RSK4803 ASSESSMENT 2 SEMESTER 1 2026 BMZ Create a full exam for the title above with
Answer and rationale in the options 100+questios
SECTION A: MULTIPLE CHOICE QUESTIONS.
Answer all questions in this section. Each question is worth 2 marks.
Topic 1: Risk Management Fundamentals
Question 1
Risk financing is an important element of risk…
a) management.
b) the management process.
c) the management framework.
d) the control process.
Answer: a) management
Rationale: Risk financing forms an integral part of the broader risk management function,
encompassing the strategies and methods used to fund potential losses. It is not merely a
process or framework but a core component of how organizations manage their overall risk
exposure .
Question 2
Holistic risk management…
a) takes advantage of internal risk hedging opportunities.
b) delivers efficient and effective risk hedging.
c) covers the identified exposures and minimises the total cost of risk.
d) achieves the organisation's objectives efficiently.
Answer: c) covers the identified exposures and minimises the total cost of risk
Rationale: Holistic risk management adopts an integrated approach that identifies all
exposures across the organization and seeks to minimize the total cost of risk, rather than
focusing on individual risks in isolation. This approach recognizes the interconnectedness of
risks and optimizes the overall risk financing strategy .
Question 3
Strategic risk management means…
a) delivering a strategy that allows efficient risk hedging.
b) delivering a strategy that is risk free, which maximises the value add.
,c) achieving the organisation's objectives efficiently.
d) achieving the organisation's objectives within the stipulated time frame.
Answer: a) delivering a strategy that allows efficient risk hedging
Rationale: Strategic risk management focuses on aligning risk management strategies with
the organization's overall business strategy, enabling efficient hedging of risks that could
impact strategic objectives. It is not about eliminating risk entirely but about managing it in
a way that supports value creation .
Question 4
The primary objective of minimising the cost of risk is to…
a) maintain the ratio of the total cost of risk.
b) signal to investors that the company considers risks in its business decisions.
c) maximise return on investment.
d) signal to regulators that controls ensure compliance with laws and regulations.
Answer: c) maximise return on investment
Rationale: By minimizing the total cost of risk, organizations can improve their bottom line
and maximize returns to investors. This approach recognizes that risk management is not
just about avoiding losses but about optimizing the risk-return trade-off to enhance
shareholder value .
Question 5
The responsibility of risk management is best described as…
a) assessing, controlling and financing critical risks facing the organisation and reporting
outcomes to the board.
b) assessing critical risks facing the organisation and communicating the assessment to
management and the board.
c) compiling a report on all risk exposures of the organisation for reporting to the board.
d) providing assurance about the management of risks to stakeholders of the organisation.
Answer: a) assessing, controlling and financing critical risks facing the organisation and
reporting outcomes to the board
Rationale: This comprehensive view encompasses the full spectrum of risk management
activities—assessment, control, and financing—with accountability to the board. It reflects
the broader enterprise risk management approach that recognizes the importance of both
risk mitigation and risk financing strategies .
,Question 6
The foundation of classical economics, finance and decision theory is the abstract view that
human beings…
a) act rationally and maximise some measure of utility by optimally weighing and integrating
all relevant information.
b) use simple but ecologically rational strategies to make sound and robust decisions.
c) solve complex problems by employing complex tools and solutions.
d) make decisions under uncertainty conditions using outcome probabilities.
Answer: a) act rationally and maximise some measure of utility by optimally weighing and
integrating all relevant information
Rationale: Classical economic theory is built on the assumption of rational actors who make
decisions by optimizing utility. This rational choice theory forms the foundation of traditional
finance and decision-making models, though behavioural economics has since challenged
these assumptions .
Question 7
One of the weaknesses of traditional risk management is…
a) an inability to integrate all types of risks and balance sheet protection.
b) reliance on traditional risk mitigation, risk transfer and risk hedging opportunities.
c) that it considers the accounting, regulatory and rating agency treatment of financial
instruments.
d) that it requires the chief risk officer to have substantial knowledge of various business
areas.
Answer: a) an inability to integrate all types of risks and balance sheet protection
Rationale: Traditional risk management often operates in silos, addressing different risk
types separately without considering their interconnections. This fragmented approach fails
to provide comprehensive balance sheet protection and cannot capture the full scope of
organizational risk exposures, a key limitation that holistic enterprise risk management seeks
to address .
Topic 2: Insurance Principles and Concepts
Question 8
The senior underwriter reviewed the submitted insurance quotation and showed the trainee
underwriter that the R160 cost, which applies to all the 2025 insurance quotations, was not
included. The amount of R160 should be the… cost factor.
, a) moral hazard
b) adverse selection
c) capital
d) administration
Answer: d) administration
Rationale: Administrative costs are standard charges applied to all insurance quotations to
cover the insurer's operational expenses, such as policy issuance, documentation, and
processing. These are distinct from risk-based factors like moral hazard or adverse selection .
Question 9
The principle that gives the insurer the right to take legal action in the name of the insured
to recover the amount of a claim paid to the insured from the party legally responsible for
the loss is…
a) co-insurance.
b) average.
c) subrogation.
d) proximate cause.
Answer: c) subrogation
Rationale: Subrogation is a fundamental insurance principle that allows the insurer, after
paying a claim, to step into the insured's shoes and pursue legal action against any third
party responsible for the loss. This prevents the insured from recovering twice—from both
the insurer and the responsible party—and helps insurers recoup claim payments .
Question 10
Company A's assets were damaged by floods due to unmaintained storm drainage by the
city municipality. Company A successfully claimed for R85,000 and was paid R70,000 by the
insurer. However, the insurer proceeded to sue the municipality for the repayment of
R85,000. Choose the correct statement below.
a) The insurer understated the payment by R15,000.
b) The payment difference of R15,000 in the claim payment is an outstanding premium,
which Company A did not pay.
c) The municipality will have to pay R15,000 to Company A if the litigation is successful.
d) The difference of R15,000 in the claim payment is an excess.
Answer: d) The difference of R15,000 in the claim payment is an excess
Answer and rationale in the options 100+questios
SECTION A: MULTIPLE CHOICE QUESTIONS.
Answer all questions in this section. Each question is worth 2 marks.
Topic 1: Risk Management Fundamentals
Question 1
Risk financing is an important element of risk…
a) management.
b) the management process.
c) the management framework.
d) the control process.
Answer: a) management
Rationale: Risk financing forms an integral part of the broader risk management function,
encompassing the strategies and methods used to fund potential losses. It is not merely a
process or framework but a core component of how organizations manage their overall risk
exposure .
Question 2
Holistic risk management…
a) takes advantage of internal risk hedging opportunities.
b) delivers efficient and effective risk hedging.
c) covers the identified exposures and minimises the total cost of risk.
d) achieves the organisation's objectives efficiently.
Answer: c) covers the identified exposures and minimises the total cost of risk
Rationale: Holistic risk management adopts an integrated approach that identifies all
exposures across the organization and seeks to minimize the total cost of risk, rather than
focusing on individual risks in isolation. This approach recognizes the interconnectedness of
risks and optimizes the overall risk financing strategy .
Question 3
Strategic risk management means…
a) delivering a strategy that allows efficient risk hedging.
b) delivering a strategy that is risk free, which maximises the value add.
,c) achieving the organisation's objectives efficiently.
d) achieving the organisation's objectives within the stipulated time frame.
Answer: a) delivering a strategy that allows efficient risk hedging
Rationale: Strategic risk management focuses on aligning risk management strategies with
the organization's overall business strategy, enabling efficient hedging of risks that could
impact strategic objectives. It is not about eliminating risk entirely but about managing it in
a way that supports value creation .
Question 4
The primary objective of minimising the cost of risk is to…
a) maintain the ratio of the total cost of risk.
b) signal to investors that the company considers risks in its business decisions.
c) maximise return on investment.
d) signal to regulators that controls ensure compliance with laws and regulations.
Answer: c) maximise return on investment
Rationale: By minimizing the total cost of risk, organizations can improve their bottom line
and maximize returns to investors. This approach recognizes that risk management is not
just about avoiding losses but about optimizing the risk-return trade-off to enhance
shareholder value .
Question 5
The responsibility of risk management is best described as…
a) assessing, controlling and financing critical risks facing the organisation and reporting
outcomes to the board.
b) assessing critical risks facing the organisation and communicating the assessment to
management and the board.
c) compiling a report on all risk exposures of the organisation for reporting to the board.
d) providing assurance about the management of risks to stakeholders of the organisation.
Answer: a) assessing, controlling and financing critical risks facing the organisation and
reporting outcomes to the board
Rationale: This comprehensive view encompasses the full spectrum of risk management
activities—assessment, control, and financing—with accountability to the board. It reflects
the broader enterprise risk management approach that recognizes the importance of both
risk mitigation and risk financing strategies .
,Question 6
The foundation of classical economics, finance and decision theory is the abstract view that
human beings…
a) act rationally and maximise some measure of utility by optimally weighing and integrating
all relevant information.
b) use simple but ecologically rational strategies to make sound and robust decisions.
c) solve complex problems by employing complex tools and solutions.
d) make decisions under uncertainty conditions using outcome probabilities.
Answer: a) act rationally and maximise some measure of utility by optimally weighing and
integrating all relevant information
Rationale: Classical economic theory is built on the assumption of rational actors who make
decisions by optimizing utility. This rational choice theory forms the foundation of traditional
finance and decision-making models, though behavioural economics has since challenged
these assumptions .
Question 7
One of the weaknesses of traditional risk management is…
a) an inability to integrate all types of risks and balance sheet protection.
b) reliance on traditional risk mitigation, risk transfer and risk hedging opportunities.
c) that it considers the accounting, regulatory and rating agency treatment of financial
instruments.
d) that it requires the chief risk officer to have substantial knowledge of various business
areas.
Answer: a) an inability to integrate all types of risks and balance sheet protection
Rationale: Traditional risk management often operates in silos, addressing different risk
types separately without considering their interconnections. This fragmented approach fails
to provide comprehensive balance sheet protection and cannot capture the full scope of
organizational risk exposures, a key limitation that holistic enterprise risk management seeks
to address .
Topic 2: Insurance Principles and Concepts
Question 8
The senior underwriter reviewed the submitted insurance quotation and showed the trainee
underwriter that the R160 cost, which applies to all the 2025 insurance quotations, was not
included. The amount of R160 should be the… cost factor.
, a) moral hazard
b) adverse selection
c) capital
d) administration
Answer: d) administration
Rationale: Administrative costs are standard charges applied to all insurance quotations to
cover the insurer's operational expenses, such as policy issuance, documentation, and
processing. These are distinct from risk-based factors like moral hazard or adverse selection .
Question 9
The principle that gives the insurer the right to take legal action in the name of the insured
to recover the amount of a claim paid to the insured from the party legally responsible for
the loss is…
a) co-insurance.
b) average.
c) subrogation.
d) proximate cause.
Answer: c) subrogation
Rationale: Subrogation is a fundamental insurance principle that allows the insurer, after
paying a claim, to step into the insured's shoes and pursue legal action against any third
party responsible for the loss. This prevents the insured from recovering twice—from both
the insurer and the responsible party—and helps insurers recoup claim payments .
Question 10
Company A's assets were damaged by floods due to unmaintained storm drainage by the
city municipality. Company A successfully claimed for R85,000 and was paid R70,000 by the
insurer. However, the insurer proceeded to sue the municipality for the repayment of
R85,000. Choose the correct statement below.
a) The insurer understated the payment by R15,000.
b) The payment difference of R15,000 in the claim payment is an outstanding premium,
which Company A did not pay.
c) The municipality will have to pay R15,000 to Company A if the litigation is successful.
d) The difference of R15,000 in the claim payment is an excess.
Answer: d) The difference of R15,000 in the claim payment is an excess
