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Contributed by: Ann
  • 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 you can buy insurance policy
C) Risks can never be avoided
D) When the risk event is has a very high probability of occurrence and high impact
  • 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) Financial risk
C) Speculative risk
D) Pure risk
  • 4. The use of fire-resistive materials when
    constructing a building is an example of
A) Risk retention
B) Risk avoidance
C) Risk control
D) Risk transfer
  • 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) I only
D) II only
  • 6. Refers to the level of risk that the
    company is willing to accept given the
    risks and exposures in the industry.
A) Risk Appetite
B) Risk exposure
C) Diversifiable risk
D) Moral risk
  • 7. Which of the following will minimize
    business risks?
A) Diversification
B) Product development
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) Neither I and II
B) II only
C) Both I and II
D) I only
  • 9. Sources of information that can be used
    by a Risk Manager to identify pure loss
    exposures include all of the following
    EXCEPT:
A) Physical inspections
B) Risk analysis questionnaires
C) Currency exchange rate
D) Past losses
  • 10. Risk transfer means:
A) Shifting of loss consequences to wealthy group of people
B) Shifting of loss consequences to third party
C) Shifting of loss consequences to well-diversified portfolio
D) Shifting of loss consequences to self-insurance program
  • 11. Diversifiable risk is defined as:
A) All of the above
B) None 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 Avoidance
C) Risk Transfer
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) True
B) Neither True or False
C) False
D) Either True or False
  • 14. The most difficult and important step in
    the risk management process generally
    is:
A) Reviewing the risks
B) Selecting the best method to handle the risks
C) Evaluating the risks
D) Identifying 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) 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 transfer
B) Risk retention
C) Risk prevention
D) Risk avoidance
  • 18. Abandoning an existing loss exposures
    is an example of:
A) Risk avoidance
B) Risk retention
C) Risk transfer
D) Risk retention
  • 19. All of the following are the possible
    sources of risks EXCEPT
A) Strategic management errors
B) Legal liabilities
C) Technology issues
D) Planning
  • 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 Forecasting
D) Data Analysis
  • 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 Manual
B) Risk Management Policy Statement
C) Risk Management Manuscript Policy
D) Risk Management Binder
  • 22. Which of the following statement is
    True?
A) Most individuals in highly industrialized countries carry no insurance
B) Liability Risks are risks associated in with building calamities
C) Theft is a diversifiable risks
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) Financial risks
D) Strategic risks
  • 24. The worst loss that could ever happen
    to a firm is referred to as the:
A) Maximum possible losses
B) Frequency of loss
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) If a risk management program is properly designed, periodic review of the program is unnecessary
B) The risk manager is an important part of a firm's management team
C) In order to properly identify the loss exposures, the risk manager needs the cooperation of the departments
D) A risk management policy statement can be used to educate top executives about the risk management process
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