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  • 1. 1. When should be a risk be avoided?
A) When the risk event is has a very low probability of occurrence and high impact
B) When the risk event is has a very high probability of occurrence and high impact
C) Risks can never be avoided
D) When you can buy insurance policy
  • 2. An earthquake is an example of a (an)
A) Moral hazard
B) Physical hazard
C) Peril
D) Objective risk
  • 3. A name that encompasses all of the
    major risks faced by a business firm is:
A) Pure risk
B) Speculative risk
C) Financial risk
D) Enterprise risk
  • 4. The use of fire-resistive materials when
    constructing a building is an example of
A) Risk control
B) Risk transfer
C) Risk avoidance
D) Risk retention
  • 5. Characteristic of a fortuitous loss
    includes: I. The loss is certain to occur; II. The loss occurs as a result of chance
A) Both I and II
B) Neither I nor II
C) II only
D) I only
  • 6. Refers to the level of risk that the
    company is willing to accept given the
    risks and exposures in the industry.
A) Diversifiable risk
B) Risk exposure
C) Moral risk
D) Risk Appetite
  • 7. Which of the following will minimize
    business risks?
A) Product development
B) Premium pricing
C) Listing
D) Diversification
  • 8. A risk manager is concerned with which
    of the following? I. Identifying potential
    losses; II. Selecting appropriate
    techniques for treating loss exposures
A) II only
B) Neither I and II
C) I only
D) Both I and II
  • 9. Sources of information that can be used
    by a Risk Manager to identify pure loss
    exposures include all of the following
    EXCEPT:
A) Past losses
B) Currency exchange rate
C) Physical inspections
D) Risk analysis questionnaires
  • 10. Risk transfer means:
A) Shifting of loss consequences to self-insurance program
B) Shifting of loss consequences to third party
C) Shifting of loss consequences to well-diversified portfolio
D) Shifting of loss consequences to wealthy group of people
  • 11. Diversifiable risk is defined as:
A) None of the above
B) All of the above
C) Risk at least with one possible
D) Risk with two possible outcomes
  • 12. f the chance of loss is high and loss
    severity is high, generally the most
    appropriate risk management tool is:
A) Risk Transfer
B) Risk Diversification
C) Risk Transfer
D) Risk Avoidance
  • 13. f a Risk Manager installs an automatic
    sprinkler system to prevent serious fire
    damage, this action can be considered
    “risk control” as defined in the text?
A) Either True or False
B) Neither True or False
C) False
D) True
  • 14. The most difficult and important step in
    the risk management process generally
    is:
A) Evaluating the risks
B) Reviewing the risks
C) Identifying the risks
D) Selecting the best method to handle the risks
  • 15. . All of the following are risk
    management objectives prior to the
    occurrence of loss EXCEPT:
A) Meeting internally imposed obligations
B) Reduction of anxiety
C) Continuing operations after a loss
D) Analysis of the cost of different techniques for handling losses
  • 16. All of the following statements about
    avoidance are true EXCEPT
A) The chance of loss for certain loss exposures may be reduced to zero
B) It can be used for any loss exposure facing a firm
  • 17. The US Government is concerned that
    terrorists might try to crash a vehicle
    loaded with explosives into a US
    Embassy based in other countries.
    Inside the gate of the embassy, they
    installed steel and cement posts in the
    road. These posts can be raised up from
    the ground to form a barrier against
    suicide bombers. The posts can be
    lowered back into the ground to allow
    safe vehicles to pass. The physical
    barrier system illustrates which risk
    management technique?
A) Risk avoidance
B) Risk transfer
C) Risk retention
D) Risk prevention
  • 18. Abandoning an existing loss exposures
    is an example of:
A) Risk avoidance
B) Risk transfer
C) Risk retention
D) Risk retention
  • 19. All of the following are the possible
    sources of risks EXCEPT
A) Technology issues
B) Strategic management errors
C) Planning
D) Legal liabilities
  • 20. This refers to gathering relevant data
    and information such as historical
    records, incident reports, and statistics
    for the risk.
A) Data Analysis
B) Data Collection
C) Data Forecasting
D) Data Banking
  • 21. When Tom Cruise became risk manager
    of Kuripot Lending Company, he noticed
    that the company did not have a clear
    set of risk management objectives and a
    clearly-stated risk management
    philosophy. Tom Cruise developed a
    written document stating the
    company's risk management objectives
    and risk management philosophy. This
    document is called as:
A) Risk Management Binder
B) Risk Management Manual
C) Risk Management Policy Statement
D) Risk Management Manuscript Policy
  • 22. Which of the following statement is
    True?
A) Liability Risks are risks associated in with building calamities
B) Theft is a diversifiable risks
C) Most individuals in highly industrialized countries carry no insurance
D) The Law of Large Numbers is used in Risk Pooling
  • 23. Selecting the best method to handle the
    risks
A) Operational risks
B) Assumption risks
C) Strategic risks
D) Financial risks
  • 24. The worst loss that could ever happen
    to a firm is referred to as the:
A) Frequency of loss
B) Maximum possible losses
C) Severity of losses
D) Probable maximum losses
  • 25. All of the following statements about
    the administration of risk management
    program are true EXCEPT:
A) If a risk management program is properly designed, periodic review of the program is unnecessary
B) A risk management policy statement can be used to educate top executives about the risk management process
C) In order to properly identify the loss exposures, the risk manager needs the cooperation of the departments
D) The risk manager is an important part of a firm's management team
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