INSR 310 CORE MAIN EXAMS ALL QUESTIONS AND
ANSWERS SURE A+
✔✔Personal risks - ✔✔risks directly affect individual/family
✔✔Physical hazard - ✔✔physical condition that increases the chance of loss
✔✔Premature death - ✔✔death of a family head w/ outstanding unfulfilled financial
obligations, dependents to support, children to educate, or a mortgage to pay off.
✔✔Property risks - ✔✔persons owning property are exposed to; risks of having property
damaged or destroyed from numerous causes
✔✔Pure risk - ✔✔only the possibilities of loss or no loss
✔✔Risk - ✔✔any uncertainty regarding financial loss/occurrence of a loss.
✔✔Risk control - ✔✔techniques that reduce frequency or severity of losses
Avoidance, loss prevention, loss reduction, duplication, separation, diversification
✔✔Risk financing - ✔✔techniques that provide for funding of losses; Risk managers use
combo of techniques for treating each loss exposure
, ✔✔Strategic risk - ✔✔risks that are external to the firm; Uncertainty regarding the firm's
financial goals and objectives; Firm enters a new line of BI; line may be unprofitable
Included in enterprise risk
✔✔Speculative risk - ✔✔profit or loss are possibilities; Purchase 100 shares of common
stock, you would profit if the price of the stock increases but would lose if the price
declines.
> Betting on horse race
> Investing in real estate
> Going into BI for yourself
✔✔Subjective Risk - ✔✔perceived risk; uncertainty based one 1's mental condition or
state of mind; Psychology; Individual PERCEPTION
> Driver w/ several convictions for drunk driving is drinking heavily in a neighborhood
bar and attempts to drive home. Driver may be uncertain if he will make it home safely
without being arrested
>Mental uncertainty or perception
> Impact varies depending on individual
✔✔HIGH SUBJECTIVE RISK - ✔✔conservative and prudent behavior
✔✔SUBJECTIVE RISK - ✔✔less conservative behavior
✔✔LOW SUBJECTIVE RISK - ✔✔less conservative driving behavior
✔✔Systemic risk - ✔✔risk of collapse of an entire financial system or financial market
due to the failure of a single entity or group of entities, which can result in the
breakdown of the entire financial system
> 2008-2009 BI recession in U.S.; 2nd worst economic downswing financial meltdown,
stock mkt crash, Unemployment rate high levels, Housing mkt collapsed, 100+
commercial banks and financial institutions failed/merged with other entities, Complex
derivatives, largely unregulated--> losses to investors
✔✔Loss prevention - ✔✔technique that reduces the probability of loss so that the
frequency of losses is reduced.
> Auto accidents can be reduced if motorists take a safe-driving course and drive
defensively.
> # of heart attacks can be reduced if individuals control their weight, stop smoking, eat
healthy diets, and follow an exercise program.
> important for BI firms.
ANSWERS SURE A+
✔✔Personal risks - ✔✔risks directly affect individual/family
✔✔Physical hazard - ✔✔physical condition that increases the chance of loss
✔✔Premature death - ✔✔death of a family head w/ outstanding unfulfilled financial
obligations, dependents to support, children to educate, or a mortgage to pay off.
✔✔Property risks - ✔✔persons owning property are exposed to; risks of having property
damaged or destroyed from numerous causes
✔✔Pure risk - ✔✔only the possibilities of loss or no loss
✔✔Risk - ✔✔any uncertainty regarding financial loss/occurrence of a loss.
✔✔Risk control - ✔✔techniques that reduce frequency or severity of losses
Avoidance, loss prevention, loss reduction, duplication, separation, diversification
✔✔Risk financing - ✔✔techniques that provide for funding of losses; Risk managers use
combo of techniques for treating each loss exposure
, ✔✔Strategic risk - ✔✔risks that are external to the firm; Uncertainty regarding the firm's
financial goals and objectives; Firm enters a new line of BI; line may be unprofitable
Included in enterprise risk
✔✔Speculative risk - ✔✔profit or loss are possibilities; Purchase 100 shares of common
stock, you would profit if the price of the stock increases but would lose if the price
declines.
> Betting on horse race
> Investing in real estate
> Going into BI for yourself
✔✔Subjective Risk - ✔✔perceived risk; uncertainty based one 1's mental condition or
state of mind; Psychology; Individual PERCEPTION
> Driver w/ several convictions for drunk driving is drinking heavily in a neighborhood
bar and attempts to drive home. Driver may be uncertain if he will make it home safely
without being arrested
>Mental uncertainty or perception
> Impact varies depending on individual
✔✔HIGH SUBJECTIVE RISK - ✔✔conservative and prudent behavior
✔✔SUBJECTIVE RISK - ✔✔less conservative behavior
✔✔LOW SUBJECTIVE RISK - ✔✔less conservative driving behavior
✔✔Systemic risk - ✔✔risk of collapse of an entire financial system or financial market
due to the failure of a single entity or group of entities, which can result in the
breakdown of the entire financial system
> 2008-2009 BI recession in U.S.; 2nd worst economic downswing financial meltdown,
stock mkt crash, Unemployment rate high levels, Housing mkt collapsed, 100+
commercial banks and financial institutions failed/merged with other entities, Complex
derivatives, largely unregulated--> losses to investors
✔✔Loss prevention - ✔✔technique that reduces the probability of loss so that the
frequency of losses is reduced.
> Auto accidents can be reduced if motorists take a safe-driving course and drive
defensively.
> # of heart attacks can be reduced if individuals control their weight, stop smoking, eat
healthy diets, and follow an exercise program.
> important for BI firms.
