Exam 3: Introduction to Risk Management

Which statement about a company's cost of risk is (are)true? I.Cost of risk includes insurance premiums and retained losses. II.Reducing the cost of risk increases profitability.

Bev lives in the suburbs and works downtown.She drives to work,and her most direct route to work would require her to pass through an area where carjackings and drive-by-shootings are common.Bev does not drive through this area.Instead,she uses a route which adds 10 minutes to her commute.Which risk management technique is Bev using with respect to the risk of injury while driving through the dangerous area?

A situation or circumstance in which a loss is possible,regardless of whether a loss occurs,is called a

Which of the following statements about an excess insurance plan is true?

Factors a risk manager must consider in selecting an insurer include which of the following? I.The availability of risk management services. II.The financial strength of the insurer.

Parker Department Stores has been hurt in recent months by a large increase in shoplifting losses.Parker's risk manager concluded that while the frequency of shoplifting losses was high,the severity is still relatively low.What is (are)the appropriate risk management technique(s)to apply to this problem?

Purchasing health insurance illustrates the use of which personal risk management technique?

Risk management is concerned with

All of the following statements about captive insurers are true EXCEPT

All of the following are risk management objectives prior to the occurrence of loss EXCEPT

A risk manager is concerned with I.Identifying potential losses. II.Selecting the appropriate techniques for treating losses.

All of the following statements about avoidance are true EXCEPT

ABC Insurance retains the first $1 million of each property damage loss and purchases insurance for that part of any property loss that exceeds $1 million.The insurance for property losses above $1 million is called

All of the following are disadvantages of using insurance in a risk management program EXCEPT

Cal was just hired as XYZ Company's first risk manager.Cal would like to employ the risk management process.The first step in the process Cal should follow is to

Members of Mid-South Petroleum Distributors,a trade group,had trouble obtaining affordable pollution liability insurance.The members formed a group captive that is exempt from many state laws that apply to other insurers.This group captive is called a(n)

Ryan decided to review his personal risk management program.His car is 10 years old,and he would receive little money from his insurer if the car was damaged or destroyed.Ryan decided to drop the physical damage insurance on the car.From a risk management perspective,dropping the physical damage insurance on the car is best described as

Preloss objectives of risk management include which of the following? I.Preparing for potential losses in the most economical way. II.Reduction of anxiety.

To better understand her company's operations,a risk manager asked a production manager to draw a diagram tracing the steps in the production and distribution of the company's products.Such a diagram,which is useful in risk identification,is called a

Which of the following statements about a personal risk management program is (are)true? I.Insurance and retention are the only techniques used to handle potential losses. II.The steps in a personal risk management process are the same steps used by businesses.