Assignment: Risk Management Quiz

Assignment: Risk Management Quiz

Assignment: Risk Management Quiz


Week 2 Quiz

FIN 428 Week 2 Quiz

Financial risk management encompasses management of

  • operational risk, strategic risk, and credit risk
  • credit risk, market risk, and liquidity risk
  • compliance risk, credit risk, and strategic risk
  • pure risk, speculative risk, and strategic risk


There are two basic approaches to the interpretation of probability.  In insurance we are primarily concerned with

  • the relative frequency interpretation.
  • the a priori interpretation.
  • the Bayesian interpretation.
  • the subjective interpretation.


A peril, as distinguished from a hazard, is defined as

  • the cause of a loss.
  • the same thing as risk.
  • a condition that increases the likelihood of loss.
  • a type of legal liability.


The definition of  risk suggested in the text views risk as

  • a condition of the real world.
  • an opportunity for gain or loss.
  • subjective uncertainty.
  • a state of mind.


The evolution of risk management is traceable to

  • insurance marketing campaigns.
  • legal cases which set the precedent for risk management practices.
  • systems safety in the aerospace program.
  • the introduction of decision theory in business college curricula.

From the insured’s perspective, the purchase of insurance is an example of


Probability may be defined as

  • a measure of the likelihood of an occurrence.
  • an unquantifiable measure.
  • a measure of the degree of uncertainty.
  • the number of losses that occur annually.


Risk management contributes to organization profit

  • by reducing organization’s operating costs with staff reductions.
  • by allowing the organization to engage in certain speculative risks.
  • by reducing the cost of losses.
  • by reducing the organization’s operating effectiveness.


An insurer insures 1000 houses, with 10 expected losses and a standard deviation of 2.  Other things being equal, the insurer may be 99% certain that the number of losses will be

  • 10.
  • between 0 and 22.
  • between 7 and 13.
  • between 4 and 16.


The four elements of an insurable risk

  • must be present or the exposure cannot be insured.
  • include the requirement of economic feasibility.
  • are desirable, but some insurable risks do not possess them.
  • require that the probability of loss be known.


The term hazard refers to

  • the same thing as the term peril.
  • uncertainty regarding loss.
  • a condition that increases the chance of loss
  • the same thing as probability of loss


Which of the following techniques for dealing with risk may be said to represent a special variation of other techniques?

  • Transfer
  • Retention
  • Reduction
  • Sharing


From the insurer’s perspective, the operation of the insurance mechanism is an example of


The possibility of loss resulting from a flood is an example of

  • a static fundamental risk.
  • a static particular risk.
  • a dynamic particular risk.
  • a dynamic fundamental risk.


Pure risk is characterized by

  • a chance of loss or no loss only.
  • the chance of gain or no loss only.
  • a chance of gain and a chance of gain.
  • a chance of loss and a chance of gain.


From the viewpoint of society and the economy, the most desirable means of dealing with risk is

  • loss prevention.


The distinction between fundamental and particular risks is important because

  • normally only particular risks are insurable
  • whether a risk is fundamental or particular may determine how society will deal with it.
  • fundamental risks are a source of gain to society.
  • particular risk policies only allow for partial coverage, whereas fundamental risk policies allow full coverage.


Traditional risk management is concerned primarily with

  • dynamic risks.
  • pure risks.
  • fundamental risks.
  • speculative risks.


The term enterprise risk management refers to

  • management of risks for profit-making organizations.
  • management of risks related to derivatives and futures.
  • integrated management of a firm’s pure and speculative risks.
  • management of financial risks.


Property insurance policies typically exclude coverage for losses caused by war.  This is because

  • insuring war creates an adverse selection problem.
  • it is impossible to determine which warring faction actually caused the damage.
  • the courts have defined the term war broadly.
  • losses from war are potentially catastrophic.


According to the law of large numbers, as the number of exposure units is increased

  • the chance or probability of loss increases.
  • the chance of loss declines.
  • the accuracy of predictions should be better.
  • the accuracy of predictions should remain about the same.


Hazards are usually classified into three categories.  They are:

  • perils, risks, and uncertainties.
  • personal, property, and liability.
  • physical, mental, and moral.
  • moral, morale, and physical.


Involuntary retention occurs when

  • insurance covers the intended exposure.
  • the risk is recognized.
  • loss control measures are improperly implemented.
  • loss control measures are properly implemented.


To be technically correct, we should define fire as

  • a hazard.
  • a peril.
  • peril, hazard and risk are all equally correct definitions.
  • a risk.


Adverse selection is a term used to describe

  • a loss situation in which the chance of loss cannot be determined.
  • the tendency of the poorer than average risks to seek insurance to a greater extent than do the better than average risks.
  • the choice of the wrong insurance to fit a specific need.
  • an underwriting error on the part of an insurance company.


Although insurance may be defined in various ways, the two fundamental characteristics of the insurance mechanism are

  • combination and sharing.
  • transfer and sharing.
  • premiums and policies.
  • loss prevention and transfer.

Assignment: Risk Management Quiz

The risk that a firm’s IT systems will fail is an example of

  • compliance risk.
  • strategic risk.
  • operational risk.
  • credit risk.


Henri Fayol’s place in the history of risk management arises from

  • his work in the field of systems safety.
  • his work in the field of operations research.
  • his introduction of the term risk management.
  • his recognition of risk management as one of six broad functions of business.


Unemployment would generally be considered to be

  • a dynamic particular risk.
  • a static particular risk.
  • a static fundamental risk.
  • a dynamic fundamental risk.


Traditional risk management

  • is somewhat narrower in scope than insurance management.
  • is synonymous with corporate insurance buying.
  • is somewhat greater in scope than insurance management.

draws on several other disciplines but is a distinct discipline and function.

Assignment Policies



Please read all of the information about the assignments below:


The assignments are to be done in Microsoft Word with Times New Roman 12- point font. Each assignment should use the modified APA 6th edition format. The assignment templates are set up in this modified format. The reference page should be in the APA format for every reference. The word requirement for the assignments are specifically stated in the guidelines of the assignment. The word count is from the first word of the introductory paragraph to the last word of the conclusion paragraph. FYI.


1- There should be a cited reference for each section of a paper as there are conclusion statements in each section (to meet the grading criteria) so the conclusion should be supported by a reference as the assignments are evidence-based research, clinical papers.

2- Word Count- The word count is done from the first word of the introductory paragraph to the last word of the conclusion. The word count must be within the minimum and maximum word limit stated in the assignment instructions. A 10% – point reduction will be made in the total points for the assignment.

Week 1 and 5 assignments should have SIX studies. Week 5 assignment is a compilation of sections from the week 1, 2 & 3 assignments.

Weeks 2 and 3 need to have at least THREE studies in the form of research studies. Please make sure that you look at the instructions for the assignment as well as the grading rubric. I have also provided templates for ALL assignments. It is in your best interest to use these as it will guide you so that you do not make common formatting errors.


Please utilize the resources in the STUDENT SUCCESS CENTER if you have difficulty with APA 6th Edition format, grammar, sentence structure, punctuation or tense structure.


Always submit the assignment in the drop box for that assignment. I cannot accept any assignment as an attachment to an email sent to my college email. Attaching it to a posting to the Questions to Instructor Forum or the Individual Forum is also not accepted.

I cannot grade any assignment unless it is placed into the drop box by the student per university policy.

Turn-It-In / Lopes Write

This is to be used for the assignments for these three weeks (2, 3 & 5) and it is NOT required for Week 1. All assignments will be placed through Turn It In first and then submitted in the drop box on the course shell. No assignments will be accepted as attachments to emails as this is not the university policy.

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