Risk management topic 2 Revised Test Questions And Advanced Answers.

Loss exposure - correct answer Any conditions or situation that presents a possibility of a loss Risk Management - correct answer The decision making process of making and implanting decisions that will minimize of risks. Traditional Risk Management (TRM) - correct answer = Pure Risk loss exposures are evaluated in an isolated approach. Ex: Each exposure has own department and fails to talk to each other. Enterprise Risk Management (ERM) - correct answer The more broad view of ALL risks. Combining all risk departments to maximize organizational value. The Risk Management process - correct answer 6 Steps Step 1: Identifying Loss exposures (most important) - correct answer Identify every loss exposure that can affect firm. Failing to identify can lead to bankruptcy. Step 2: Analyzing the loss - correct answer The estimated freq. and severity of the loss exposure. 4 dimensions 1. loss freq. # of loss 2. Loss sevr. # total $ Amt of a specific loss 3. Total dollar losses: for ALL losses 4. Timing When losses occur and when loss payments are made. Step 3: Identify possible Risk options - correct answer Risk control: saftey/training programs. Risk Financing: insurance budgeting for the loss Step 4: Selecting from Various Risk mngmt options - correct answer After analyzing the possible techniques an organization picks one that fits the best exposure. Ex: Dennis Alter would rather pay more $ then deal with risk.(Subjective risk) Step 5: Implementing the chosen options - correct answer Put it into action. Ex: purchase insurance, safety programs Step 6: Re-evaluating chosen strategies - correct answer Make sure expected results is being achieved and if needed change in order to achieve success Soft markets: - correct answer Ins on sale, not picky BUY! Hard Markets: - correct answer sellers market, Picky Methods of Exposure Identification - correct answer 7 methods 1. - correct answer Inspections/ walkarounds 2. - correct answer Contract analysis Ex: leases 3. - correct answer Look at past info. If dynamic or "new", not helpful 4. - correct answer Share Info with other firms through associations 5. - correct answer Checklists/surveys 6. - correct answer Flow Chart 7. 8. - correct answer Share info with oth