter 2 carefully) 

  • What is the problem? For example, Canadian firms face a variety of risks and may end up losing entire capital in the domestic as well as in the international markets without insurance.

● What is the purpose of the paper? 

  • What is your answer to the question? You can answer these two questions in one sentence. For example, the purpose of this study is to examine the types of risks the Canadian firm faces and recommend a variety of insurances to mitigate risks. 

Note: Please note that the above is just a guideline. Please feel free to come up with and use your ideas to answer the questions. Notes to financial statements (i.e., balance sheet, income statement, and statement of cash flows) provide additional information related to assets, liabilities, income, and cash flows and can help you to answer the questions.   

2. Analysis, findings, and recommendations (eight to ten pages)

2.1 Analysis and findings

Analysis and findings should include the types of risk your chosen firm faces. You may use table(s) to show types of risks. For example, your chosen firm may face the following risks:

Table 2: Types of risks

o Property risk (e.g., risk related buildings such as fire, theft, water damages, etc.)  
o Personal risk (e.g., poor health, liability risk, etc.)  
o Risk to reputation
o Operational risk [e.g., workplace safety, damage to the physical asset (equipment, automobile) and loss of production/service]  
o Financial risk (e.g., exchange rate, credit risk, etc.)  
o Legal hazards (e.g., risk of lawsuits)
o Moral hazards (e.g., risk of lawsuits)
o Casualty risk (e.g., risk related to product/service, errors, and omissions, directors and officers, employees, malpractice, etc.)  
o Marine risk (e.g., risk related to transporting goods, etc.)  
o Economic risk (e.g., Demand for product/service, competition, etc.)
o Political risk (e.g., bureaucracy, government stability) 


2.2 Recommendations (Please read chapters one to eight very carefully) 

Based on your analysis of the chosen firm, what type of insurances (e.g., automobile insurance, homeowners’ insurance, commercial insurance, employee health care insurance such as medical coverage and dental coverage, workers' compensation insurance, corporate income protection insurance, executive and employee life insurance, etc.) would you recommend? Why? Please justify your thoughts by providing a high-quality argument.

You can also use table(s) to provide recommendations to mitigate risks. For example, your chosen firm may require the following insurances:

Table 3: Types of coverages needed for the firm

o Property insurance  o Group life insurance o Group disability insurance for Employees/MGMNTo Critical illness insurance
o Equipment insuranceo Casualty insuranceo Private health insurance (group plans) for Emp./MGMNT o Creditor insurance (p. 431)
o Marine insuranceo Workers’ compensationo Dental & medical insurance for Employees/MGMNTo Key persons’ life insurance (e.g., CEO)


3. Conclusion (one to two pages) 

A reasonable conclusion is a simple matter. Please sum up how you proved your thesis (argument) to be correct.

A variety of factors can cause a firm to be underinsured or uninsured certain types of risks. Please include these factors in the conclusion. For example, a firm may not mitigate exchange rate risk because of the reduced cash inflow.       

Citations and References: Please use APA style to provide citations and references (https://owl.english.purdue.edu/owl/resource/560/01/).

Citation example: Insurance companies use inductive reasoning (logical process) to conclude objective risk (Clark, 2018).

Reference example: Clark, C. (2018). Risk Management and Insurance in Canada, 2nd Edition. Captus press Inc., Ontario, Canada.

Note: Please note that the above is just a guideline. Please apply information from all the chapters (except chapter 9) to the group project. Please feel free to use your ideas and concepts to make an insurance coverage decision. You may also need to conduct some research using websites and library sources to answer the group project questions.  

What my group did so far:

Company description 

RBC is a global financial institution that is one of Canada’s “Big 5” (Source https://www.investopedia.com/terms/b/bigfivebanks.asp) banks. RBC was founded in 1864 as the Merchant’s Bank of Halifax, Nova Scotia, but became RBC in 1901 and now is the largest bank in Canada (http://www.rbc.com/investorrelations/pdf/rbcglance.pdf). With a purpose of “Helping clients thrive and communities prosper” (https://www.rbc.com/our-company/purpose-vision-and-values.html) and a vision “To be among the world’s most trusted and successful financial institutions,” (https://www.rbc.com/our-company/purpose-vision-and-values.html) RBC aims to focus on more than just managing money. In 2019, RBC invested more than $34 million in the RBC Youth Mental Well-Being Project (https://www.rbc.com/community-social-impact/youth/index.html), $4 billion in renewable energy financing (https://www.rbc.com/community-social-impact/environment/index.html), and $5.1 billion in green bond underwriting (https://www.rbc.com/community-social-impact/environment/index.html), all of which helped to strengthen RBC’s great brand value. 

RBC’s significant lines of business include personal and commercial banking, insurance, investment and wealth management, capital markets, and treasury services (http://www.rbc.com/investorrelations/pdf/rbcglance.pdf). They operate in 36 countries around the world (https://www.rbc.com/our-company/index.html), including Canada and the United States, and employ more than 86,000 employees who serve their 16 million clients (https://www.rbc.com/our-company/index.html). 

In 2019, RBC achieved a total revenue of $46,002 (million), which was an 8.0% increase from 2018 (http://www.rbc.com/investorrelations/pdf/ar_2019_e.pdf). Their net income for the year was $12,871 (million), with net cash from/used in operating activities of $14,265 (million). Their profit is made up of interest income, $19,749 (million) in 2019, and non-interest income, $26,253 (million) in 2019. They maintain $1,522.2 billion worth of assets (www.rbc.com/investorrelations/pdf/rbcglance.pdf) which is mainly comprised of loans (retail and wholesale), securities, and derivatives. A detailed list of RBC’s assets for fiscal 2019 can be found in the Appendix. 

The management team of RBC aims to build a brighter future for their company while making the world a better place (https://www.rbc.com/our-company/index.html). The current CEO and President, David McKay, has been leading the RBC management team since 2014, and has been pivotal to RBC’s investment in artificial intelligence and machine-learning (http://www.rbc.com/newsroom/executive-biographies/david-i-mckay.html). He has achieved a Bachelor of Mathematics and an Honorary Doctor of Mathematics degree from the University of Waterloo (http://www.rbc.com/newsroom/executive-biographies/david-i-mckay.html), an Honorary Doctor of Laws degree from the Richard Ivey School of Business at the University of Western Ontario (http://www.rbc.com/newsroom/executive-biographies/david-i-mckay.html), and an honorary degree from the Ryerson University (http://www.rbc.com/newsroom/executive-biographies/david-i-mckay.html). David McKay’s education and experience strongly qualifies him to lead RBC, which produces high quality work. 

RBC’s Board of Directors consists of 14 members (https://www.rbc.com/our-company/governance/index.html#top-page-content-1), one of which is CEO and President David McKay. The Board of Directors is actively engaged with all stakeholders, and requires all members to know the business and its risks. The entire board is comprised of Andrew A. Chisholm, Jacynthe Côté, Toos N. Daruvala, David F. Denison, Alice D. Laberge, Michael H McCain, David McKay, Heather Munroe-Blum, Kathleen Taylor, Maryann Turcke, Bridget A. van Kralingen, Thierry Vandal, Frank Vettese, and Jeffery Yabuki. 

Recent News & Trends Causing Risks for RBC 

The main trends that are causing risks for RBC are economic trends. During the fourth quarter of 2019, GDP growth slowed to 0.3% and the unemployment rate ended the year at 5.6% (http://www.rbc.com/economics/economic-reports/pdf/other-reports/ecotrend.pdf). Additionally, imports decreased drastically for RBC at the end of 2019 (http://www.rbc.com/economics/economic-reports/pdf/other-reports/ecotrend.pdf). However, inflation was stronger than expected at 2.4% at the end of the year (http://www.rbc.com/economics/economic-reports/pdf/other-reports/ecotrend.pdf). 

Unfortunately, in March of this year the markets took a huge hit due to the panic caused by the COVID-19 virus. On Monday March 9th, 2020, the New York Stock Exchange and the Toronto Stock Exchange temporarily paused trading after the plummeting oil prices caused stocks to dangerously drop (https://globalnews.ca/news/6649509/coronavirus-gas-prices-canada/). This drastic effect of the global virus on the stock markets has created uneasy feelings as memories of the 2008 stock market crash are in the fore front of several investor’s minds. 

In addition to volatility and uncertainty caused by the stock markets, RBC has been facing back-lash from customers over the CEO’s earnings in 2019. David McKay, RBC CEO and President, earned $13.7 million in 2019. This large sum is comprised of compensation, $12.8 million, $1.5 million of base salary, short-term incentives totaling $2.6 million, $6.9 million from performance deferred share units, and $1.7 million in personal stock options (https://www.investmentexecutive.com/news/people/rbcs-mckay-earned-13-7-million-in-2019/). His 2019 earnings grew decreased from 2018 by 5.5% but still earned more than the chief executives of Toronto-Dominion Bank and Bank of Nova Scotia. This large amount of earnings for David McKay has upset some of RBC’s shareholders. 

Property risk (e.g., risk related buildings such as fire, theft, water damages, etc.) Property risk is the risk of damage to or loss of one’s auto, home, and personal belongings as a result of perils such as fire, an accident, an earthquake, theft, etc. Property risk can come in two different forms – direct and indirect losses. 

RBC has over 1,200 branches within Canada and due to the abundance of locations around the country, RBC is faced with an enormous amounts of property which faces the probability of a to direct loses to occur. (Canadian Encyclopedia, 2019). Known for its different branches of banking, and most commonly retail banking, RBC relies heavily on brick and mortar locations, and with that comes property risk. As with any physical property, RBC faces threats such as natural disasters, and an elevated risk of theft due to its appealing contents of technology, cash and customer information. While private information does not have a price associated with it, it is important to have insurance to cover theft in the event that technology or cash is stolen. The property risk RBC faces results in direct loses and does not contribute to indirect loses because if one of their many branches faces a problem, they can continue to operate with the remaining locations until the issue is resolved. 

Personal risk (e.g., poor health, liability risk, etc.) 

Personal risk comes from the possibility of perils and the effect they have on each individual person. 

Since RBC is a corporation, the liability begins and ends with the corporation. To start, in the event of a lawsuit, they would go against the corporation rather than the individuals involved. In order to protect the corporation, it is liability insurance would be required. Due to the nature of the business being based in an office setting away from 

harmful substances and unsafe work conditions, takes away from any excess personal risks that RBC may face. Although there is not the risk of stimulating poor working conditions, some personal risks that RBC faces is the 

highly sensitive private customer information. The customers and their finances are what makes RBC and other financial institutions successful. Customers have developed trust in financial institutions to keep their information  safe and out of the hands of the public. In the event of this information being released or stolen many things can happen such as, stolen identities, theft of personal finances and also the repercussion of being sued by the customer who’s information was compromised, which falls under liability risk. Risk to reputation Risk to reputation can cause customers, both businesses and individuals to change suppliers. 

The Canadian banking industry is highly competitive and due to the fierce competition, there is an abundance of risk to reputation. Canada has six major banks which includes RBC and due to the relatively small number of major competitors, reputation plays a huge role in how customers perceive a company and the market share they receive based on reputation. RBC needs to be proactive in resolving any issues that can cause a negative reputation within the market as it can have a huge impact on the future success of the firm. It is recommended that the management of RBC put in place operational guidelines, quality control techniques and management 

programs that are designed to reduce the chance of negative events happening. 

Operational risk [e.g., workplace safety, damage to the physical asset (equipment, automobile) and loss of production/service] 

Operational risks can cause a loss of revenue, or additional unnecessary costs based on a number of things. 

Operation risks account for the majority of risks faced by RBC. The operational risks that RBC faces are fraud, both internally and externally, poor management, technology failures, forecasting errors and also the possibility of inaccurate or insufficient record keeping. In order for RBC to minimize these risks it is beneficial for regular audits in all branches of RBC. Auditing can identify operational risks before they cause irreparable loses, and can help 

develop more efficient, and less risky methods for conducting business. 

Financial risk (e.g., exchange rate, credit risk, etc.) 

The banking industry is the heart of finance and due to RBC being a Canadian leader in banking, it is faced with an abundance of financial risks. The financial risks that RBC faces is arguably the most important to the success of the firm. The financial risks that RBC faces begins with the exchange rate risk. The exchange rate risk arises from the changes in foreign exchange rates and due to RBC being directly connected to the global economy and a variety of different currencies, exchange rate risk is present in every day of operation. The next major financial risk is interest rate risk which arises from the difference between the assets RBC invests in and the cost of the 


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Answer :

Report

Recommendation

Banking sector is full of financial information’s which are personal to consumer as well as firm too due to which it is essential to use distinct plans for protecting employees from silly errors. According to the given scenario, there are various types of risk are incurred at workplace from which casual risk is major one that are encountered by an employee. In which, an individual has done some silly omission by mistake because of health issue due to which consumer and firm both have to face a major problem. Although, as per employee it’s a very minute mistake but for organization and customer it’s a blunder one because it might resultant into wrong transactions. Generally, capital is considered as the backbone for every individual because a fund is used for generating more funds with creative ideas and a banking system is responsible for providing loans or monetary support to other entities. It shows that financial institutions played a very significant role in the success of SMEs and large firms too (Ortiz2015).  

Consequently, some risks are faced by employees while performing complex activities at the Royal Bank of Canada such as; casualty risk. But one of the most common risks which are identified at the workplace related to the casualty is; errors incurred while preparing records and managing confidential data by employees due to illness (McQuillan2013).

The banking sector is full of private data and information which are personal to customers because few individuals are having an unexpected amount in their account that might not like by others. At the same time, legal bodies have also enacted laws related to privacy as banking employees are responsible for preventing customer’s data from fraudulent activities and getting misused. Along with this, it is essential to maintain records and data in a corrective manner so that things don’t get mismatched. But, employees are also human beings and a mistake can happen anytime anywhere as none of the people are GOD or fully “PERFECT” (Iannaccone and Royal Bank of Canada, 2018). Thus, RBC needs to implement some insurance for staff members too so that they can secure their income from various risky situations because according to corporate rules mistake of an employee always recovered by deducting an amount from their salary. It means that there is a major risk on employee salary in the Banking sector because financial institutions are full of delicate information that might get misplaced by a staff accidentally (Calmès and Théoret2010). Therefore, it is indispensable for an employee to use “Income Protection Insurance” for preventing their income from getting deducted just for silly reasons. Moreover, it is essential for staff members to prepare a consent paper that is signed by Board members and a managerial team that “small mistake related to a manual is not considered as blunder error and did not need to deduct salary for this kind of mistakes”. Apart from this, various other rules and regulations also need to apply at a workplace for protecting staff members of the Banking sector because employees of a financial firm are always surrounded by delicate data which are too personal for customers.  Therefore, proper risk compliance program and internal control system would be used to strengthen the overall process work. 

According to “income protection plan” an individual is having an opportunity of taking off from work for at least 6 months because of illness and accidental situation. This coverage is done by three compulsory plans of government and private too. First one is; worker’s compensation plan which is initiated for a very first time in Canada in 1915, second one is employment insurance that plays a major role in providing coverage for short-term unemployment as it’s a kind of sickness advantages and last one is Canada Pension Plan (CPP) which is a type of disability benefits in which disability pension of a person is almost $980.24 average monthly. 

Therefore, it has been understood that usage of Income protection insurance is beneficial for employees in various states as it covers the income of a person via various sources and employee will not feel unemployed if he/she is not having a job. 

CONCLUSION

From the above report, it has been summarized that the Banking sector needs to take measures for preventing employee’s income without giving any excuses because human resource is a most indispensable element for the corporate world. However, every operational activity is accomplished by them only which shows that the success of a business is based on an employee’s potentiality. Therefore, the management team needs to take action for controlling risk which is encountered by employees in a financial institution.