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CPCU 500 Exam|31 Complete Questions and Answers
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CPCU 500 Exam|31 CompleteQuestions and Answers
Describe the 2 elements of risk - -1.) Uncertainty of outcomes: risk involves
uncertainty about the type of outcome, timing o outcome, or both
2.) possibility of a negative outcome: at least of the potential outcomes is
negative
-Whats the difference between possibility and probability? - -Possibility:
outcome may or may not occur
Probability: likelihood that an outcome will occur
-Does Possibility or Probability measure risk? - -Probability does, possibility
DOES NOT
-Explain how understanding various outcome probabilities can aid an
organization in its risk management efforts - -With understanding various
outcome possibilities, an organization can focus on its risk management
efforts on risk that can be appropriately manages.
Also it can also use probabilities to determine which risks to take and which
ones not
-Describe how classifying risk helps an organization'r risk management
process - -Classification can help with assessing and managing risks.
Many risks in the same classification have similar attributes and can be
managed with similar techniques
Helps with the administrative function of risk management by helping to
ensure that risks in the same classification are less likely to be overlooked
-Compare pure and speculative risk
Why is it important to distinguish between them? - -Pure risk: chance of loss
or no loss
Speculative risk: chance of profit or loss
the two different types of risk must be managed differently
-Why might subjective and objective risks differ? - -Familiarity and control
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