Risk Management Chapter 1 2023 Correct Questions & Answers(Rated A)

Risk - ANSWER uncertainty concerning the occurrence of a loss Objective risk (aka degree of risk) - ANSWER the relative variation of actual loss from expected loss Law of large numbers - ANSWER as the number of exposure units increases, the more closely the actual loss experience will approach the expected loss experience Subjective risk - ANSWER uncertainty based on a person's mental condition or state of mind Chance of loss - ANSWER the probability that an event will occur Objective probability - ANSWER the long-run relative frequency of an event based on the assumptions of an infinite number of observations and of no change in the underlying conditions Subjective probability - ANSWER the individual's personal estimate of the chance of loss Peril - ANSWER the cause of a loss Hazard - ANSWER a condition that creates or increases the frequency or severity of loss Physical hazard - ANSWER a physical condition that increases the frequency or severity of loss Moral hazard - ANSWER dishonesty or character defects in an individual that increase the frequency or severity of loss Attitudinal hazard (morale hazard) - ANSWER carelessness or indifference to a loss, which increases the frequency or severity of a loss Legal hazard - ANSWER characteristics of the legal system or regulatory environment that increase the frequency or severity of loss Pure risk - ANSWER a situation in which there are only the possibilities of loss or no loss