RISK MANAGEMENT - EXAM 1
(TEMPLE UNIVERSITY - MCCLOSKEY)
QUESTIONS AND ANSWERS | 2026
UPDATE | 100% CORRECT.
Risk - ANS the uncertainty concerning the occurrence of a loss
Loss Exposure - ANS any situation or circumstance in which a loss is possible, regardless of
whether a loss actually occurs
Law of Large Numbers - ANS as the number of exposure units increase, the more closely the
actual loss experience will approach the expected loss experience
Peril - ANS the cause of the loss
Hazard - ANS a condition that creates or increases the frequency or severity of a loss, or both
Pure Risk - ANS a situation in which there are only the possibilities of loss or no loss
Speculative Risk - ANS a situation in which either profit, break even, or loss is possible
Diversifiable - ANS a risk that affects only individuals or small groups and not the entire
economy
@COPYRIGHT ALL RIGHTS RESERVED PAGE 1 OF 8
, Nondiversifiable - ANS a risk that affects the entire economy or large numbers of persons or
groups within the economy
Static - ANS Risk that does not change significantly over time
Dynamic - ANS Risk that arises out of constantly changing circumstances
Subjective Risk - ANS An individual view of uncertainty regarding risk; not easily measurable
Objective Risk - ANS Based on data, experience, and other means; measures the actual loss;
more easily measurable
Direct Loss - ANS The cost to replace or repair financial or physical assets
Indirect Loss - ANS Extra expenses that are the result of a loss (i.e. Loss of Income)
Frequency - ANS How often losses occure
Severity - ANS How bad the loss is in terms of dollars
Physical Hazard - ANS Examples of this include location, construction, and use
Moral Hazard - ANS When behavior is different because of the existence of insurance
Morale Hazard - ANS Carelessness concerning losses; has nothing to do with the existence of
insurance
Burden of Risk - ANS Asks the question of what risks truly cost an organization or society
@COPYRIGHT ALL RIGHTS RESERVED PAGE 2 OF 8
(TEMPLE UNIVERSITY - MCCLOSKEY)
QUESTIONS AND ANSWERS | 2026
UPDATE | 100% CORRECT.
Risk - ANS the uncertainty concerning the occurrence of a loss
Loss Exposure - ANS any situation or circumstance in which a loss is possible, regardless of
whether a loss actually occurs
Law of Large Numbers - ANS as the number of exposure units increase, the more closely the
actual loss experience will approach the expected loss experience
Peril - ANS the cause of the loss
Hazard - ANS a condition that creates or increases the frequency or severity of a loss, or both
Pure Risk - ANS a situation in which there are only the possibilities of loss or no loss
Speculative Risk - ANS a situation in which either profit, break even, or loss is possible
Diversifiable - ANS a risk that affects only individuals or small groups and not the entire
economy
@COPYRIGHT ALL RIGHTS RESERVED PAGE 1 OF 8
, Nondiversifiable - ANS a risk that affects the entire economy or large numbers of persons or
groups within the economy
Static - ANS Risk that does not change significantly over time
Dynamic - ANS Risk that arises out of constantly changing circumstances
Subjective Risk - ANS An individual view of uncertainty regarding risk; not easily measurable
Objective Risk - ANS Based on data, experience, and other means; measures the actual loss;
more easily measurable
Direct Loss - ANS The cost to replace or repair financial or physical assets
Indirect Loss - ANS Extra expenses that are the result of a loss (i.e. Loss of Income)
Frequency - ANS How often losses occure
Severity - ANS How bad the loss is in terms of dollars
Physical Hazard - ANS Examples of this include location, construction, and use
Moral Hazard - ANS When behavior is different because of the existence of insurance
Morale Hazard - ANS Carelessness concerning losses; has nothing to do with the existence of
insurance
Burden of Risk - ANS Asks the question of what risks truly cost an organization or society
@COPYRIGHT ALL RIGHTS RESERVED PAGE 2 OF 8
