Risk - correct answer the uncertainty about outcomes, with the possibility that some of the outcomes can be negative. Quantified by knowing the
... [Show More] probability of the possible outcomes
Probability - correct answer the likelihood that an outcome or event will occur. Probabilities are stated as a decimal figure, a percentage, or a fraction.
What are the 2 elements associated with risk? - correct answer uncertainty of outcome + possibility of negative outcome
Pure Risk - correct answer a chance of loss or no loss, but no chance of gain.
Speculative Risk - correct answer a chance of gain or loss (investment).
Price Risk - correct answer the uncertainty over the size of cash flows resulting from possible changes in the cost of raw materials and other inputs (lumber, gas, or electricity)
Credit Risk - correct answer the risk that customers and other debtors will fail to make promised payments.
Distinguish Diversifiable vs. Nondiversifiable Risk - correct answer Diversifiable risks can be managed by spreading (such as purchasing multiple businesses). Nondiversifiable risks are correlated so that their gains or losses tend to occur simultaneously rather than randomly.
What are the 4 quadrants of risk? - correct answer Hazard, Operational, Financial, and Strategic risk
Hazard - correct answer a condition that increases the frequency or severity of a loss.
What are the classifications of risk? - correct answer pure vs. speculative. subjective vs. objective. diversifiable vs. nondiversifiable.
The quadrants of risk focus on... - correct answer the source of risk and who has traditionally managed it
The classifications of risk focus on... - correct answer some aspect of the risk itself
3 components of Financial consequences or risk? - correct answer Expected cost of losses or gains. Expenditures on risk mgmt. Cost of residual uncertainty.
Residual Uncertainty - correct answer the amount of risk that remains after individuals or organizations implement their risk mgmt plans. (need to study more)
Risk Management - correct answer any effort to economically deal with uncertainty of outcomes (risk).
Enterprise Risk Management (ERM) - correct answer is an approach to managing all of an org's key risks and opportunities, pure and speculative, with the intent of maximizing the org's value.
Loss Exposure - correct answer any condition or situation that presents a possibility of loss, whether or not an actual loss occurs.
4 Types of Loss Exposures - correct answer Property, Liability, Personnel, and Net Income
What are the 3 elements of loss exposures? - correct answer an asset exposed to loss. cause of loss (peril). financial consequences of the loss.
Net Income losses are usually associated with what? - correct answer Property losses
For insurance and traditional risk management purposes, loss exposures are typically divided into the following four types: - correct answer property, liability, personnel, and net income.
A cause of loss is an element of a: - correct answer loss exposure
Physical Hazard - correct answer A tangible characteristic of property, persons, or operations that tends to increase the frequency or severity of loss.
Pre-Loss Goals - correct answer1. Economy of Operations
2. Tolerable uncertainty
3. Legality
4. Social Responsibility
Post-Loss Goals - correct answer1. Survival
2. Continuity of Operations
3. Profitability
4. Earnings Stability
5. Social Responsibility
6. Growth [Show Less]