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CFO Fundamentals: Your Quick Guide to Internal Controls, Financial Reporting, IFRS, Web 2.0, Cloud Computing, and More by ALLISON I. SHIM, JOEL G. SIEGEL, JAE K. SHIM

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CHAPTER THIRTY-TWO

Insurance and Legal Considerations

THE CFO SHOULD be familiar with insurance and law. Insurance coverage protects against fire and theft losses, product liability, and contract repudiation. Federal and state laws deal with the relationship between the employer and employee.

INSURANCE PROTECTION

In a large company, a risk manager position should exist to handle insurance issues. The risk manager should report directly to the CFO. In a smaller company, the CFO may be responsible for insurance matters him- or herself.

Insurance protection minimizes the risk of loss. Insurance may be mandated by law, such as workers’ compensation. Insurance coverage may be required by contract, such as fire insurance in order to adhere to the provisions of a loan agreement. The CFO must understand insurance requirements and procedures, and must monitor and control insurance costs while maintaining sufficient insurance coverage. The CFO has to consider the limits for risk assumption or retention, self-insurance, and uninsurable risks. Furthermore, suitable documentation of insurance procedures is needed.

What are your duties in the insurance area?

The CFO has many responsibilities in insurance protection, including:

  • Identifying and appraising risks
  • Monitoring changes in the corporate environment as it affects insurance
  • Estimating the probability of loss
  • Maintaining insurance records
  • Keeping abreast of new developments in insurance
  • Ensuring compliance with federal and local regulatory ...

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