Business Operations, Insurance, and Risk Management
What the exam tests
Business Operations, Insurance, and Risk Management tests business structure, insurance, contracts, employment, safety, and continuity planning. The exam asks whether the business is legally organized, adequately insured, and prepared for ordinary risks.
Core rules
- Choose an entity (sole proprietorship, LLC, corporation) and keep licenses, contracts, and bank accounts in the correct name. An entity may limit personal liability, but it does not excuse licensed conduct or personal negligence.
- Insurance review: general liability for premises and operations; professional liability or errors and omissions for auction services; property and inland marine for goods in custody; commercial auto; workers' compensation for employees; cyber coverage for data and online sales.
- Use written consignment or seller contracts and buyer terms. Clarify employment status; treat workers as employees or independent contractors based on control, not labels.
- Risk management: crowd control, cash handling, lot security, loading safety, weather plans, and online data protection. Keep records and a business-continuity plan.
Worked example
An auction company has general liability but no errors and omissions coverage. A seller sues after the company misstates a reserve term in the catalog, causing a canceled sale. General liability may not cover professional services; E&O is the likely policy. A slip-and-fall at the gallery would instead implicate general liability. The company should also review whether the contract limits liability and whether the entity is properly named.
Traps
Do not assume an LLC license covers an individual's unlicensed conduct. Do not label a regular worker an independent contractor without analysis. Do not rely on one policy for every exposure. Do not ignore cyber risk just because the auction is 'local.'