Acme Company has three identical manufacturing plants, one on the Texas Gulf Coast, one in southern Alabama, and one in Florida. Each plant is valued at $200 million. Acme’s risk manager is concerned about the damage which could be caused by a single hurricane. The risk manager believes there is an extremely low probability that […]
Risk management is concerned with A) the identification and treatment of loss exposures. B) the management of speculative risks only. C) the management of pure risks that are uninsurable. D) the purchase of insurance only. ANSWER Answer: A
A situation or circumstance in which a loss is possible, regardless of whether a loss occurs, is called a A) deductible. B) loss exposure. C) loss avoidance. D) peril. ANSWER Answer: B
Which of the following is a post-loss risk management objective? A) treating loss exposures in the most economical way B) continuing operations C) reduction of anxiety D) meeting externally imposed legal obligations ANSWER Answer: B
A risk manager is concerned with which of the following? I. Identifying potential losses II. Selecting the appropriate techniques for treating loss exposures A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: C
Preloss objectives of risk management include which of the following? I. Preparing for potential losses in the most economical way II. Reduction of anxiety A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: C
Loss frequency is defined as the A) probable size of the losses that may occur during some period. B) probable number of losses that may occur during some period. C) probability that any particular piece of property may be totally destroyed. D) probability that a liability judgment may exceed a firm’s net worth. […]
Loss severity is defined as the A) probable size of the losses which may occur during some period. B) probable number of losses which may occur during some period. C) probability that any particular piece of property may be totally destroyed. D) probability that a liability judgment may exceed a firm’s net worth. […]
Which of the following is a source of information a risk manager could use to help identify pure loss exposures? A) commodity prices B) physical inspections C) currency exchange rates D) interest rate movements ANSWER Answer: B
The worst loss that is likely to happen is referred to as the A) maximum possible loss. B) probable maximum loss. C) frequency of loss. D) severity of loss. ANSWER Answer: B
