RMI Exam 1 UPDATED ACTUAL Questions And Correct Answers
Terms in this set (71)
Risk Uncertainty regarding loss
Can depend on the level:
- Individual
- Organization
-Society
Burden of Risk on Society • Need for Larger Emergency Funds
• Loss of Needed Goods and Services
• Fear and Worry
Individual Risk - Uncertainty regarding loss.
- Works well for individuals (Risk associated with sports, driving, investing, and
most living aspects)
Organization Risk - It is an uncertain future event which could adversely affect the achievement of
an organization's objectives (Ex. New product launch, hiring and firing, political
actions)
- Often follow well defined risk management plans
Society Risk - It is an uncertain future event which could adversely affect large portions of the
population (Ex. Economic risk, health risk, done by gov. leaders)
Rules of Risk Management - Don't risk more than you can afford to lose
- Don't risk a lot for a little
- Consider the odds
Frequency - Risk Likelihood: How often will something happen?
- High: an event is expected to occur in most circumstances
- Medium: An event will probably occur in many circumstances
- Low: An event may occur at some time
Severity - How bad is it when it does happen?
- High: Serious impact on operation, reputation, or funding status
- Medium: Significant impact on operations, reputation, or funding status
- Low: Less significant impact on operations, reputation, or funding status
Expected Value (Combining Frequency & Severity) EV = Frequency * Severity
What makes insurance possible? - Expected Value
- Standard Deviation
- Law of Large Numbers
Standard Deviation Best measure of risk
, Risk Profile Categorize risks based on frequency and severity
Categories of Risk - Pure vs. Speculative
- Static vs. Dynamic
- Fundamental vs. Particular
- Core vs. Secondary
Terms in this set (71)
Risk Uncertainty regarding loss
Can depend on the level:
- Individual
- Organization
-Society
Burden of Risk on Society • Need for Larger Emergency Funds
• Loss of Needed Goods and Services
• Fear and Worry
Individual Risk - Uncertainty regarding loss.
- Works well for individuals (Risk associated with sports, driving, investing, and
most living aspects)
Organization Risk - It is an uncertain future event which could adversely affect the achievement of
an organization's objectives (Ex. New product launch, hiring and firing, political
actions)
- Often follow well defined risk management plans
Society Risk - It is an uncertain future event which could adversely affect large portions of the
population (Ex. Economic risk, health risk, done by gov. leaders)
Rules of Risk Management - Don't risk more than you can afford to lose
- Don't risk a lot for a little
- Consider the odds
Frequency - Risk Likelihood: How often will something happen?
- High: an event is expected to occur in most circumstances
- Medium: An event will probably occur in many circumstances
- Low: An event may occur at some time
Severity - How bad is it when it does happen?
- High: Serious impact on operation, reputation, or funding status
- Medium: Significant impact on operations, reputation, or funding status
- Low: Less significant impact on operations, reputation, or funding status
Expected Value (Combining Frequency & Severity) EV = Frequency * Severity
What makes insurance possible? - Expected Value
- Standard Deviation
- Law of Large Numbers
Standard Deviation Best measure of risk
, Risk Profile Categorize risks based on frequency and severity
Categories of Risk - Pure vs. Speculative
- Static vs. Dynamic
- Fundamental vs. Particular
- Core vs. Secondary
