Exam (elaborations)
Final Study Set: RMIN 4000 - Daniel Jeremy Brown Exam/195 Q’s and A’s
- Course
- Institution
Final Study Set: RMIN 4000 - Daniel Jeremy Brown Exam/195 Q’s and A’s
[Show more]
Content preview
Final Study Set: RMIN 4000 - DanielJeremy Brown Exam/195 Q’s and A’s
Exposures - -Things of value (assets) that could be lost (Any
situation/circumstance in which a loss is possible, regardless of whether a
loss actually occurs)
- Perils - -Things that could happen to your assets - cause of loss
- Risk Management - -What you do to protect these assets and/or
prevent/reduce losses (Identifies loss exposures faced by an organization
and selects the most appropriate techniques for treating such exposures)
- Risk - -The calculated possibility of a negative outcome
- Loss - -Negative outcome - must be quantifiable
- Frequency - -How often a loss occurs (number of losses that occur within a
specified time period)
- Severity - -How much a loss costs when it does occur (the dollar amount of
loss for a specific peril
- Hazard - -Condition that creates or increases frequency/severity of loss
- Physical Hazard - -A physical condition that increases the
frequency/severity of a loss
- Moral Hazard - -Presence of insurance changes the behavior of the insured
- Morale (Attitudinal) Hazard - -Carelessness/indifference to a loss
(increases frequency/severity of a loss)
- Legal Hazard - -Characteristics of legal system/regulatory environment
that increase the frequency and/or severity of a loss
- Pure Risk - -Two outcomes possible: loss or no loss (can purchase
insurance for this)
- Speculative Risk - -Three outcomes possible: loss, no loss/no gain, or gain
(cannot purchase insurance for this)
, - Diversifiable Risk - -Affects only individuals/small groups, not entire
economy: can be reduced/eliminated thru diversification (ex: fire, theft,
collision)
- Nondiversifiable Risk - -Affects entire economy/large numbers of
groups/persons within the economy - can't be reduced thru diversification,
government assistance may be needed to insure (correlated risks, ex:
hurricane)
- Enterprise Risk - -All major risks faced by a business firm (pure,
speculative, strategic, operational, financial)
- Systemic Risk - -Risk of collapse of an entire system/market due to the
failure of a single entity/group of entities
Instability in the financial system due to the interdependency between the
players in the market
- Personal Risk - -Directly affects an individual/family - involve the possibility
of loss of income, extra expenses, depletion of financial assets (ex. of perils:
death, unemployment, disability, etc.)
- Property Risk - -Possibility of losses associated with the destruction or
theft of property (Direct loss: cost to repair, Indirect loss: cost to live
elsewhere during repairs)
- Liability Risk - -Legal liability (financial consequences) resulting from
injuries/damages you caused - no upper limit
- Loss of Business Income - -Business having to shut down for a period of
time due to physical damage loss: unable to generate an income
- Risk Control - -Techniques to reduce the frequency/severity of losses
- Risk Financing - -Techniques for funding losses
- Loss Prevention - -Reduces frequency (airport security, safety training
programs)
- Loss Reduction - -Reduces severity (fire sprinklers) - can occur pre or post
loss
- Avoidance - -Type of risk control in which a certain loss exposure is never
acquired (frequency = 0) - many downsides
- Retention - -Retaining part or all of losses that can occur from a given risk
(active: deliberate, passive: unknowing)
, Good when a risk is difficult to insure, low severity, predictable loss
- Noninsurance Transfer - -Methods other than insurance by which a pure
risk and its potential financial consequences are transferred to another party
(by contract, hedging, incorporation)
- Step 1: Identify Loss Exposures - -What assets need to be protected?
What perils are those assets exposed to?
** Most important step!
- Step 2: Measure and Analyze the Loss Exposures - -Estimate the
frequency/severity of loss exposures
Rank loss exposures according to relative importance (severity >>>)
- Maximum Possible Loss - -Worst loss that could happen to the firm during
its lifetime
- Probable Maximum Loss (PML) - -The worst loss that is likely to happen
- Step 3: Consider and Select the Appropriate Risk Management Techniques
- -Options: Risk control or risk financing
- Duplication - -Back-ups or copies of important document/property
- Separation - -Dividing the assets exposed to loss to minimize the harm
from a single event
- Diversification - -Reducing the chance of loss by spreading the loss
exposure across different parties (customers, supplies), securities (stocks,
bonds), or transactions
- Captive Insurer - -Insurer owned by a patent firm for the purpose of
insuring the patent firm's loss exposures (single-parent: owned by only one
parent, group captive: several parents)
- Risk Retention Group - -Group captive that can write any type of liability
coverage except employers' liability, workers comp, and personal lines
- Deductible - -Specified amount subtracted from the loss payment
otherwise payable to the insured
- Excess Insurance - -Plan in which the insurer pays only if the actual loss
exceeds the amount a firm has decided to retain
- Manuscript Policy - -Policy specifically tailored for the firm
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Nursephil2023. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $12.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
67096 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now
