Risk management essentials Questions and Verified Answers, 100% Score Guarantee Pass (Latest 2025)
Define the two types of risk: pure and speculative. Give an
example of each and indicate whether the type of risk is insurable. - Correct Answers ✅Pure risk- has only the
chance of loss. Example: a person is injured in an accident or
a building burns down. (Insurable)
Speculative risk- has the chance of loss or gain. Example:
stock markets go up and down, a business may succeed or fail, and gamblers can win or lose. (Not insurable) What are three of the four definitions of risk? - Correct Answers ✅Chance or probability of loss Uncertainty concerning a loss A possibility of variation of outcomes from a given set of circumstances The difference between expected losses and actual losses One definition states that risk is the variation between what is predicted and what actually occurs. Which of the following loss probabilities (P) is riskier? Explain your answer, including the reasons the other two are not riskier.P(a)=1%, P(b)=50%, P(c)=99% - Correct Answers ✅P(b) is riskier because risk is UNCERTAINTY concerning loss, and this has the highest degree of risk, uncertainty. We are almost certain in P(a) that a loss WILL NOT happen and we are almost certain in P(c) that a loss WILL happen. 1 / 4
Risk management essentials Questions and Verified Answers, 100% Score Guarantee Pass (Latest 2025) Economic risk is uncertainty arising out of the organization's operations, marketplace, financial, or entrepreneurial endeavors. Name and briefly describe 3 of the other 5 general classes of risk. - Correct Answers ✅Legal risk- uncertainty in the applicability or interpretation of contracts, laws, liability, or regulations Political risk- uncertainty associated with changes, interpretations, or reinterpretations of governmental rules and regulations.Social risk- uncertainty concerning public relations, image, and cultural problems- losing touch with the social direction of the country Physical risk- uncertainty concerning damage or injury to property, persons, and other resources (information, etc.) Juridical risk- uncertainty regarding decisions by judge or jury, or tends in the legal climate With widely differing risk-taking personalities, one company might decide to build something like bombs or fireworks while another chooses to manufacture pillows or perhaps clothespins. Each company has to consider its willingness to accept or retain risk, as well as its financial ability to accept or retain risk. What term is used to describe the willingness to accept or retain risk? - Correct Answers ✅Risk appetite Incident - Correct Answers ✅An event that disrupts normal activities and may become a loss 2 / 4
Risk management essentials Questions and Verified Answers, 100% Score Guarantee Pass (Latest 2025) Loss - Correct Answers ✅a reduction in value Hazard - Correct Answers ✅Physical, moral, or morale characteristics that make the likelihood of a loss from a given peril greater Accident - Correct Answers ✅An event definite as to time and place that results in injury or damage to a person or property Frequency - Correct Answers ✅The number of losses occurring in a given time period Occurance - Correct Answers ✅An accident with the limitation of time removed (an "accident" that is extended over a period of time rather than a single observable happening) Exposure - Correct Answers ✅A situation, practice, or condition that may lead to an adverse financial consequence; an activity or asset Claim - Correct Answers ✅A demand for payment or an obligation to pay as a result of a loss 3 / 4
Risk management essentials Questions and Verified Answers, 100% Score Guarantee Pass (Latest 2025) Severity - Correct Answers ✅The dollar amount of a given loss or the aggregate dollar amount of all losses for a given period Peril - Correct Answers ✅The cause of loss, e.g., fire, wind, hail, slip and fall Rod of Rod's Rod and Reel Supply knows the costs of materials and supplies, labor and benefits, shipping, and overhead but he asks you what other costs he should be considering as he establishes the wholesale prices for fishing tackle for sale to sporting goods stores. You mention to him that he will need to consider the cost of insurance premiums.What are four other costs of risk he should consider? - Correct Answers ✅Retained losses (whether passively or actively retained) Risk management departmental costs Outside services (risk management consultants, third party administrators, and actuarial services) Loss of productivity, cost of overtime, and lost opportunity costs Costs of preventing and reducing losses (training sessions or safety consultant) Costs of physical measures (sprinkler system or installation of fire walls)
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