Risk Management

The relative variation between expected losses and actual losses is called

• objective probability

• subjective probability

• objective risk

• subjective risk

A condition that increases the chance of loss is called a(n)

• a peril

• indirect (consequential) loss

• hazard

• direct loss

A risk that affects the entire economy, or a large number of people or groups within the economy, is called

• a speculative risk

• non-diversifiable risk

• objective risk

• diversifiable risk

All of the following are burdens of risk on society EXCEPT

• risk forces individuals to practice loss control

• risk deprives society of certain goods and services

• risk requires funds to be set aside in case a loss occurs

• risk creates fear and worry

The terrorism risk

• is of no concern to private companies

• is limited to attacks by foreign nationals

• can be addressed through risk control and insurance

• is an uninsurable risk

Michael opened a department store. After a fire damaged the store, Michael was forced to close the business for four weeks while repairs were completed. The loss of profits that could have been earned if the business had remained open is best described as

• hazard

• peril

• direct loss

• indirect loss

A comprehensive risk management program that addresses an organization's pure risk, speculative risk, strategic risk, and operational risk is called a(n)

• risk management information system

• financial risk management plan

• enterprise risk management plan

Pure risk may produce either a profit or a loss.

• true

• false

Tom's Discount Store has been experiencing problems with shoplifting losses. Tom decided to install a camera monitoring system and use magnetic tags on some products. If a tag is not demagnetized before the product bearing the tag leaves the store, an alarm bell sounds. These measures are examples of

• risk retention

• loss prevention

• risk transfer

• risk avoidance

Premature death and damage to property caused by a fire are pure risks.

• true

• false