A risk manager was asked to review all the loss exposures his company faces. The risk manager noted that the company obtained over 90 percent of its raw materials from one supplier. He voiced concern about business interruption if that supplier was closed for some reason. Acting on his recommendation, the company began to purchase […]
A company has a fleet of 200 vehicles. On average, 50 vehicles per year experience property damage. What is the probability that any vehicle will be damaged in any given year? A) 10 percent B) 20 percent C) 25 percent D) 50 percent ANSWER Answer: C
Melanie was just hired as the risk manager of JKL Company. The company president asked her to make a thorough review of all of the company’s loss exposures. Melanie noted that many employees were too heavily invested in stock issued by the company in their 401-k plan. Melanie suggested that the employees change some of […]
RST Company has production facilities in Salt Lake City and Cleveland. The probability that in any given year a fire will damage the production facility in Salt Lake City is 5 percent. The probability that in any given year a fire will damage the Cleveland production facility is 4 percent. What is the probability that […]
A college professor stores class grading records on a spreadsheet on her office computer. Each time she updates a grading file she makes a printout and a backup copy of the grading file. The professor is using which risk management method to address the risk of losing her class grading records? A) risk avoidance B) […]
A large property and liability insurance company merged with a bank and then acquired a stock brokerage company. This type of merger and acquisition activity is categorized as A) insurance company consolidation. B) cross-industry consolidation. C) financial risk management. D) insurance brokerage consolidation. ANSWER Answer: B
A U.S. athletic equipment company has production plants in several Pacific Rim countries. Each plant is divided into separate production areas using six-foot thick concrete walls. The construction method is designed to prevent fire from spreading from one production area to another. Using thick concrete walls so that fire does not spread to another production […]
Which of the following is a financial risk that may be faced by a business organization? A) injuries suffered by employees at the workplace B) lost income after a fire loss C) product liability risk D) currency exchange rate risk ANSWER Answer: D
A comprehensive risk management program that addresses an organization’s pure risks, speculative risks, strategic risks, and operational risks is called a(n) A) risk management information system. B) financial risk management plan. C) speculative risk management plan. D) enterprise risk management plan. ANSWER Answer: D
Which statement is (are) true with respect to enterprise risk management programs? I. They address traditional property, liability, and personnel loss exposures. II. They do not address financial risks. A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: A
