Business Risk Quiz

What is risk in a business capacity?

• The chance of loss, the degree of probability of loss, and the amount of possible loss.

• The possibility of incurring losses due to problems and circumstances, expected or unexpected.

• The practice of reducing the impact of potential risks by developing a plan to manage, eliminate, or limit setbacks as much as possible.

• The threat of loss with no chance for profit.

Which of the following is an example of an unquantifiable risk?

• The breakdown of key equipment or machinery.

• The probability that a major customer becomes bankrupt and does not pay money owed to a supplier.

• The effect of external factors, such as a recession.

• The adverse effect on the company’s reputation if there is a major failure in quality control or if a major brand has to be withdrawn because it is affected by a health scare.

What is the difference between internal and external risk?

• Internal risk is the threat of loss with no chance for profit, while external risk is the chance of loss, the degree of probability of loss, and the amount of possible loss.

• Internal risk is the practice of reducing the impact of potential risks by developing a plan to manage, eliminate, or limit setbacks as much as possible, while external risk is the possibility of incurring losses due to problems and circumstances, expected or unexpected.

• Internal risk is the business has the power to prevent the risk, while external risk is risks over which a business has no control, where the only possible action is mitigation.

• Internal risk is the breakdown of key equipment or machinery, while external risk is the effect of external factors, such as a recession.

Which risk mitigation strategy focuses on minimizing the loss rather than completely eliminating it?

• Reducing risk

• Avoiding risk

• Self-insuring

• Buying insurance to cover risk

What is the purpose of risk mitigation?

• To maximize profits

• To completely eliminate all risks

• To reduce the impact of potential risks by developing a plan to manage, eliminate, or limit setbacks as much as possible

• To take speculative risks

Which of the following is an example of a quantifiable risk?

• The breakdown of key equipment or machinery.

• The effect of external factors, such as a recession.

• The adverse effect on the company’s reputation if there is a major failure in quality control or if a major brand has to be withdrawn because it is affected by a health scare.

• The probability that a major customer becomes bankrupt and does not pay money owed to a supplier.

What is the practice of setting aside money to cover routine claims and buying only “catastrophe” insurance policies to cover big losses called?

• Reducing risk

• Avoiding risk

• Self-insuring

• Buying insurance to cover risk

Which of the following is an example of an external risk?

• The breakdown of key equipment or machinery.

• The probability that a major customer becomes bankrupt and does not pay money owed to a supplier.

• The effect of external factors, such as a recession.

• The adverse effect on the company’s reputation if there is a major failure in quality control or if a major brand has to be withdrawn because it is affected by a health scare.

What is the term for a chance of either profit or loss?

• Speculative risk

• Pure risk

• Quantifiable risk

• Unquantifiable risk

Which risk mitigation strategy involves not participating in activities that may negatively affect the organization?

• Reducing risk

• Avoiding risk

• Self-insuring

• Buying insurance to cover risk