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  • 1. 1. When should be a risk be avoided?
A) When the risk event is has a very high probability of occurrence and high impact
B) When you can buy insurance policy
C) When the risk event is has a very low probability of occurrence and high impact
D) Risks can never be avoided
  • 2. An earthquake is an example of a (an)
A) Objective risk
B) Peril
C) Physical hazard
D) Moral hazard
  • 3. A name that encompasses all of the
    major risks faced by a business firm is:
A) Enterprise risk
B) Speculative risk
C) Financial risk
D) Pure risk
  • 4. The use of fire-resistive materials when
    constructing a building is an example of
A) Risk transfer
B) Risk avoidance
C) Risk control
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) Neither I nor II
B) Both I and 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) Moral risk
C) Risk Appetite
D) Risk exposure
  • 7. Which of the following will minimize
    business risks?
A) Product development
B) Diversification
C) Premium pricing
D) Listing
  • 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) Both I and II
C) I only
D) Neither 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) Risk analysis questionnaires
C) Currency exchange rate
D) Physical inspections
  • 10. Risk transfer means:
A) Shifting of loss consequences to third party
B) Shifting of loss consequences to self-insurance program
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) Risk at least with one possible
B) None of the above
C) Risk with two possible outcomes
D) All of the above
  • 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 Transfer
C) Risk Avoidance
D) Risk Diversification
  • 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) Neither True or False
B) False
C) Either True or False
D) True
  • 14. The most difficult and important step in
    the risk management process generally
    is:
A) Identifying the risks
B) Reviewing the risks
C) Evaluating 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) Analysis of the cost of different techniques for handling losses
B) Continuing operations after a loss
C) Meeting internally imposed obligations
D) Reduction of anxiety
  • 16. All of the following statements about
    avoidance are true EXCEPT
A) It can be used for any loss exposure facing a firm
B) The chance of loss for certain loss exposures may be reduced to zero
  • 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 retention
B) Risk prevention
C) Risk transfer
D) Risk avoidance
  • 18. Abandoning an existing loss exposures
    is an example of:
A) Risk avoidance
B) Risk retention
C) Risk retention
D) Risk transfer
  • 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 Collection
B) Data Banking
C) Data Analysis
D) Data Forecasting
  • 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 Policy Statement
B) Risk Management Manual
C) Risk Management Binder
D) Risk Management Manuscript Policy
  • 22. Which of the following statement is
    True?
A) The Law of Large Numbers is used in Risk Pooling
B) Most individuals in highly industrialized countries carry no insurance
C) Theft is a diversifiable risks
D) Liability Risks are risks associated in with building calamities
  • 23. Selecting the best method to handle the
    risks
A) Operational risks
B) Financial risks
C) Strategic risks
D) Assumption 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) Probable maximum losses
D) Severity of losses
  • 25. All of the following statements about
    the administration of risk management
    program are true EXCEPT:
A) In order to properly identify the loss exposures, the risk manager needs the cooperation of the departments
B) A risk management policy statement can be used to educate top executives about the risk management process
C) The risk manager is an important part of a firm's management team
D) If a risk management program is properly designed, periodic review of the program is unnecessary
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