Exam 3: Introduction to Risk Management

When Derrick became risk manager of Boller Company,he noticed that the company did not have a clear set of risk management objectives and a clearly-stated risk management philosophy.Derrick developed a written document stating the company's risk management objectives and risk management philosophy.This document is called a risk management

The worst loss that could ever happen to a firm is referred to as the

Barb,who is self-employed,is the main breadwinner for her family.Barb does not have disability income insurance because she has never stopped to consider the impact of a long-term disability upon her family.Barb's treatment of the risk of disability is best described as

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

Which of the following is a source of information a risk manager could use to help identify pure loss exposures?

Which of the following statements about the use of deductibles is (are)true? I.They represent risk retention by insurance purchasers. II.They tend to increase the cost of adjusting small claims.

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

A risk manager is concerned with which of the following? I.Identifying potential losses II.Selecting the appropriate techniques for treating loss exposures

In reviewing his company's operations,a risk manager noticed that all of the company's finished goods were stored in a single warehouse.The risk manager recommended that the finished goods be divided among three warehouses to prevent all of the finished goods from being destroyed by the same peril.Dividing the finished goods among three warehouses illustrates

Which of the following conditions is (are)appropriate for using retention? I.Losses are difficult to predict. II.The worst possible loss is not serious.

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

Which of the following statements about captive insurance companies is (are)true? I.A captive insurance company established by a U.S.company must be domiciled in the United States. II.A captive insurance company may be owned by several parents.

An insurance policy specifically written and designed to meet the needs of an insurance purchaser is called a(n)

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?

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

A U.S.athletic equipment company has production plants in several Pacific Rim countries.Each plant is divided into separate production areas using six-foot thick concrete walls.The construction method is designed to prevent fire from spreading from one production area to another.Using thick concrete walls so that fire does not spread to another production area illustrates which risk control method?

Which of the following is a post-loss risk management objective?

Risk management is concerned with

Brenda identified all of the pure loss exposures her family faces.Then she analyzed these loss exposures,developed a plan to treat these risks,and implemented the plan.The process Brenda conducted is called