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RMI 2302 Chapter 1- Basic of Risk Questions and Answers
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RMI 2302 Chapter 1- Basic of Risk Questions and Answers
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RMI 2302 Chapter 1- Basic of RiskQuestions and Answers
Can information alter risk? - ANSWER-No, but it can alter uncertainty
Combination Approach? - ANSWER-All the tools available are brought to bear on the
problem
Dynamic Risk - ANSWER-Are the result of the economy changing
Example of Dynamic Risk - ANSWER-Inflation, recession, and other business cycle
changes
Example of Static Risk - ANSWER-hurricanes, earthquakes, other natural disasters
Exposure - ANSWER-Person or property facing risk of loss
Financial Risk - ANSWER-The possibility that shareholders will lose money when they
invest in a company that has debt, if the company's cash flow proves inadequate to
meet its financial obligations.
Fundamental Risk - ANSWER-Exposure to loss from a situation affecting a large group
of people or firms, and caused by (a) natural phenomenon or (b) social phenomenon
Given that a loss has occurred, how bad was it?: - ANSWER-Severity
Hazard - ANSWER-Condition affecting the frequency or severity of loss
Hazards can increase: - ANSWER-Frequency, severity, or both
How often losses occur: - ANSWER-Frequency
How to measure risk? - ANSWER-In Standard Deviation or Variation
If frequency is zero, ____ is not an issue - ANSWER-severity
Liability Risk - ANSWER-Risk to a company arising from the possibility of liability for
damages resulting from the purchase, ownership, or use of a good or service offered by
that company.
Maximum Possible Loss - ANSWER-An estimate of the worst loss that might result from
a given occurrence.
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