Question 1

Risk management for business is critical due in part to:

Accepted Answer

The answer of Risk management for business is critical due...

Question 2

An insurance company would not be willing to insure a risk if it:

Accepted Answer

Insurance companies are generally reluctant to insure risks that stem from political disruptions because these events are unpredictable and can lead to massive, unquantifiable losses.

Question 3

Which type of risk management strategy is a company using when it installs mirrors and surveillance cameras to spot and prevent shoplifting?

Accepted Answer

The company is using a strategy of reducing the risk of shoplifting by installing mirrors and surveillance cameras. This strategy aims to identify and deter potential shoplifters, ultimately lowering the risk of merchandise theft.

Question 4

Some businesses will set aside money to cover routine losses and buy "catastrophe" policies to cover big losses.This is an example of which of the following?

Accepted Answer

This is an example of self-insuring against the risk by setting aside money to cover routine losses and buying catastrophe policies to cover big losses.

Question 5

Jonathon is in charge of risk management for Learnit Corp. ,a large chain of preschools in the mid-west.He has decided to build enterprise risk management into the organization.The first step Jonathon should take is to:

Accepted Answer

The first step in building enterprise risk management is to identify and assess the potential risks to the organization. This involves deciding which risks the organization should manage. Choices A and B are not related to risk management, and choice C could actually increase the risk of injury and liability for the organization.

Question 6

________ is a term that refers to the chance of loss,the degree of probability of loss,and the amount of possible loss.

Accepted Answer

The term that refers to chance of loss, degree of probability of loss, and amount of possible loss is risk. Speculation refers to the act of taking on risk in the hopes of making a profit. Hazard refers to a condition or situation that increases the likelihood of loss. Insurability refers to the ability of a risk to be covered by insurance.

Question 7

A type of event that makes risk management more important is:

Accepted Answer

Terrorist threats often bring about a high degree of uncertainty, making risk management even more important in order to mitigate potential losses or damages.

Question 8

Hap has health coverage through a Health Maintenance Organization (HMO).He is likely to be very pleased with the amount of flexibility he has to choose his doctor and his health care options.

Accepted Answer

HMOs typically have a restricted network of healthcare providers, meaning patients may have limited options when choosing their doctors and health care services.

Question 9

________ risk involves a chance of either profit or loss.

Accepted Answer

Speculative risk involves a chance of either profit or loss, unlike pure risk which involves only the possibility of loss and insurable risk which is transferable through insurance. Managed risk is a strategy for minimizing or controlling risk within an organization.

Question 10

The threat of lawsuits has caused some drug companies not to manufacture certain types of vaccines.What type of risk management option is being practiced?

Accepted Answer

The drug companies are avoiding the risk of potential lawsuits by choosing not to manufacture certain types of vaccines. This is a risk management strategy of completely avoiding the risk altogether.

Question 11

It's good advice for doctors and lawyers to carry malpractice insurance.

Accepted Answer

Malpractice insurance provides financial protection in case of lawsuits or claims of professional negligence. It is recommended for those in high-risk professions such as doctors and lawyers.

Question 12

Harmon works on a highway construction crew and frequently handles explosives.His friend Willie works as a bookkeeper for a retail store.The amount of workers' compensation premiums paid by Harmon's employer will probably exceed the premiums paid by Willie's employer.

Accepted Answer

Harmon's job is considered more high-risk than Willie's job, which increases the likelihood of workplace injuries or accidents. As a result, Harmon's employer will likely have to pay higher workers' compensation premiums than Willie's employer.

Question 13

A firm that chooses to self-insure and cover losses out of its budget is said to:

Accepted Answer

The answer of A firm that chooses to self-insure and...

Question 14

________ risk involves the threat of loss with no chance for profit.

Accepted Answer

Pure risk is a situation where there is only the possibility of loss and no chance of profit. It is often associated with events that are beyond one's control, such as natural disasters, theft, and accidents. Insurers typically focus on managing pure risks through various forms of insurance coverage.

Question 15

Enterprise risk management is:

Accepted Answer

Enterprise risk management is important to help businesses identify and manage potential risks that could impact their operations and bottom line. It is not irrelevant to business, nor is it only used by nonprofit organizations or the Department of Homeland Security.

Question 16

Airlines likely consider risk management to be more important because of:

Accepted Answer

Terrorist threats pose a significant risk to airlines, passengers, and crew members. This has led airlines to prioritize risk management to ensure the safety and security of everyone involved in air travel. While changing flight patterns, employing experienced pilots, and the decrease in price of jet fuel may also impact an airline's operations and decision-making, they do not pose as immediate and significant a risk as terrorist threats.

Question 17

Which of the following is the risk that most concerns businesspeople?

Accepted Answer

Businesspeople are mostly concerned with pure risk, which involves the possibility of loss or no loss. This includes risks like natural disasters, theft, fire, and liability lawsuits. Avoidable risk and managed risk are strategies to mitigate or minimize the impact of pure risks. Speculative risk, on the other hand, involves a possibility of loss or gain and is usually associated with investment decisions.

Question 18

A policyholder must have a(n)__________ in what is being insured,meaning that the policyholder must be the one at risk to suffer an economic loss.

Accepted Answer

Insurable interest is the policyholder's stake or ownership in the property or person being insured. It means that the policyholder must be the one who will suffer a financial loss if the insured property is damaged or destroyed. Without insurable interest, the policyholder would have no reason to protect the insured property or person and may even have an incentive to cause harm to it. Therefore, insurable interest is a fundamental principle of insurance, ensuring that policies are taken out for legitimate reasons and preventing insurance fraud.

Question 19

Which of the following is a goal of enterprise risk management?

Accepted Answer

The goal of enterprise risk management is to define and manage risks that could potentially impact an organization's objectives. Option B and C are not related to enterprise risk management, and option D may be a part of the risk management process but is not a goal in itself.

Question 20

Risk management is:

Accepted Answer

Risk management is increasing in importance for businesses as they face a variety of potential risks such as financial, legal, operational, and reputational risks. It helps them identify and mitigate these risks through various strategies like risk avoidance, risk reduction, risk transfer, and risk acceptance. Insurance is just one aspect of risk management. Therefore, option A and D are incorrect. Option C is outright wrong, given the importance of risk management in the business world.

Quiz 22: Bonus B: Managing Risk