Certified Insurance Service Representative (CISR) – Elements
of Risk Management, Questions And Correct Answers With
Verified Solutions Already Grade A+.
✅ Key Topics Covered by the Course
Before diving into questions, a quick recap of the main content areas (based on the official
course outline):
• Definition of risk & risk management; risk terminology; the five-step risk
management process; total cost of risk. (IIAN)
• Risk Identification: the general classes of risk, logical classifications of exposures,
methods of risk identification. (IIAN)
• Risk Analysis: qualitative vs quantitative analysis, loss data collection/trending,
forecasting, prioritizing risks. (NASBA Registry)
• Risk Control: risk control techniques (avoidance; prevention; loss reduction;
segregation/duplication/separation; transfer) and claims/ crisis management. (IIAN)
• Risk Financing: retention vs transfer of risk, use of internal vs external funds,
determining insurable vs non-insurable risks. (NASBA Registry)
• Risk Administration / overall risk-management program. (NASBA Registry)
🎯 Sample Exam Questions & Answers
Question 1 – Definitions / Basic Concepts
Q: How does CISR define “risk”?
A. A definite loss
B. A cause of a loss
C. A condition of uncertainty that can lead to positive or negative outcomes
D. Only the chance of loss
Answer: C — risk is defined as a condition of either positive or negative uncertainty arising
from given circumstances. (Stuvia)
Explanation: Risk is not always negative; there could be neutral or even positive results. The
uncertainty — not just loss — makes it “risk.” (Stuvia)
Question 2 – Pure vs Speculative Risk
Q: Which scenario is an example of pure risk?
A. Investing in the stock market
B. Launching a new product with potential profit or loss
,C. Fire damaging a building owned by a business
D. Expanding business into a new country
Answer: C — fire damaging a building is pure risk (only possible loss or no loss).
(Docsity)
Explanation: Pure risk involves situations with no possibility of gain — only loss or no
change. Investing or business ventures involve speculative risk because they carry potential
for gain or loss. (Stuvia)
Question 3 – Risk Management Process Steps
Q: What is the correct sequence of the core steps in the risk-management process?
A. Risk Identification → Risk Control → Risk Financing → Risk Analysis → Risk
Administration
B. Risk Identification → Risk Analysis → Risk Control → Risk Financing → Risk
Administration
C. Risk Analysis → Risk Identification → Risk Control → Risk Administration → Risk
Financing
D. Risk Control → Risk Identification → Risk Analysis → Risk Financing → Risk
Administration
Answer: B — Identification → Analysis → Control → Financing → Administration.
(IIAN)
Question 4 – Classification of Risks
Q: Which of the following is not one of the general classes of risk recognized in CISR?
A. Physical
B. Economic
C. Ethical
D. Technological
Answer: C — Ethical is not among the standard general classes (which include physical,
economic, legal, social, technological, juridical, political). (Quizlet)
Question 5 – Risk Control Techniques
Q: What risk-control technique involves completely eliminating an exposure so that potential
loss is removed?
A. Prevention
B. Loss Reduction
C. Avoidance
D. Transfer
Answer: C — Avoidance. (Docsity)
,Explanation: Avoidance means simply not engaging in the risky activity or exposure.
Prevention and Loss Reduction aim to reduce likelihood or severity; Transfer shifts risk to
another party. (Docsity)
Question 6 – Risk Financing: Retention vs Transfer
Q: If an insurer or organization decides to pay losses out-of-pocket rather than purchasing
insurance (or transferring risk), this is called:
A. Risk Transfer
B. Risk Avoidance
C. Risk Retention
D. Risk Reduction
Answer: C — Risk Retention. (Docsity)
Explanation: Retention means keeping the financial burden internally; transfer would be
shifting to a third-party (e.g. insurer). (NASBA Registry)
Question 7 – Insurable Risk (Characteristics)
Q: Which of the following is not typically a requirement for a risk to be insurable under
standard insurance principles?
A. Loss must be accidental
B. Loss must be definite as to time, place, and amount
C. Loss must be speculative (with possibility of gain)
D. Loss must be large enough to create economic distress
Answer: C — speculative risk (with possibility of gain) is generally not insurable;
insurance typically covers pure risk (only loss or no loss). (Docsity)
Question 8 – Logical Classifications of Exposures
Q: Which is not one of the four logical classifications of exposures used during risk
identification?
A. Property
B. Human Resources
C. Ambiental
D. Net Income
Answer: C — “Ambiental” (or environmental) is not one of the four standard
classifications; the four are Property, Human Resources, Liability, Net Income. (IIAN)
Question 9 – Loss Data & Risk Analysis
, Q: What is one primary purpose of collecting and analyzing loss data in the risk-management
process?
A. To ensure the company avoids all risks entirely
B. To determine who to fire after a loss occurs
C. To forecast future losses and prioritize risk-management efforts
D. To create complexity so insurers charge more
Answer: C — to forecast likely losses (frequency/severity) and prioritize which risks to
treat, transfer, or monitor. (NASBA Registry)
Question 10 – Hazard vs Peril vs Exposure
Q: Which of the following best defines “peril”?
A. A situation or condition that increases the likelihood of loss (e.g. slippery floor)
B. A cause of loss — the event that directly brings about loss (e.g. fire, flood)
C. A resource or asset exposed to potential loss (e.g. building, machinery)
D. A plan to avoid or reduce risk
Answer: B — a peril is a cause of loss. A hazard (A) increases likelihood or severity;
exposure (C) is what’s exposed to the peril.
Questions 11–20
Q11: Which of the following is a method of risk identification?
A. Risk retention
B. Financial statement analysis
C. Risk avoidance
D. Insurance claim filing
Answer: B — analyzing financial statements helps identify potential exposures.
Q12: Separation, duplication, and segregation are examples of:
A. Risk financing
B. Risk control
C. Risk retention
D. Risk transfer
Answer: B — these are risk-control techniques designed to reduce loss severity.
Q13: Risk avoidance is most effective when:
A. Loss frequency is high but severity is low
B. Loss severity is catastrophic
C. Risk can be insured
D. Cost of loss is minimal
of Risk Management, Questions And Correct Answers With
Verified Solutions Already Grade A+.
✅ Key Topics Covered by the Course
Before diving into questions, a quick recap of the main content areas (based on the official
course outline):
• Definition of risk & risk management; risk terminology; the five-step risk
management process; total cost of risk. (IIAN)
• Risk Identification: the general classes of risk, logical classifications of exposures,
methods of risk identification. (IIAN)
• Risk Analysis: qualitative vs quantitative analysis, loss data collection/trending,
forecasting, prioritizing risks. (NASBA Registry)
• Risk Control: risk control techniques (avoidance; prevention; loss reduction;
segregation/duplication/separation; transfer) and claims/ crisis management. (IIAN)
• Risk Financing: retention vs transfer of risk, use of internal vs external funds,
determining insurable vs non-insurable risks. (NASBA Registry)
• Risk Administration / overall risk-management program. (NASBA Registry)
🎯 Sample Exam Questions & Answers
Question 1 – Definitions / Basic Concepts
Q: How does CISR define “risk”?
A. A definite loss
B. A cause of a loss
C. A condition of uncertainty that can lead to positive or negative outcomes
D. Only the chance of loss
Answer: C — risk is defined as a condition of either positive or negative uncertainty arising
from given circumstances. (Stuvia)
Explanation: Risk is not always negative; there could be neutral or even positive results. The
uncertainty — not just loss — makes it “risk.” (Stuvia)
Question 2 – Pure vs Speculative Risk
Q: Which scenario is an example of pure risk?
A. Investing in the stock market
B. Launching a new product with potential profit or loss
,C. Fire damaging a building owned by a business
D. Expanding business into a new country
Answer: C — fire damaging a building is pure risk (only possible loss or no loss).
(Docsity)
Explanation: Pure risk involves situations with no possibility of gain — only loss or no
change. Investing or business ventures involve speculative risk because they carry potential
for gain or loss. (Stuvia)
Question 3 – Risk Management Process Steps
Q: What is the correct sequence of the core steps in the risk-management process?
A. Risk Identification → Risk Control → Risk Financing → Risk Analysis → Risk
Administration
B. Risk Identification → Risk Analysis → Risk Control → Risk Financing → Risk
Administration
C. Risk Analysis → Risk Identification → Risk Control → Risk Administration → Risk
Financing
D. Risk Control → Risk Identification → Risk Analysis → Risk Financing → Risk
Administration
Answer: B — Identification → Analysis → Control → Financing → Administration.
(IIAN)
Question 4 – Classification of Risks
Q: Which of the following is not one of the general classes of risk recognized in CISR?
A. Physical
B. Economic
C. Ethical
D. Technological
Answer: C — Ethical is not among the standard general classes (which include physical,
economic, legal, social, technological, juridical, political). (Quizlet)
Question 5 – Risk Control Techniques
Q: What risk-control technique involves completely eliminating an exposure so that potential
loss is removed?
A. Prevention
B. Loss Reduction
C. Avoidance
D. Transfer
Answer: C — Avoidance. (Docsity)
,Explanation: Avoidance means simply not engaging in the risky activity or exposure.
Prevention and Loss Reduction aim to reduce likelihood or severity; Transfer shifts risk to
another party. (Docsity)
Question 6 – Risk Financing: Retention vs Transfer
Q: If an insurer or organization decides to pay losses out-of-pocket rather than purchasing
insurance (or transferring risk), this is called:
A. Risk Transfer
B. Risk Avoidance
C. Risk Retention
D. Risk Reduction
Answer: C — Risk Retention. (Docsity)
Explanation: Retention means keeping the financial burden internally; transfer would be
shifting to a third-party (e.g. insurer). (NASBA Registry)
Question 7 – Insurable Risk (Characteristics)
Q: Which of the following is not typically a requirement for a risk to be insurable under
standard insurance principles?
A. Loss must be accidental
B. Loss must be definite as to time, place, and amount
C. Loss must be speculative (with possibility of gain)
D. Loss must be large enough to create economic distress
Answer: C — speculative risk (with possibility of gain) is generally not insurable;
insurance typically covers pure risk (only loss or no loss). (Docsity)
Question 8 – Logical Classifications of Exposures
Q: Which is not one of the four logical classifications of exposures used during risk
identification?
A. Property
B. Human Resources
C. Ambiental
D. Net Income
Answer: C — “Ambiental” (or environmental) is not one of the four standard
classifications; the four are Property, Human Resources, Liability, Net Income. (IIAN)
Question 9 – Loss Data & Risk Analysis
, Q: What is one primary purpose of collecting and analyzing loss data in the risk-management
process?
A. To ensure the company avoids all risks entirely
B. To determine who to fire after a loss occurs
C. To forecast future losses and prioritize risk-management efforts
D. To create complexity so insurers charge more
Answer: C — to forecast likely losses (frequency/severity) and prioritize which risks to
treat, transfer, or monitor. (NASBA Registry)
Question 10 – Hazard vs Peril vs Exposure
Q: Which of the following best defines “peril”?
A. A situation or condition that increases the likelihood of loss (e.g. slippery floor)
B. A cause of loss — the event that directly brings about loss (e.g. fire, flood)
C. A resource or asset exposed to potential loss (e.g. building, machinery)
D. A plan to avoid or reduce risk
Answer: B — a peril is a cause of loss. A hazard (A) increases likelihood or severity;
exposure (C) is what’s exposed to the peril.
Questions 11–20
Q11: Which of the following is a method of risk identification?
A. Risk retention
B. Financial statement analysis
C. Risk avoidance
D. Insurance claim filing
Answer: B — analyzing financial statements helps identify potential exposures.
Q12: Separation, duplication, and segregation are examples of:
A. Risk financing
B. Risk control
C. Risk retention
D. Risk transfer
Answer: B — these are risk-control techniques designed to reduce loss severity.
Q13: Risk avoidance is most effective when:
A. Loss frequency is high but severity is low
B. Loss severity is catastrophic
C. Risk can be insured
D. Cost of loss is minimal
