Insurance - Exam 2025
axscientificxapproachxtoxthexproblemxofxdealingxwithxthexrisksxfacingxindividualsxandxorganizations.x-
xANSWERxRiskxManagement
Thosexwhoxarexresponsiblexforxthexentirexprogramxofxpurexriskxmanagementx(ofxwhichxinsurancexbuyi
ngxisxonlyxaxpart)xarex-xANSWERxriskxmanagers
___xattemptsxtoxintegratexthexmanagementxofxallxofxthexfirm'sxrisks,xbothxpurexandxspeculative.x-
xANSWERxEnterprisexRiskxManagement
CommonxRiskxcategoriesxinxanxERMxprogramxincludex(4):x-xANSWERxMarketxrisk
Creditxrisk
Liquidityxrisk
Operationalxrisk
Thexriskxarisingxfromxthexpotentialxthatxaxborrowerxwillxfailxtoxpayxaxdebt.x-xANSWERxCreditxRisk
Thexriskxarisingxfromxadversexmovementsxinxmarketxprices.x-xANSWERxMarketxRisk
Thexdefinitionxvaries.xItxincludesxaxvarietyxofxpurexrisks,xincludingxtechnologyxrisks,xeventsxsuchxasxfire,
xworkerxinjury,xCYBERxRISKx(#1xissuexrn)xetc.x-xANSWERxOperationalxRisk
,Thexriskxthatxthexbusinessxwillxhavexinsufficientxliquidxassetsxtoxmeetxobligationsxthatxcomexdue.x-
xANSWERxLiquidityxrisk
integratedxmanagementxofxallxrisks,xpurexandxspeculativex-xANSWERxEnterprisexriskxmanagement
thexmanagementxofxpurexrisks,xbothxinsurablexandxuninsurablex-
xANSWERxTraditionalxriskxmanagement
thexmanagementxofxfinancialxrisks,xincludingxcreditxrisk,xmarketxrisk,xandxliquidityxriskx-
xANSWERxFinancialxriskxmanagement
ThexgreatestxprogressxtowardxERMxhasxbeenxinx___,xwherexfinancialxriskxmanagementxisxcriticalx-
xANSWERxfinancialxinstitutions
axscientificxapproachxtoxdealingxwithxrisksxbyxanticipatingxpossiblexaccidentalxlossesxandxdesigningxand
ximplementingxproceduresxthatxminimizexthexoccurrencexofxlossxorxthexfinancialximpactxofxthexlossesxt
hatxdoxoccur.x-xANSWERxriskxmanagement
TwoxcomponentsxofxRiskxControlx-xANSWERxAvoidance
Reduction
TwoxComponentsxofxRiskxFinancingx-xANSWERxRetention
Transfer
Buyingxinsurance
DeepxPocketxTheoryx-xANSWERxTransfer
, encompassesxallxtechniquesxaimedxatxreducingxthexnumberxofxrisksxfacingxthexorganizationxorxthexam
ountxofxlossxthatxcanxarisexfromxthesexexposures.x-xANSWERxRiskxControl
Noxmorexriskxpossiblex-xANSWERxriskxavoidance
takesxplacexwhenxdecisionsxarexmadexthatxpreventxaxriskxfromxevenxcomingxintoxexistence.x-
xANSWERxavoidance
TxorxF:xRiskxavoidancexshouldxbexusedxinxthosexinstancesxinxwhichxthexexposurexhasxcatastrophicxpote
ntialxandxcannotxbexreducedxorxtransferred.x-xANSWERxTrue
Broadlyxspeaking,x"lossxprevention"xeffortsxarexaimedxatxpreventingxthex-xANSWERxOccurrencexofxloss
consistsxofxthosextechniquesxdesignedxtoxguaranteexthexavailabilityxofxfundsxtoxmeetxthosexlossesxthat
xdoxoccur.x-xANSWERxRiskxfinancing
Allxrisksxthatxcannotxbexavoidedxorxreducedxmustxbex_______.x-xANSWERxTransferredxorxretained
Intentional/Unintentional
Voluntary/Involuntary
Funed/Unfundedx-xANSWERxRiskxRetentionxTechniques
___xriskxretentionxisxalwaysxundesirablex-xANSWERxUnintentional
___xretentionxresultsxfromxthexjudgmentxthatxretentionxisxthexmostxeffectivexmeansxofxdealingxwithxth
exrisk.