Fin 341 Ole Miss Jingshou Lou UPDATED ACTUAL Questions And Correct
Answers
C
Terms in this set (64)
Definition of Risk Risk is uncertainty about outcomes, with the possibility of negative outcomes
Does Risk = loss? No, if the loss happened, it is no longer a risk
Does Risk = Probability of loss? No - risk only equals uncertainty, not the loss itself or the probability (because at
100% probability, there is no risk)
Two types of Risk Negative Outcome and Uncertainty
Is there any risk in the following situation? A drunk driver No risk is presented because there is no uncertainty
gets pulled over by the police. This has been his/her third
conviction of a DUI in the last 5 years. He/she is worried
that the court will suspend his/her driver's license.
Pure Risk A chance of loss or no loss
Speculative Risk A chance of loss, no loss, or gain.
Which of the following is related to pure risk? Covid-19, Fire Risk, Flood Risk, The Risk of sickness or death
Covid-19
Fire Risk
Flood Risk
The Risk of sickness or death
Investment Risk in the stock market
Investment Risk in the housing market
Gambling
Business risk
Static Risk Risks that don't change significantly over time
Dynamic Risk Risks that are new and emerging
Which of the following is related to Dynamic Risk? Cyber, Terrorism, Covid-19
Flood, fire, wind, and tornado
Theft
Cyber risk
Terrorism risk
Covid-19 risk
Diversifiable Risk A risk that affects only some individuals, businesses, or small groups.
, Non-Diversifiable Risk A risk that affects a large amount of society at the same time.
Which of the following is related to Non_Diversifiable Flood, Covid-19, 2008 Financial crisis, Death risk due to wars
Risk?
Normal death risk
Car accident risk
Kitchen fire risk
Flood risk
Covid-19
Systemic risks such as 2008 financial crisis
Death risk due to wars
Objective Risk Measurable level of risk
Subjective Risk An individual's view of uncertainty or the situation involving risk
Factors Affecting Risk Frequency, Severity, Peril, Hazard
Frequency vs Severity How often loss occurs vs How bad of a loss is it (Financially)
Peril A random event that is the immediate cause of loss
Hazard A condition that lies behind the loss and increases
Types of Hazard Physical, Legal, Moral, Morale
Physical Hazards A physical condition of a property that increases the likelihood or severity of a
loss (Construction, Location, and Usage Hazards)
Moral Hazard Certain conditions increase the likelihood that a person may intentionally cause or
exaggerate a loss (Insurance Fraud, Charity Hazard)
Morale Hazard A lack of concern about potential losses, typically due to carelessness (Forgetting
to lock door, losing an item)
Legal hazard A condition within the legal environment that increases the frequency or severity
of losses (Damages Awarded, McDonalds example)
Total Costs of Risk Direct Losses, Indirect Losses, Expenditures on risk management
Total Cost of Risk Example: Medical Malpractice Loss Financial Loss (Legal fees and possible patient payments), Cost of Risk
Management (Doctor training/insurance), Loss of goodwill (reputation loss).
What is Risk Management? Determining the cost-effectiveness of mitigating a risk.
Answers
C
Terms in this set (64)
Definition of Risk Risk is uncertainty about outcomes, with the possibility of negative outcomes
Does Risk = loss? No, if the loss happened, it is no longer a risk
Does Risk = Probability of loss? No - risk only equals uncertainty, not the loss itself or the probability (because at
100% probability, there is no risk)
Two types of Risk Negative Outcome and Uncertainty
Is there any risk in the following situation? A drunk driver No risk is presented because there is no uncertainty
gets pulled over by the police. This has been his/her third
conviction of a DUI in the last 5 years. He/she is worried
that the court will suspend his/her driver's license.
Pure Risk A chance of loss or no loss
Speculative Risk A chance of loss, no loss, or gain.
Which of the following is related to pure risk? Covid-19, Fire Risk, Flood Risk, The Risk of sickness or death
Covid-19
Fire Risk
Flood Risk
The Risk of sickness or death
Investment Risk in the stock market
Investment Risk in the housing market
Gambling
Business risk
Static Risk Risks that don't change significantly over time
Dynamic Risk Risks that are new and emerging
Which of the following is related to Dynamic Risk? Cyber, Terrorism, Covid-19
Flood, fire, wind, and tornado
Theft
Cyber risk
Terrorism risk
Covid-19 risk
Diversifiable Risk A risk that affects only some individuals, businesses, or small groups.
, Non-Diversifiable Risk A risk that affects a large amount of society at the same time.
Which of the following is related to Non_Diversifiable Flood, Covid-19, 2008 Financial crisis, Death risk due to wars
Risk?
Normal death risk
Car accident risk
Kitchen fire risk
Flood risk
Covid-19
Systemic risks such as 2008 financial crisis
Death risk due to wars
Objective Risk Measurable level of risk
Subjective Risk An individual's view of uncertainty or the situation involving risk
Factors Affecting Risk Frequency, Severity, Peril, Hazard
Frequency vs Severity How often loss occurs vs How bad of a loss is it (Financially)
Peril A random event that is the immediate cause of loss
Hazard A condition that lies behind the loss and increases
Types of Hazard Physical, Legal, Moral, Morale
Physical Hazards A physical condition of a property that increases the likelihood or severity of a
loss (Construction, Location, and Usage Hazards)
Moral Hazard Certain conditions increase the likelihood that a person may intentionally cause or
exaggerate a loss (Insurance Fraud, Charity Hazard)
Morale Hazard A lack of concern about potential losses, typically due to carelessness (Forgetting
to lock door, losing an item)
Legal hazard A condition within the legal environment that increases the frequency or severity
of losses (Damages Awarded, McDonalds example)
Total Costs of Risk Direct Losses, Indirect Losses, Expenditures on risk management
Total Cost of Risk Example: Medical Malpractice Loss Financial Loss (Legal fees and possible patient payments), Cost of Risk
Management (Doctor training/insurance), Loss of goodwill (reputation loss).
What is Risk Management? Determining the cost-effectiveness of mitigating a risk.
