CISR RISK MANAGEMENT EXAM 2023-2024 ACTUAL
EXAM 200 QUESTIOS AND CORECT DETAILED
ANSWERS WITH RATIONALES (VERIFIED
ANSWERS) |AGRADE
Risk Financing - ....ANSWER...The acquisition of internal and external funds to pay
losses at the most favorable cost.
Risk Financing Techniques - ....ANSWER...Risk Taking appetite, transfer options,
simple transfer options & loss sensitive transfer options
Risk Administration - ....ANSWER...the process of planning, implementing, and
monitoring the risk management program
Risk Management Information System - ....ANSWER...an information system that
supports both the risk team and the organization. This type of software deploys risk
management tools in addition to managing risk data. RMIS can sometimes serve as a
customer relationship module, as well.
Four Components of the Total Cost of Risk - ....ANSWER...Insurance Costs, Retained
losses & ALAE, Risk Management departmental costs and Outside service fees
Pure Risk - ....ANSWER...A chance of loss or no loss, but no chance of gain.
Speculative Risk - ....ANSWER...Chance of loss or gain, usually associated with
business or financial risk.
Exposure - ....ANSWER...a situation, practice, or condition that may lead to an adverse
financial consequence; an activity or asset.
Hazard - ....ANSWER...a condition that may give rise to a loss from a given peril;
physical, moral, or morale characteristics that increases the likelihood of a loss.
Peril - ....ANSWER...the cause of loss, such as fire, wind, hail, slip and fall, etc.
Severity - ....ANSWER...the dollar amount of a given loss or the aggregate dollar
amount of all losses for a given period.
Accidents are also evaluated according to how severe the ensuing injury or property
damage may be.
,Frequency - ....ANSWER...the number of losses occurring in a given time period.
Accidents are evaluated according to how often they might occur.
Incident - ....ANSWER...an event that disrupts normal activities and may become a loss
(also referred to as a near miss)
Accident - ....ANSWER...an unplanned event definite as to time and place that results in
injury or damage to a person or property
Occurrence - ....ANSWER...an accident with the limitation of time removed (an
"accident" that is extended over a period of time rather than a single observable
happening)
Loss - ....ANSWER...a reduction in the value of assets. Not all losses become claims
Claim - ....ANSWER...a demand for payment or an obligation to pay as a result of a loss
Incurred but not reported (IBNR) - ....ANSWER...a reserve that must be established for
claims that have already occurred but that have not yet been reported
Which of the following is not one of the components in the definition of risk? -
....ANSWER...Chance or probability of loss
Certainty concerning a loss
Possibility of a variation of outcomes from a given set of circumstances
Difference between expected losses and actual losses
Loss Trending - ....ANSWER...adjusting historical losses to account for inflationary
trends so that the ultimate value is more current or meaningful. Loss trend factors are
multiplied by actual historical losses to trend the losses
Loss Development - ....ANSWER...the difference between the value of a loss as
originally reported and its subsequent evaluation at a later date or at the time of its final
disposition
Expected Losses - ....ANSWER...Loss projections ("loss pics" or "loss picks") based on
probability distributions and statistics, frequently developed using actuarial techniques
including trending and development.
Avoidance - ....ANSWER...eliminating an activity or exposure which eliminates chance
of loss
, Prevention - ....ANSWER...breaks sequence of events that leads to a loss or that makes
the event less likely
Reduction - ....ANSWER...reducing the severity or financial impact from unpreventable
losses
Segregation/Separation/Duplication - ....ANSWER...working primarily to reduce the
severity of the loss
Transfer (Contractual, Physical or Both) - ....ANSWER...having another party be
financially responsible for all or a partial amount of the loss
Active Retention - ....ANSWER...planned financial responsibility for the loss. The
organization knows in advance that it will be financially responsible should a loss occur
Passive Retention - ....ANSWER...not planned. It is an organization's unplanned
financial responsibility for the loss. Passive retention can be the result of failure of the
risk manager or insurance professional to identify the exposure, failure to act or
forgetting to act.
Retention Level - ....ANSWER...the amount of loss that is self-insured. It is usually
expressed on a per occurrence basis. It is sometimes referred to as the self-insured
retention
Frequency - ....ANSWER...A control technique that is designed to prevent a certain type
of accident would have the goal of reducing
Economic - ....ANSWER...the risk arising out of an organization's operational,
marketplace, financial or entrepreneurial activities
Legal - ....ANSWER...the risks inherent in compliance or arising from statutory liability
Political - ....ANSWER...the risk associated with legal changes by the governmental
interpretations (or reinterpretations) of rules and regulations
Social - ....ANSWER...the risks arising from public relations, loss of reputation, image or
cultural problems
Physical - ....ANSWER...risks arising from property, persons, or information
Juridicial - ....ANSWER...risks arising from the decision of a judge or jury, or from court
or jury attitudes
Statutory Liability - ....ANSWER...holds that a person or company can be held
responsible for a certain action or omission because of a related law that is not open to
interpretation.
EXAM 200 QUESTIOS AND CORECT DETAILED
ANSWERS WITH RATIONALES (VERIFIED
ANSWERS) |AGRADE
Risk Financing - ....ANSWER...The acquisition of internal and external funds to pay
losses at the most favorable cost.
Risk Financing Techniques - ....ANSWER...Risk Taking appetite, transfer options,
simple transfer options & loss sensitive transfer options
Risk Administration - ....ANSWER...the process of planning, implementing, and
monitoring the risk management program
Risk Management Information System - ....ANSWER...an information system that
supports both the risk team and the organization. This type of software deploys risk
management tools in addition to managing risk data. RMIS can sometimes serve as a
customer relationship module, as well.
Four Components of the Total Cost of Risk - ....ANSWER...Insurance Costs, Retained
losses & ALAE, Risk Management departmental costs and Outside service fees
Pure Risk - ....ANSWER...A chance of loss or no loss, but no chance of gain.
Speculative Risk - ....ANSWER...Chance of loss or gain, usually associated with
business or financial risk.
Exposure - ....ANSWER...a situation, practice, or condition that may lead to an adverse
financial consequence; an activity or asset.
Hazard - ....ANSWER...a condition that may give rise to a loss from a given peril;
physical, moral, or morale characteristics that increases the likelihood of a loss.
Peril - ....ANSWER...the cause of loss, such as fire, wind, hail, slip and fall, etc.
Severity - ....ANSWER...the dollar amount of a given loss or the aggregate dollar
amount of all losses for a given period.
Accidents are also evaluated according to how severe the ensuing injury or property
damage may be.
,Frequency - ....ANSWER...the number of losses occurring in a given time period.
Accidents are evaluated according to how often they might occur.
Incident - ....ANSWER...an event that disrupts normal activities and may become a loss
(also referred to as a near miss)
Accident - ....ANSWER...an unplanned event definite as to time and place that results in
injury or damage to a person or property
Occurrence - ....ANSWER...an accident with the limitation of time removed (an
"accident" that is extended over a period of time rather than a single observable
happening)
Loss - ....ANSWER...a reduction in the value of assets. Not all losses become claims
Claim - ....ANSWER...a demand for payment or an obligation to pay as a result of a loss
Incurred but not reported (IBNR) - ....ANSWER...a reserve that must be established for
claims that have already occurred but that have not yet been reported
Which of the following is not one of the components in the definition of risk? -
....ANSWER...Chance or probability of loss
Certainty concerning a loss
Possibility of a variation of outcomes from a given set of circumstances
Difference between expected losses and actual losses
Loss Trending - ....ANSWER...adjusting historical losses to account for inflationary
trends so that the ultimate value is more current or meaningful. Loss trend factors are
multiplied by actual historical losses to trend the losses
Loss Development - ....ANSWER...the difference between the value of a loss as
originally reported and its subsequent evaluation at a later date or at the time of its final
disposition
Expected Losses - ....ANSWER...Loss projections ("loss pics" or "loss picks") based on
probability distributions and statistics, frequently developed using actuarial techniques
including trending and development.
Avoidance - ....ANSWER...eliminating an activity or exposure which eliminates chance
of loss
, Prevention - ....ANSWER...breaks sequence of events that leads to a loss or that makes
the event less likely
Reduction - ....ANSWER...reducing the severity or financial impact from unpreventable
losses
Segregation/Separation/Duplication - ....ANSWER...working primarily to reduce the
severity of the loss
Transfer (Contractual, Physical or Both) - ....ANSWER...having another party be
financially responsible for all or a partial amount of the loss
Active Retention - ....ANSWER...planned financial responsibility for the loss. The
organization knows in advance that it will be financially responsible should a loss occur
Passive Retention - ....ANSWER...not planned. It is an organization's unplanned
financial responsibility for the loss. Passive retention can be the result of failure of the
risk manager or insurance professional to identify the exposure, failure to act or
forgetting to act.
Retention Level - ....ANSWER...the amount of loss that is self-insured. It is usually
expressed on a per occurrence basis. It is sometimes referred to as the self-insured
retention
Frequency - ....ANSWER...A control technique that is designed to prevent a certain type
of accident would have the goal of reducing
Economic - ....ANSWER...the risk arising out of an organization's operational,
marketplace, financial or entrepreneurial activities
Legal - ....ANSWER...the risks inherent in compliance or arising from statutory liability
Political - ....ANSWER...the risk associated with legal changes by the governmental
interpretations (or reinterpretations) of rules and regulations
Social - ....ANSWER...the risks arising from public relations, loss of reputation, image or
cultural problems
Physical - ....ANSWER...risks arising from property, persons, or information
Juridicial - ....ANSWER...risks arising from the decision of a judge or jury, or from court
or jury attitudes
Statutory Liability - ....ANSWER...holds that a person or company can be held
responsible for a certain action or omission because of a related law that is not open to
interpretation.
