RMIN 4000 UGA EDMUNDS EVALUATION EXAMS TEST
QUESTIONS AND ANSWERS SURE A+
✔✔Direct Loss - ✔✔cost to replace a loss that is a direct result of a peril, such as fire.
✔✔Indirect Loss - ✔✔Loss that is a result or consequence of a direct loss
✔✔Liability Risk - ✔✔a risk that relates to harm or injury to other people or their
property because of your actions; no upper limit; Defense costs; liens may be placed on
income or assets may be siezed
✔✔Loss of business income - ✔✔Financial loss when the firm must shut down for some
time after a physical damage loss
✔✔Grease fire in the kitchen causes a restaurant to close down for 4 weeks while
repairs are made. The restaurant has no income while closed. this is an example of: -
✔✔Loss of business income
✔✔2 techniques for managing risk - ✔✔risk control, risk financing
✔✔Risk Control - ✔✔techniques that reduce the frequency or severity of losses
✔✔Risk Financing - ✔✔techniques that provide for the funding of losses
✔✔Loss Prevention is a _____ _________ technique that reduces the frequency of a
loss. an example would be airport security - ✔✔risk control
✔✔_______ _____________ is a risk control technique that reduces the severity of a
loss. it can occur pre-loss or post-loss. examples are duplication, diversification, and
separation - ✔✔Loss reduction
✔✔which avoidance technique is practiced when a certain loss exposure is never
acquired? - ✔✔proactive avoidance
✔✔which avoidance technique is practiced when an existing exposure is abandoned? -
✔✔Reactive avoidance
✔✔Retention is a ___ _____________ technique in which you retain part or all of
losses that can occur from a given risk. - ✔✔Risk Financing
✔✔Active Retention - ✔✔an individual is aware of the risk and deliberately plans to
retain all or part of it; ex: high deductible
, ✔✔Passive Retention - ✔✔means risks may be unknowingly retained because of
ignorance, indifference, or laziness
✔✔__________________ _____________ is a risk financing technique in which you
transfer liability by contract, hedging, or incorporation. - ✔✔Non-Insurance transfer.
✔✔insurance is a type of _______ _____________ - ✔✔risk financing technique
✔✔Risk Management - ✔✔a process that identifies loss exposures faced by an
organization and selects the most appropriate techniques for treating such exposures
✔✔Loss Exposure - ✔✔any situation or circumstance in which a loss is possible,
regardless of whether a loss occurs
✔✔4 Steps in Risk Management Process - ✔✔1. Identify potential losses
2. Evaluate potential losses
3. Select the appropriate risk management techniques
4. Implement and monitor the risk management program
✔✔the most important step in the risk management process - ✔✔identifying loss
exposures (which assets need to be covered and which perils are associated with those
assets)
✔✔When measuring and analyzing the loss exposures (step 2) you rank the loss
exposures according to - ✔✔relative importance with severity being more important.
✔✔maximum possible loss - ✔✔the worst loss that could happen to the firm during its
lifetime
✔✔Probable Maximum Loss (PML) - ✔✔the worst loss that is likely to happen
✔✔Step 3: consider and select the appropriate form of risk management technique from
- ✔✔risk control techniques and risk financing techniques
✔✔Risk Control Techniques (6) - ✔✔avoidance; loss prevention; loss reduction;
separation; duplication; diversification
✔✔Risk Financing Techniques - ✔✔retention and transfer
✔✔Types of retention - ✔✔unfunded retention, funded reserve, deductible, captive
insurer, self insurance, risk retention group
✔✔when should risk be retained? - ✔✔when it is difficult to insure
when the worst possible losses are not serious (low severity )
QUESTIONS AND ANSWERS SURE A+
✔✔Direct Loss - ✔✔cost to replace a loss that is a direct result of a peril, such as fire.
✔✔Indirect Loss - ✔✔Loss that is a result or consequence of a direct loss
✔✔Liability Risk - ✔✔a risk that relates to harm or injury to other people or their
property because of your actions; no upper limit; Defense costs; liens may be placed on
income or assets may be siezed
✔✔Loss of business income - ✔✔Financial loss when the firm must shut down for some
time after a physical damage loss
✔✔Grease fire in the kitchen causes a restaurant to close down for 4 weeks while
repairs are made. The restaurant has no income while closed. this is an example of: -
✔✔Loss of business income
✔✔2 techniques for managing risk - ✔✔risk control, risk financing
✔✔Risk Control - ✔✔techniques that reduce the frequency or severity of losses
✔✔Risk Financing - ✔✔techniques that provide for the funding of losses
✔✔Loss Prevention is a _____ _________ technique that reduces the frequency of a
loss. an example would be airport security - ✔✔risk control
✔✔_______ _____________ is a risk control technique that reduces the severity of a
loss. it can occur pre-loss or post-loss. examples are duplication, diversification, and
separation - ✔✔Loss reduction
✔✔which avoidance technique is practiced when a certain loss exposure is never
acquired? - ✔✔proactive avoidance
✔✔which avoidance technique is practiced when an existing exposure is abandoned? -
✔✔Reactive avoidance
✔✔Retention is a ___ _____________ technique in which you retain part or all of
losses that can occur from a given risk. - ✔✔Risk Financing
✔✔Active Retention - ✔✔an individual is aware of the risk and deliberately plans to
retain all or part of it; ex: high deductible
, ✔✔Passive Retention - ✔✔means risks may be unknowingly retained because of
ignorance, indifference, or laziness
✔✔__________________ _____________ is a risk financing technique in which you
transfer liability by contract, hedging, or incorporation. - ✔✔Non-Insurance transfer.
✔✔insurance is a type of _______ _____________ - ✔✔risk financing technique
✔✔Risk Management - ✔✔a process that identifies loss exposures faced by an
organization and selects the most appropriate techniques for treating such exposures
✔✔Loss Exposure - ✔✔any situation or circumstance in which a loss is possible,
regardless of whether a loss occurs
✔✔4 Steps in Risk Management Process - ✔✔1. Identify potential losses
2. Evaluate potential losses
3. Select the appropriate risk management techniques
4. Implement and monitor the risk management program
✔✔the most important step in the risk management process - ✔✔identifying loss
exposures (which assets need to be covered and which perils are associated with those
assets)
✔✔When measuring and analyzing the loss exposures (step 2) you rank the loss
exposures according to - ✔✔relative importance with severity being more important.
✔✔maximum possible loss - ✔✔the worst loss that could happen to the firm during its
lifetime
✔✔Probable Maximum Loss (PML) - ✔✔the worst loss that is likely to happen
✔✔Step 3: consider and select the appropriate form of risk management technique from
- ✔✔risk control techniques and risk financing techniques
✔✔Risk Control Techniques (6) - ✔✔avoidance; loss prevention; loss reduction;
separation; duplication; diversification
✔✔Risk Financing Techniques - ✔✔retention and transfer
✔✔Types of retention - ✔✔unfunded retention, funded reserve, deductible, captive
insurer, self insurance, risk retention group
✔✔when should risk be retained? - ✔✔when it is difficult to insure
when the worst possible losses are not serious (low severity )
