Risk Management 314

Jason Davies is the new risk manager of Precious Metals Mining Company. Jason decided to take a "fresh" look at all the risks Precious Metals faces. He considered the causes and sources of the risks, as well as the positive and negative consequences, and the likelihood of the occurrence of the consequences. Jason conducted a a. Risk identification. b. Risk analysis. c. Risk treatment. d. Risk monitoring.

Risk analysis.

A risk control technique that reduces the severity of a particular loss is a. Diversification. b. Loss reduction. c. Duplication. d. Loss prevention.

Loss reduction.

Risk management programs should a. Incur substantial costs for slight benefits. b. Operate economically and efficiently. c. Be an autonomous part of the organization. d. Not use benchmarking to compare costs

Operate economically and efficiently.

A risk management plan that considers all of the risks that an organization faces, including operational, financial, and strategic risks, is called a. A hazard risk management plan. b. An open-perils risk management plan. c. A protected cell risk management plan. d. An enterprise risk management plan.

An enterprise risk management plan.

Which of the following risk management program goals is an essential goal for all public entities? a. Earning stability b. Continuity of operations c. Growth d. Profit

Continuity of operations

Cold Coolers, Inc., has its main warehouse in St. Louis. It also stores inventory in two warehouses in other cities to reduce the distance between their warehouses and retail locations. Cold Coolers is using which one of the following risk management techniques? a. Diversification b. Separation c. Duplication d. Risk transfer

Diversification

A1 Architectural Design relies on its historical files and blueprints. The partners of the firm are discussing risk control measures that can be implemented to provide protection against property-related losses. Which one of the following would likely offer the best protection for this exposure? a. Duplication b. Avoidance c. Diversification d. Separation

Duplication

Which one of the following provides a measure of the maximum potential damage associated with an occurrence? a. Exposure b. Duration c. Maximum probable loss d. Underwriting risk

Exposure

Insurance deals primarily with a. Strategic risks. b. Speculative risks. c. Subjective risks. d. Pure risks.

Pure risks.

The risk that remains after all of the risk treatment methods have been applied is called a. Speculative risk. b. Diversifiable risk. c. Pure risk. d. Residual risk.

Residual risk.

Which one of the following risk identification techniques can be applied if the problem is of low complexity and there is no need for quantitative output? a. Scenario analysis. b. Brainstorming. c. Failure mode and effects analysis. d. Risk analysis questionnaires.

Risk analysis questionnaires.

The process of making and implementing decisions that enable an organization to optimize its level of risk is called a. Strategic management. b. Insurance management. c. Risk management. d. Financial management.

Risk management.

As part of its risk assessment process, a company's risk management department performed a SWOT (strengths, weaknesses, opportunities, threats) analysis. SWOT analysis is a form of which one of the following types of risk identification techniques? a. Future states analysis b. Strategy analysis c. Cause and effect analysis d. Failure analysis

Strategy analysis

Which one of the following statements is true regarding the evolution of risk and risk management? a. The definition of risk has evolved to include positive as well as negative attributes. b. Risk management now involves only those areas where the organization has some degree of control over the outcome. c. Risk management is increasingly being applied to the risks associated with accidental losses. d. The definitions of risk and risk management have become considerably more focused over the years.

The definition of risk has evolved to include positive as well as negative attributes.

Which one of the following is true regarding risks? a. Positive risks need not be managed. b. Holistic risk management deals only with familiar risks. c. The number and interaction of risks is decreasing. d. The inability to easily distribute products is an operational risk.

The inability to easily distribute products is an operational risk.

Which one of the following is a speculative risk? a. The risk of being sued for bodily injury b. The risk of premature death c. The risk of a wager at a casino d. The risk of insufficient retirement income

The risk of a wager at a casino

The most direct driving route between Bailey's home and the office where she works would require her to drive through a high-crime area. In the high-crime area, car jackings and drive-by shootings are common. Although it increases her travel time by 15 to 20 minutes in each direction, Bailey takes a longer route so that she does not have to drive through the high-crime area. Bailey is dealing with the risk of being injured while driving through the high-crime area through a. Transfer. b. Retention. c. Avoidance. d. Loss control.

Avoidance

Cotton Products Company manufactures cotton clothing, towels, sheets, and other cotton products. All production takes place at one large multi-acre production facility. The risk manager of Cotton Products Company called a meeting attended by her staff, the plant foreman, the plant safety engineer, and the head of operations. She told the group that she wanted to analyze one problem--the top event--a catastrophic fire at the production facility. The group discussed all the causes of failure and factors that could contribute to the top event. The causes of the "top event" were listed, and methods of reducing the likelihood and consequences of the event were examined. The technique the risk manager employed is called a. Fault tree analysis (FTA). b. Failure mode and effects analysis (FMEA). c. Scenario analysis. d. SWOT analysis.

Fault tree analysis (FTA).

Which one of the following types of risks can result in losses but not in any gains? a. Speculative risks b. Financial risks c. Hazard risks d. Strategic risks

Hazard risks

Risk management reviews the cost of risk associated with protecting cash flows, assets, and personnel. Which one of the following statements best describes the key components of an organization's cost of risk? a. Operational, administrative, and risk control costs b. Hazard risk and operational costs c. Risk hazards, cost of perils insured against, premium, and loss control expenses d. Risk management department costs, retained losses, premiums, and risk control costs

Risk management department costs, retained losses, premiums, and risk control costs