Exam Bank for RMI 300- Solution Manual Already Passed
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Module
RMI 300
Institution
RMI 300
Exam Bank for RMI 300- Solution Manual Already Passed
What is risk? - Answers Variability in future outcomes.
What is Risk Management? - Answers Decision making process by which adverse consequences or risk are minimized. Manage variability not reduce loss.
What are adverse conciquences of risk...
Exam Bank for RMI 300- Solution Manual Already Passed
What is risk? - Answers Variability in future outcomes.
What is Risk Management? - Answers Decision making process by which adverse consequences or risk
are minimized. Manage variability not reduce loss.
What are adverse conciquences of risk? - Answers Forefitting opportunities or expending resources to
minimize risk(variability)
Risk Management decision making process - Answers 1) set objectives (what do we want to achieve?
Consider trade offs eg. WS and Walmart) - usually seek to maximize shareholder wealth
2) identify problems (obstacles to reaching objectives)
3) measure problem dimensions (how big are they, how much will they cost?)
4) identify and evaluate alternatives
5) select alternatives and implement selection
6) monitor the system
Pure Risk - Answers Best that can happen is nothing
Speculative Risk - Answers Can be positive or negative outcome
GARP Strategic - Answers Changes that effect the competitive environment. Macro-economic trends
(employment trends).
GARP Market - Answers Input/output prices, interest rate, exchange rate. This is speculative risk
GARP Credit - Answers Contractual obligations and promises (buyer fails to pay for goods). This is
speculative risk.
GARP Liquidity - Answers How much available cash do we have to make value-enhancing investments?
How much liquid assets do you need to have? (Illiquid assets are usually more productive)
SMART - Answers Specific Measurable Achievable Relevant Timed
Enterprise risk manager job duties - Answers Gives recommendations, doesn't usually make final
decision. Implements safety programs and works closely with other internal departments (HR, legal,
, audit). Can usually make insurance purchases. *Enterprise risk manager has more authority to make
decisions than regular risk managers.
Why does RM matter? - Answers When we don't know what's going to happen we tend to use our
resources inefficiently.
What needs to be identified to understand RM? - Answers Value of possible outcomes (often referred to
as severity), frequency of each outcome, and conditions that effect the value/likelihood of outcomes.
Elements of RM problems - Answers Exposures - assets exposed to variability in outcomes
Perils - specific causes of variability
Hazards - conditions that increase the frequency/severity/likelihood/size of negative outcomes.
Moral Hazard - Answers Costs of the outcome of the behavior are not borne entirely by the actor.
Methods to identify RM problems - Answers Internal documents
Inspections/Interviews
Insurer/Consultant questionnaires
Flowcharts
Research,press reports, etc.
Real vs. Personal property - Answers Real - structural; cannot be moved
Personal - can be mobile (phone, car, airplanes)
Book Value - Answers Historical cost - Depreciation (1/#of years owned)
Actual Cash Value - Answers Replacement cost new - depreciation on RCN
Or
% remaining life of asset
Common law vs. Civil law - Answers Common law - determined by court decisions (precedents)
Civil law - determined by legislative bodies
Special damages - Answers Things that are easily quantified
General damages - Answers Pain and suffering
Punitive damages - Answers Intended to punish as a result of outrageous reckless behavior
Criminal wrong vs. Civil wrong - Answers Criminal - act against society
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