RMI Exam 1 UPDATED ACTUAL
QUESTIONS AND CORRECT ANSWERS
Risk - CORRECT ANSWER Uncertainty concerning the occurrence of a loss.
Loss Exposure - CORRECT ANSWER Any situation or circumstance in which a loss
is possible.
Objective Risk - CORRECT ANSWER The relative variation of actual loss from
expected loss.
Subjective Risk - CORRECT ANSWER Uncertainty based on a person's mental
condition or state of mind.
Peril - CORRECT ANSWER The cause of loss.
Hazard - CORRECT ANSWER A condition that increases the chance or severity of
loss.
Physical Hazard - CORRECT ANSWER A physical condition that increases the chance
of loss.
Moral Hazard - CORRECT ANSWER Dishonesty or character defects that increase the
chance of loss.
Morale Hazard - CORRECT ANSWER Carelessness or indifference to loss because
insurance exists.
Legal Hazard - CORRECT ANSWER Legal or regulatory characteristics that increase
frequency or severity.
, Pure Risk - CORRECT ANSWER A situation that can only result in loss or no loss.
Speculative Risk - CORRECT ANSWER A situation that may result in loss, no loss, or
gain.
Diversifiable Risk - CORRECT ANSWER Affects individuals or small groups; can be
reduced by diversification.
Nondiversifiable Risk - CORRECT ANSWER Affects the entire economy or large
groups; cannot be reduced by diversification.
Enterprise Risk - CORRECT ANSWER All major risks faced by a firm, including
strategic, operational, financial, and hazard risks.
Systemic Risk - CORRECT ANSWER Risk of collapse of an entire system or market.
Risk Management - CORRECT ANSWER A process that identifies loss exposures and
selects techniques to treat them.
Risk Control - CORRECT ANSWER Techniques that reduce the frequency or severity
of losses.
Risk Financing - CORRECT ANSWER Techniques that provide for the funding of
losses.
Risk Avoidance - CORRECT ANSWER Eliminating a loss exposure entirely.
Loss Prevention - CORRECT ANSWER Measures that reduce the frequency of loss.
Loss Reduction - CORRECT ANSWER Measures that reduce the severity of loss.
QUESTIONS AND CORRECT ANSWERS
Risk - CORRECT ANSWER Uncertainty concerning the occurrence of a loss.
Loss Exposure - CORRECT ANSWER Any situation or circumstance in which a loss
is possible.
Objective Risk - CORRECT ANSWER The relative variation of actual loss from
expected loss.
Subjective Risk - CORRECT ANSWER Uncertainty based on a person's mental
condition or state of mind.
Peril - CORRECT ANSWER The cause of loss.
Hazard - CORRECT ANSWER A condition that increases the chance or severity of
loss.
Physical Hazard - CORRECT ANSWER A physical condition that increases the chance
of loss.
Moral Hazard - CORRECT ANSWER Dishonesty or character defects that increase the
chance of loss.
Morale Hazard - CORRECT ANSWER Carelessness or indifference to loss because
insurance exists.
Legal Hazard - CORRECT ANSWER Legal or regulatory characteristics that increase
frequency or severity.
, Pure Risk - CORRECT ANSWER A situation that can only result in loss or no loss.
Speculative Risk - CORRECT ANSWER A situation that may result in loss, no loss, or
gain.
Diversifiable Risk - CORRECT ANSWER Affects individuals or small groups; can be
reduced by diversification.
Nondiversifiable Risk - CORRECT ANSWER Affects the entire economy or large
groups; cannot be reduced by diversification.
Enterprise Risk - CORRECT ANSWER All major risks faced by a firm, including
strategic, operational, financial, and hazard risks.
Systemic Risk - CORRECT ANSWER Risk of collapse of an entire system or market.
Risk Management - CORRECT ANSWER A process that identifies loss exposures and
selects techniques to treat them.
Risk Control - CORRECT ANSWER Techniques that reduce the frequency or severity
of losses.
Risk Financing - CORRECT ANSWER Techniques that provide for the funding of
losses.
Risk Avoidance - CORRECT ANSWER Eliminating a loss exposure entirely.
Loss Prevention - CORRECT ANSWER Measures that reduce the frequency of loss.
Loss Reduction - CORRECT ANSWER Measures that reduce the severity of loss.
