Risk Management – Quiz #1, 2026 – Study Material and
Practice Questions
Risk - ANS✔✔ -unknown future outcome with potential for loss
direct loss - ANS✔✔ loss directly caused by an event (house burns down--how much you lose
from the fire)
indirect loss - ANS✔✔ an additional loss that is suffered as a result of the direct loss, but not as
a direct result of the original cost
(have to move after fire---much longer commute)
uncertainty - ANS✔✔ unknown future outcome (may or may not have potential for loss
likelihood - ANS✔✔ (probability) the chance of a loss occuring
severity - ANS✔✔ the dollar amount of a loss, given that loss occurs
personal utility function - ANS✔✔ how you value reward relative to risk
risk identification - ANS✔✔ 1. identifying the risks potentially arising out of a given risk
environment
2. identifying both direct (risks) losses and indirect (risks) losses
risk environment - ANS✔✔ (where risk lives)
1. physical environment: physical surroundings
2. social environment: social media, community, workplace
Practice Questions
Risk - ANS✔✔ -unknown future outcome with potential for loss
direct loss - ANS✔✔ loss directly caused by an event (house burns down--how much you lose
from the fire)
indirect loss - ANS✔✔ an additional loss that is suffered as a result of the direct loss, but not as
a direct result of the original cost
(have to move after fire---much longer commute)
uncertainty - ANS✔✔ unknown future outcome (may or may not have potential for loss
likelihood - ANS✔✔ (probability) the chance of a loss occuring
severity - ANS✔✔ the dollar amount of a loss, given that loss occurs
personal utility function - ANS✔✔ how you value reward relative to risk
risk identification - ANS✔✔ 1. identifying the risks potentially arising out of a given risk
environment
2. identifying both direct (risks) losses and indirect (risks) losses
risk environment - ANS✔✔ (where risk lives)
1. physical environment: physical surroundings
2. social environment: social media, community, workplace
