FSU - RMI 2302 - Charles Nyce - EXAM 1 QUESTIONS AND ANSWERS
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FSU - RMI 2302 - Charles Nyce - EXAM 1
Risk has many definitions (individual, organizational, or societal), but what is the most common/broad one? - Answer- Uncertainty regarding loss
True or false: Danger does NOT equal Risk - Answer- True
What are the four ways of ANALYZING OR ME...
FSU - RMI 2302 - Charles Nyce - EXAM 1
Risk has many definitions (individual, organizational, or societal), but what is the most common/broad
one? - Answer- Uncertainty regarding loss
True or false: Danger does NOT equal Risk - Answer- True
What are the four ways of ANALYZING OR MEASURING risk discussed in module 1? - Answer-
Frequency/likelihood, Severity/impact, Expected value/loss, and the Risk profile
What does variation/standard deviation mean when discussing risk? - Answer- How far is it from what
we expected to happen to what actually happened?
What is the definition of "uncertainty" discussed in module 1? - Answer- doubt about our ability to
predict future outcomes
True or false: Uncertainty can NOT differ across individuals even when risk is the same. - Answer-
False
True or false: Information alters both risk and uncertainty. - Answer- False, information can only alter
uncertainty, not risk.
Reduction in uncertainty can be a _____________ thing. - Answer- good
What are the four CATEGORIES of risk discussed in module 1? - Answer- Pure vs. Speculative
Static vs. Dynamic
Fundamental vs. Particular
Core vs. Secondary
What are the four SOURCES of risk discussed in module 1? - Answer- Personal Risks, Property Risks,
Liability Risks, and Financial Risks
True or false: Exposure is when a person or property is facing risk of loss. - Answer- True
What is the definition of "peril" discussed in module 1? - Answer- the immediate cause of loss
What is a condition affecting the frequency or severity of loss called? - Answer- Hazard
What are the two main types of hazards? - Answer- Physical and Intangible
What are the three sub-categories of Intangible hazards? - Answer- - Moral hazard - behavioral
changes (driving faster because you have anti-lock brakes)
- Morale hazard - indifference (I don't care if I get a fender bender because my car is insured)
- Societal hazards - legal or cultural (the German autobahn has no speed limit, so I will drive as fast as I
want)
What are the three attitudes toward risk and how do they differ from each other? - Answer- - Risk
Neutral - indifferent toward risk, value of risky situation is expected loss
- Risk Averse - Prefer to avoid risk, willing to pay more than expected loss to avoid risk
- Risk Seeker - prefer risk, would pay more than expected return to engage in risky situation
What are the three "burdens of risk on society" described in module 1? - Answer- - Need for Larger
Emergency Funds
, - Loss of Needed Goods and Services
- Fear and Worry
How do organizations (i.e. entire industries) generally handle risk? - Answer- Risk Management
practices
What is the definition of Risk Management? - Answer- Scientific approach to dealing with risk
What are the three basic rules of Risk Management discussed in module 1? - Answer- 1. Don't risk
more than you can afford to lose
2. Don't risk a lot for a little
3. Consider the odds
What are the six steps of the Risk Management process? - Answer- 1. Determination of objectives
2. Identification of risks
3. Evaluation of risks
4. Consideration of alternatives - selection of the tool
5. Implementing the decision
6. Evaluation and review
True or false: Organizations do not usually have a risk management program already in existence. -
Answer- False
The Evaluation and Review step generally involves: - Answer- 1. Reevaluating the program's
objectives
2. Repeating the identification process to assure that it was performed correctly
3. Evaluating the risks that have been identified
4. Verifying that the decision on how to address each risk was proper
5. Verifying that the decision was property executed
What are the post-loss objectives listed in module 1? - Answer- 1. Survival
2. Continuity of Operations
3. Earnings Stability
4. Continued Growth
5. Social Responsibility
What are the pre-loss objectives listed in module 1? - Answer- 1. Economy
2. Reduction in Anxiety
3. Meeting Externally imposed Obligations
4. Social Responsibility
What are three "tools" for identifying risk discussed in module 1? - Answer- Questionnaires, checklists,
and procedure guides.
What is the generally accepted/preferred approach to risk identification? - Answer- A "combination
approach," in which all of the tools available are brought to bear on the problem.
True or false: Inspection tours are a valuable tool for risk identification and will often bring attention to
risks that might otherwise have been undetected. - Answer- True
True or false: Document analysis and interviews are not good strategies for identifying risk and should be
avoided. - Answer- False
______________ are often used to evaluate loss frequency. - Answer- Probability distributions
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