1. What is the primary purpose of risk management?
A. To eliminate all risks
B. To identify and manage potential losses
C. To increase the frequency of losses
D. To transfer all risks to insurance companies
Answer: B) To identify and manage potential losses
Rationale: Risk management aims to identify, assess, and prioritize
risks to minimize the impact of potential losses.
Quizlet
2. In a business, what does 'enterprise risk management' (ERM) aim to
do?
A. Focus solely on financial risks while ignoring operational risks
B. Identify and manage all types of risks across the entire organization
C. Only address risks related to external factors like competitors or
market trends
D. Focus on individual risks rather than organizational-level risk
strategies
Answer: B) Identify and manage all types of risks across the entire
organization
Rationale: ERM is a holistic approach to managing all risks, including
financial, operational, and strategic risks, across an entire organization.
(quizlet.com)
,3. In risk management, what does the term ‘risk acceptance’ mean?
A. Transferring the risk to a third party through insurance
B. Taking no action to address the risk and accepting the potential loss
C. Reducing the likelihood of the risk occurring through preventive
measures
D. Eliminating the risk entirely through avoidance techniques
Answer: B) Taking no action to address the risk and accepting the
potential loss
Rationale: Risk acceptance means recognizing the potential risk and
deciding to bear the consequences if it materializes, often because the
cost of addressing the risk is greater than the potential loss.
(quizlet.com)
4. In what situation would a risk management strategy typically choose
risk avoidance?
A. When the potential loss is high but the likelihood of occurrence is
low
B. When the frequency of loss is high and the severity is low
C. When the risk can be completely eliminated by not engaging in
certain activities
D. When transferring the risk to an insurance company is too
expensive
Answer: C) When the risk can be completely eliminated by not
engaging in certain activities
, Rationale: Risk avoidance is chosen when the risk can be completely
eliminated by avoiding the activity or situation that creates the risk.
(stuvia.com)
5. What is the purpose of risk identification in the risk management
process?
A. To assess the severity of potential risks
B. To identify the sources of risks and understand their nature
C. To allocate financial resources to manage risks
D. To transfer risks to external insurance providers
Answer: B) To identify the sources of risks and understand their nature
Rationale: Risk identification is the first step in risk management and
involves recognizing potential risks and understanding their sources
and characteristics. (quizlet.com)
6. Which of the following is an example of a legal hazard?
A. A poorly written contract that leads to disputes
B. A faulty piece of machinery in a factory
C. A natural disaster such as a flood
D. A lack of employee safety training
Answer: A) A poorly written contract that leads to disputes
Rationale: A legal hazard refers to the risk of legal consequences or
issues arising from actions like poorly drafted contracts, compliance
failures, or disputes. (quizlet.com)
A. To eliminate all risks
B. To identify and manage potential losses
C. To increase the frequency of losses
D. To transfer all risks to insurance companies
Answer: B) To identify and manage potential losses
Rationale: Risk management aims to identify, assess, and prioritize
risks to minimize the impact of potential losses.
Quizlet
2. In a business, what does 'enterprise risk management' (ERM) aim to
do?
A. Focus solely on financial risks while ignoring operational risks
B. Identify and manage all types of risks across the entire organization
C. Only address risks related to external factors like competitors or
market trends
D. Focus on individual risks rather than organizational-level risk
strategies
Answer: B) Identify and manage all types of risks across the entire
organization
Rationale: ERM is a holistic approach to managing all risks, including
financial, operational, and strategic risks, across an entire organization.
(quizlet.com)
,3. In risk management, what does the term ‘risk acceptance’ mean?
A. Transferring the risk to a third party through insurance
B. Taking no action to address the risk and accepting the potential loss
C. Reducing the likelihood of the risk occurring through preventive
measures
D. Eliminating the risk entirely through avoidance techniques
Answer: B) Taking no action to address the risk and accepting the
potential loss
Rationale: Risk acceptance means recognizing the potential risk and
deciding to bear the consequences if it materializes, often because the
cost of addressing the risk is greater than the potential loss.
(quizlet.com)
4. In what situation would a risk management strategy typically choose
risk avoidance?
A. When the potential loss is high but the likelihood of occurrence is
low
B. When the frequency of loss is high and the severity is low
C. When the risk can be completely eliminated by not engaging in
certain activities
D. When transferring the risk to an insurance company is too
expensive
Answer: C) When the risk can be completely eliminated by not
engaging in certain activities
, Rationale: Risk avoidance is chosen when the risk can be completely
eliminated by avoiding the activity or situation that creates the risk.
(stuvia.com)
5. What is the purpose of risk identification in the risk management
process?
A. To assess the severity of potential risks
B. To identify the sources of risks and understand their nature
C. To allocate financial resources to manage risks
D. To transfer risks to external insurance providers
Answer: B) To identify the sources of risks and understand their nature
Rationale: Risk identification is the first step in risk management and
involves recognizing potential risks and understanding their sources
and characteristics. (quizlet.com)
6. Which of the following is an example of a legal hazard?
A. A poorly written contract that leads to disputes
B. A faulty piece of machinery in a factory
C. A natural disaster such as a flood
D. A lack of employee safety training
Answer: A) A poorly written contract that leads to disputes
Rationale: A legal hazard refers to the risk of legal consequences or
issues arising from actions like poorly drafted contracts, compliance
failures, or disputes. (quizlet.com)
