1. The process of transferring risk to a third party is typically
achieved through which method?
A. Using diversification
B. Purchasing insurance
C. Implementing safety measures
D. Avoiding the activity
Answer: b) Purchasing insurance
Rationale: Insurance is the most common method of transferring
risk, as it shifts the financial responsibility of a loss from the
company to the insurance provider.
2. Which of the following best describes the concept of
"opportunity risk"?
A. The risk of losing out on potential opportunities due to
excessive caution or poor decision-making
B. The risk of a competitor entering the market
C. The risk associated with a specific financial investment
D. The risk of regulatory changes affecting business operations
Answer: a) The risk of losing out on potential opportunities due to
excessive caution or poor decision-making
,Rationale: Opportunity risk is the risk of failing to seize
potentially profitable opportunities because of excessive risk
aversion or poor decision-making.
3. The primary goal of risk management is to:
A. Maximize the potential for business losses
B. Minimize the likelihood of all risks
C. Identify, assess, and prioritize risks to minimize their impact
D. Transfer all risks to insurance companies
Answer: c) Identify, assess, and prioritize risks to minimize their
impact
Rationale: The main objective of risk management is to identify
potential risks, evaluate their impact, and develop strategies to
minimize their adverse effects on the organization.
4. Which of the following risk management strategies is most
appropriate for high-probability, low-impact risks?
A. Risk avoidance
B. Risk transfer
C. Risk acceptance
D. Risk reduction
Answer: c) Risk acceptance
, Rationale: For risks that are highly probable but have low
potential impact, it is often most cost-effective to accept the risk
rather than spend resources on mitigation strategies.
5. What does the term "hazard risk" refer to in risk management?
A. Risks that result from economic changes
B. Risks that arise from the environment, such as natural disasters
C. Risks caused by human error or negligence
D. Risks related to competition in the market
Answer: b) Risks that arise from the environment, such as natural
disasters
Rationale: Hazard risks are typically associated with external,
environmental events such as natural disasters, fires, or accidents
that pose a risk to a business.
6. In risk management, which of the following best describes "risk
avoidance"?
A. Transferring the risk to another party
B. Reducing the likelihood of the risk occurring
C. Taking steps to eliminate the risk altogether
D. Accepting the risk and managing the consequences
Answer: c) Taking steps to eliminate the risk altogether
achieved through which method?
A. Using diversification
B. Purchasing insurance
C. Implementing safety measures
D. Avoiding the activity
Answer: b) Purchasing insurance
Rationale: Insurance is the most common method of transferring
risk, as it shifts the financial responsibility of a loss from the
company to the insurance provider.
2. Which of the following best describes the concept of
"opportunity risk"?
A. The risk of losing out on potential opportunities due to
excessive caution or poor decision-making
B. The risk of a competitor entering the market
C. The risk associated with a specific financial investment
D. The risk of regulatory changes affecting business operations
Answer: a) The risk of losing out on potential opportunities due to
excessive caution or poor decision-making
,Rationale: Opportunity risk is the risk of failing to seize
potentially profitable opportunities because of excessive risk
aversion or poor decision-making.
3. The primary goal of risk management is to:
A. Maximize the potential for business losses
B. Minimize the likelihood of all risks
C. Identify, assess, and prioritize risks to minimize their impact
D. Transfer all risks to insurance companies
Answer: c) Identify, assess, and prioritize risks to minimize their
impact
Rationale: The main objective of risk management is to identify
potential risks, evaluate their impact, and develop strategies to
minimize their adverse effects on the organization.
4. Which of the following risk management strategies is most
appropriate for high-probability, low-impact risks?
A. Risk avoidance
B. Risk transfer
C. Risk acceptance
D. Risk reduction
Answer: c) Risk acceptance
, Rationale: For risks that are highly probable but have low
potential impact, it is often most cost-effective to accept the risk
rather than spend resources on mitigation strategies.
5. What does the term "hazard risk" refer to in risk management?
A. Risks that result from economic changes
B. Risks that arise from the environment, such as natural disasters
C. Risks caused by human error or negligence
D. Risks related to competition in the market
Answer: b) Risks that arise from the environment, such as natural
disasters
Rationale: Hazard risks are typically associated with external,
environmental events such as natural disasters, fires, or accidents
that pose a risk to a business.
6. In risk management, which of the following best describes "risk
avoidance"?
A. Transferring the risk to another party
B. Reducing the likelihood of the risk occurring
C. Taking steps to eliminate the risk altogether
D. Accepting the risk and managing the consequences
Answer: c) Taking steps to eliminate the risk altogether
