Risk Management Exam 1 Questions And Answers Rated 100% !!!

Donna has a home that is insured to its maximum value. She often leaves the door unlocked in case she forgets her keys. She knows that her insurance policy will pay for any losses if her home is robbed. Which of the following best applies to Donna? a. moral/morale hazard b. physical hazard c. societal hazard d. none of the above - ANS a. moral/morale hazard Loss frequency describes which of the following? a. number of losses b. financial impact of losses c. both the number and severity of losses d. none of the above - ANS a. number of losses Risk reduction methods are best applied to? a. High frequency losses. b.High severity losses. c. Both a. and b. d. neither a. nor b - ANS b.High severity losses. Why should we measure loss severity? a. risk classification b. determination of transfer (insurance) amount c. loss severity is never measured d. Both a. and b. - ANS d. Both a. and b. Which of the following is the last step in the risk management process (but often done first)? a. Identify Risks b. Review and Evaluate c. Determine Objectives d. Implement the decisions - ANS b. Review and Evaluate Risks affecting a large portion of the population at a given time are which of the following? a. hazard risks b. fundamental risks c. core risks d. particular risks - ANS b. fundamental risks Risk prevention and risk reduction are both included under which of the following? a. risk (loss) control b. risk (loss) financing c. risk identification d. risk classification - ANS a. risk (loss) control Loss severity describes which of the following? a. number of losses b. financial impact of losses c. reputational damage of losses d. none of the above - ANS b. financial impact of losses Which of the following method(s) best identifies all the risks faced by an organization? a. questionnaires b. checklists c. procedure guides d. combination of all of the above - ANS d. combination of all of the above As the Chief Investment Officer for "A Nyce Place to Work" you have been given the opportunity to invest in the Super-Tazer. It is a tazer, that when you push the button incapacitates everyone in a 10 foot radius of you. You have figured out that there are three potential outcomes for this investment: Outcome Probability Return 1. .25 .10 2. .50 .25 3. .25 .40 What is the expected return on the investment? *Make sure your answer is in a decimal format (.10, .55, etc...) not a percentage (50%). Round (if necessary) to the hundreths position (i.e. .089 = .09). - ANS 0.25 or 25% According to "Innovation Risk: How to Make Smarter Decisions", which of the following is NOT one of the five rules of thumb to minimizing risk? a. Determine which risks are being faced b. Expect the unexpected c. Recognize that you need a model d. Understand use and user. - ANS a. Determine which risks are being faced One of the core concepts of the reading "A Scientific View of Risk" is: a. smoking causes cancer b. dying young is worse than dying old c. risk reduction has both monetary and non-monetary costs d. cancer is a deadly disease - ANS c. risk reduction has both monetary and non-monetary costs One of the public policy concerns associated with risk reduction in the reading "A Scientific View of Risk" is estimating the cost and benefits of risk reduction. For many risks, such as highway safety estimating the cost and benefits of risk reduction include: a. the impact of pollution b. putting a value on household pets c. putting a value on human life d. the political consequences of freedom restriction - ANS c. putting a value on human life According to "Innovation Risk: How to Make Smarter Decisions", mathematical modeling is more precise than which of the following? a. Environmental modeling b. Human cognition c. Behavioral analysis d. Statistical modeling - ANS b. Human cognition According to "Innovation Risk: How to Make Smarter Decisions", the utility of a model depends on the model itself, why it's being used and which of the following? a.Where the model is being used b. Which software the model is running on c. When the model is being used d. Who is using the model - ANS d. Who is using the model According to "Innovation Risk: How to Make Smarter Decisions", what is one of the major factors in determining the risks and benefits of innovation?