risk management assignment 1 question with answers
liability - -casualty
-two types of property - -tangible & intangible
-intangible - -no physical form
-tangible - -physical form
-two types of tangible - -real property & personal property
-real property - -land, all structures attached to the land, and whatever is growing on the land
-personal property - -all property that is not real property
-risk management process - -1. identify risk exposures
2. analyze risk exposures
3. determine feasibility of risk management techniques
4. selecting the appropriate risk management techniques
5. implement the risk management technique
6. monitor results & revising risk management program
-step one: identify loss exposure methods - -- document analysis
- compliance reviews
- inspections
- expertise
-inspections example - -ore mine
-expertise comes from - -underwriters, going to conferences
-e(L) - -frequency x severity = expected value of loss
-loss frequency - -how often a loss occurs within a specific period
-loss severity - -the amount, in monetary terms, of a loss for one specific occurrence
-example of high frequency low severity - -happens 1000 times, but only costs a $1
-example of low frequency high severity - -happens once, but costs $10,000
, -law of large numbers - -the larger the number of homogenous exposure units, the more likely
actual results will approach what we expect them to be
-Matrix: High Severity Low Frequency - -Transfer & Prevent/Reduce
-Matrix: High Severity High Frequency - -AVOID! but if you cannot use all loss control measures
-Matrix: Low Severity Low Frequency - -Retain
-Matrix: Low Severity High Frequency - -Prevent & Retain
-Risk Control - -minimizes frequency or severity of loss
-Avoidance - -eliminates any possibility of loss
-Avoidance example - -no swimming sign, probability of drowning is zero because no one is
swimming
-Loss Prevention - -reducing the frequency of a loss
-Loss Prevention Example - -lid on medicine cap, makes it more difficult for children to get into
it, but doesn't make it impossible
-Loss Reduction - -reducing the severity of the loss
-Loss Reduction Example - -sprinkler systems, does nothing to prevent the fire but it reduces
the damages
-Seperation - -dispersing a particular asset/assets over several locations
-Seperation Example - -explosives and ignition are not kept right beside eachother
-Duplication - -relying on backups/spares/duplicates
-Duplication Example - -second copy of birth certificate
-Diversification - -range of products services used by variety of people; spreading risk around
multiple people
-Diversification Examples - -helps prevent old lady from accounting from fraud
-Risk Financing - -generates funds to finance losses that could not be entirely prevented or
reduced with RM techniques
liability - -casualty
-two types of property - -tangible & intangible
-intangible - -no physical form
-tangible - -physical form
-two types of tangible - -real property & personal property
-real property - -land, all structures attached to the land, and whatever is growing on the land
-personal property - -all property that is not real property
-risk management process - -1. identify risk exposures
2. analyze risk exposures
3. determine feasibility of risk management techniques
4. selecting the appropriate risk management techniques
5. implement the risk management technique
6. monitor results & revising risk management program
-step one: identify loss exposure methods - -- document analysis
- compliance reviews
- inspections
- expertise
-inspections example - -ore mine
-expertise comes from - -underwriters, going to conferences
-e(L) - -frequency x severity = expected value of loss
-loss frequency - -how often a loss occurs within a specific period
-loss severity - -the amount, in monetary terms, of a loss for one specific occurrence
-example of high frequency low severity - -happens 1000 times, but only costs a $1
-example of low frequency high severity - -happens once, but costs $10,000
, -law of large numbers - -the larger the number of homogenous exposure units, the more likely
actual results will approach what we expect them to be
-Matrix: High Severity Low Frequency - -Transfer & Prevent/Reduce
-Matrix: High Severity High Frequency - -AVOID! but if you cannot use all loss control measures
-Matrix: Low Severity Low Frequency - -Retain
-Matrix: Low Severity High Frequency - -Prevent & Retain
-Risk Control - -minimizes frequency or severity of loss
-Avoidance - -eliminates any possibility of loss
-Avoidance example - -no swimming sign, probability of drowning is zero because no one is
swimming
-Loss Prevention - -reducing the frequency of a loss
-Loss Prevention Example - -lid on medicine cap, makes it more difficult for children to get into
it, but doesn't make it impossible
-Loss Reduction - -reducing the severity of the loss
-Loss Reduction Example - -sprinkler systems, does nothing to prevent the fire but it reduces
the damages
-Seperation - -dispersing a particular asset/assets over several locations
-Seperation Example - -explosives and ignition are not kept right beside eachother
-Duplication - -relying on backups/spares/duplicates
-Duplication Example - -second copy of birth certificate
-Diversification - -range of products services used by variety of people; spreading risk around
multiple people
-Diversification Examples - -helps prevent old lady from accounting from fraud
-Risk Financing - -generates funds to finance losses that could not be entirely prevented or
reduced with RM techniques
