Question 1

Against which of the following possibilities should a high probability that a particular loss-causing event will occur be weighed during the risk evaluation process?

Accepted Answer

A)  that the event will definitely occur and the loss is unavoidable 
B)  whether the likely occurrence may be offset by a low level of associated loss 
C)  whether a low probability will be offset by a high level of associated loss 
D)  that the event will likely never occur and should be ignored 
A)  that the event will definitely occur and the loss is unavoidable 
B)  whether the likely occurrence may be offset by a low level of associated loss 
C)  whether a low probability will be offset by a high level of associated loss 
D)  that the event will likely never occur and should be ignored B

Question 2

Risk managers should have ample knowledge of the business,its activities,and the industry it operates in.

Accepted Answer

A) True 
 B)False  True

Question 3

Duble Mining Ltd.began gold mining operations in Brazil a year ago.Recent changes in government policy cause the risk management department to transfer some uninsured risk to satisfy their commercial lenders.Which of the following actions by Duble Mining would immediately confirm to the commercial lenders that their requirements have been met?

Accepted Answer

A)  hiring private security to guard the mine 
B)  selling shares to the public to raise capital 
C)  arranging a political risk insurance policy 
D)  engaging in political lobbying efforts 
A)  hiring private security to guard the mine 
B)  selling shares to the public to raise capital 
C)  arranging a political risk insurance policy 
D)  engaging in political lobbying efforts C

Question 4

A business finds that employees are involved in many road accidents that result in damages to its fleet of motor vehicles,despite having driving training and instruction.Rather than fully insuring its equipment,the business elects to insure its vehicles subject to a deductible of $1,500 per vehicle.Which approach to risk management does this plan reflect?

Accepted Answer

A)  risk avoidance 
B)  risk reduction 
C)  risk transference 
D)  risk retention 
A)  risk avoidance 
B)  risk reduction 
C)  risk transference 
D)  risk retention

Question 5

Requiring employees to wear protective equipment is an example of a risk avoidance strategy.

Accepted Answer

A) True 
 B)False

Question 6

Identify and briefly describe the legal risks associated with the human resources function of a business organization.Discuss the implications of not having a risk management plan in place with regard to its human resources.

Accepted Answer

The human resource function of a busines

Question 7

Prevention of loss is the primary goal of a risk management plan.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following correctly identifies elements that would be contained in a legal risk management plan?

Accepted Answer

A)  Transfer the risk and recommend contracts to address changes. 
B)  Identify the risk and hire insurance professionals to develop policies. 
C)  Identify the risk and monitor changes in legislation. 
D)  Track new manufacturing processes and implement new technology. 
A)  Transfer the risk and recommend contracts to address changes. 
B)  Identify the risk and hire insurance professionals to develop policies. 
C)  Identify the risk and monitor changes in legislation. 
D)  Track new manufacturing processes and implement new technology.

Question 9

Evaluating risks involves assessing both the probability and severity of loss.

Accepted Answer

A) True 
 B)False

Question 10

Identification of potential exposure to legal risks involves assessing the organization's functional areas and reviewing its business decisions and business relationships.

Accepted Answer

A) True 
 B)False

Question 11

In 2014,General Motors (GM)began recalling vehicles because of concerns about possible faulty ignition switches in some of its vehicles.What type of risk management strategies was GM attempting to employ when it initiated the recall?

Accepted Answer

A)  risk avoidance and reduction 
B)  risk transference and retention 
C)  risk insurance and avoidance 
D)  risk evaluation and acceptance 
A)  risk avoidance and reduction 
B)  risk transference and retention 
C)  risk insurance and avoidance 
D)  risk evaluation and acceptance

Question 12

A private investment firm that deals exclusively in derivative investment products is concerned its market activities may become regulated.What measures should the institution take to begin to address its concerns?

Accepted Answer

A)  establish an adequately funded cash reserve 
B)  manage legal risk with a plan to prevent loss 
C)  appoint a junior trader to monitor and assess possibility of loss 
D)  prepare a risk aversion policy manual 
A)  establish an adequately funded cash reserve 
B)  manage legal risk with a plan to prevent loss 
C)  appoint a junior trader to monitor and assess possibility of loss 
D)  prepare a risk aversion policy manual

Question 13

After several interviews and calls to follow up on references,Fashion By Design Inc.chooses a seasoned lawyer from a well-known commercial law firm to provide legal services to the company.Why does the company's management expend substantial effort during the lawyer selection?

Accepted Answer

A)  to reduce stress level put on in-house counsel 
B)  to establish a productive,long-term relationship 
C)  to allow the risk to remain outside the business 
D)  to delegate risk management to outside source 
A)  to reduce stress level put on in-house counsel 
B)  to establish a productive,long-term relationship 
C)  to allow the risk to remain outside the business 
D)  to delegate risk management to outside source

Question 14

In which risk management process would consumer protection regulations regarding advertising be noted?

Accepted Answer

A)  evaluation of potential losses 
B)  identification of legal risks 
C)  implementation of the plan 
D)  devising the management plan 
A)  evaluation of potential losses 
B)  identification of legal risks 
C)  implementation of the plan 
D)  devising the management plan

Question 15

Identification of loss is the primary goal of a risk management plan.

Accepted Answer

A) True 
 B)False

Question 16

What initial step would you suggest that a business should go through in selecting a lawyer?

Accepted Answer

The first step is to develop a clear ide

Question 17

Which of the following would strongly support a business strategy for managing risks uniquely associated with commitments made by employees to suppliers or customers?

Accepted Answer

A)  Identify a knowledgeable individual to be risk department manager. 
B)  Retain legal counsel to act as in-house counsel to the business. 
C)  Establish policies and financial limits for commitments to customers. 
D)  Deal with each risk and assign responsibility for each action. 
A)  Identify a knowledgeable individual to be risk department manager. 
B)  Retain legal counsel to act as in-house counsel to the business. 
C)  Establish policies and financial limits for commitments to customers. 
D)  Deal with each risk and assign responsibility for each action.

Question 18

Benta recently purchased an office cleaning business with established long-term contracts to provide cleaning services to a number of large office building operators.Which of the following actions would immediately allow Benta to be aware of the potential legal risks with the building operators?

Accepted Answer

A)  consult with a law firm to devise a legal strategy 
B)  consult and arrange insurance to cover legal risks 
C)  schedule introductory meetings with customers 
D)  review contracts and customer payment history 
A)  consult with a law firm to devise a legal strategy 
B)  consult and arrange insurance to cover legal risks 
C)  schedule introductory meetings with customers 
D)  review contracts and customer payment history

Question 19

What is enterprise risk assessment,and how is it related to a legal risk management plan?

Accepted Answer

An enterprise risk assessment is an exer

Question 20

Which of the following is an example of risk avoidance?

Accepted Answer

A)  discontinuing products and product lines 
B)  self-insurance 
C)  insurance policy deductibles 
D)  hiring in-house legal counsel 
A)  discontinuing products and product lines 
B)  self-insurance 
C)  insurance policy deductibles 
D)  hiring in-house legal counsel

Exam 3: Managing Legal Risks

Against which of the following possibilities should a high probability that a particular loss-causing event will occur be weighed during the risk evaluation process?

Risk managers should have ample knowledge of the business,its activities,and the industry it operates in.

Requiring employees to wear protective equipment is an example of a risk avoidance strategy.

Identify and briefly describe the legal risks associated with the human resources function of a business organization.Discuss the implications of not having a risk management plan in place with regard to its human resources.

Prevention of loss is the primary goal of a risk management plan.

Which of the following correctly identifies elements that would be contained in a legal risk management plan?

Evaluating risks involves assessing both the probability and severity of loss.

Identification of potential exposure to legal risks involves assessing the organization's functional areas and reviewing its business decisions and business relationships.

In 2014,General Motors (GM)began recalling vehicles because of concerns about possible faulty ignition switches in some of its vehicles.What type of risk management strategies was GM attempting to employ when it initiated the recall?

A private investment firm that deals exclusively in derivative investment products is concerned its market activities may become regulated.What measures should the institution take to begin to address its concerns?

After several interviews and calls to follow up on references,Fashion By Design Inc.chooses a seasoned lawyer from a well-known commercial law firm to provide legal services to the company.Why does the company's management expend substantial effort during the lawyer selection?

In which risk management process would consumer protection regulations regarding advertising be noted?

Identification of loss is the primary goal of a risk management plan.

What initial step would you suggest that a business should go through in selecting a lawyer?

Which of the following would strongly support a business strategy for managing risks uniquely associated with commitments made by employees to suppliers or customers?

Benta recently purchased an office cleaning business with established long-term contracts to provide cleaning services to a number of large office building operators.Which of the following actions would immediately allow Benta to be aware of the potential legal risks with the building operators?

What is enterprise risk assessment,and how is it related to a legal risk management plan?

Which of the following is an example of risk avoidance?

Knowledge of Law As a Business Asset

The Canadian Legal System

Dispute Resolution

An Introduction to Contracts

Forming Contractual Relationships

The Terms of a Contract

Non-Enforcement of Contracts

Termination and Enforcement of Contracts

Introduction to Tort Law

The Tort of Negligence

Other Torts

The Agency Relationship

Business Forms and Arrangements

The Corporate Form: Organizational Matters

The Corporate Form: Operational Matters

Introduction to Property Law

Intellectual Property

Real Property

The Employment Relationship

Terminating the Employment Relationship

Professional Services

The Sale of Goods

Consumer Protection and Competition Law

Business and Banking

The Legal Aspects of Credit

Bankruptcy and Insolvency

Insurance

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