a. Classify each risk according to its potential loss frequency and loss severity using the Prouty approach, and include a justification for these choices. Explain why you chose to prioritize these risks. 1] Prolonged frigid temperatures cause old piping to burst. Water damages close die restaurant for 1-3 weeks: The severity of the risk is significant, as pipe bursting may cause water damage resulting into mold and expensive repair. Based on severity of water damage, it may take long enough to repair the damages resulting business interruption and lost income. The loss frequency of this risk is slight. Typically, prolonged frigid temperature throughout the year in Nova Scotia is not expected. It would occur in winter but usually the commercial buildings are heated so the piping would not be exposed to frigid temperatures under normal circumstances. This risk must be prioritized, as it would lead to bigger damages, followed by becoming the root cause of various other damages. 'When the restaurant is not able to operate it may lose its regular clients to another restaurant, which will impact the reputation of the business to some extent. It would also face increased business expenses to go through various inspections and approval after the repairs are completed. 2} A patron who gets sick from eating improperly prepared food sues the company: The severity of the risk is significant as the litigation costs including court fees and attorney fees can be costly. If the business has to be suspended due to the incident it will also result into income loss. The loss frequency of this lisk could be moderate because Argot Foods employs about 150 individuals mostly in food preparation and service sector, and seafood could go bad quickly so requires more strict temperature control. Therefore, this risk must be prioritized considering the costly lawsuit expense and liability loss, and inevitable income loss from damaged reputation due to their negligence. 3] A competitor opens a restaurant with a similar menu, atmosphere and pricing: The severity of the risk is significant. Opening of similar restaurant will bring in competition and might change the client preferences to newer location. The shift of consumer preference to the newer restaurant may bring significant losses to the restaurant future revenue. The loss frequency of this risk is slight as of now. Considering the increased minimum wage, increased property tax and increased interest rate for bank loans, it is more difficult to open a new business. This risk should be prioritized as business depends upon revenue and having a competitor may bring long-term revenue losses. Also, the new restaurant may also lure the staff and important chef to shift their jobs with them. This will further bring additional risk until the new staff is hired or trained. 4] The president has yet to create a working budget for the current fiscal year. Unexpected projects arose and have delayed this task: The loss severity of the risk can be signicant or even severe. A working budget must be created in a timely manner so that funds are properly allocated towards the expenses and an emergency contingency plan is place for