1. Which of the following is an example of a legal hazard?
A. A hazardous chemical spill due to improper handling
B. An employee suing the company for workplace injuries
C. A natural disaster damaging business property
D. A poorly written contract leading to a lawsuit
Answer: D) A poorly written contract leading to a lawsuit
Rationale: Legal hazards refer to the potential for legal consequences
arising from actions or inactions, such as a poorly written contract.
(quizlet.com)
2. What is meant by risk financing in the context of risk management?
A. The methods used to allocate funds to cover potential financial
losses from risks
B. The process of eliminating all risks from an organization
C. The strategy to increase the frequency of risk events
D. The method of transferring all risks to insurance companies
Answer: A) The methods used to allocate funds to cover potential
financial losses from risks
Rationale: Risk financing refers to the methods used to allocate funds
to cover potential financial losses from
3. In a business, what does 'enterprise risk management' (ERM) aim to
do?
,A. Focus solely on financial risks while ignoring operational risks
B. Identify and manage all types of risks across the entire organization
C. Only address risks related to external factors like competitors or
market trends
D. Focus on individual risks rather than organizational-level risk
strategies
Answer: B) Identify and manage all types of risks across the entire
organization
Rationale: ERM is a holistic approach to managing all risks, including
financial, operational, and strategic risks, across an entire organization.
(quizlet.com)
4. What is the primary benefit of implementing a risk management
program in an organization?
A. It eliminates all risks from the organization
B. It helps to increase the likelihood of risky events occurring
C. It provides a structured approach to identifying and addressing risks
D. It helps to reduce the organization’s exposure to financial losses
Answer: C) It provides a structured approach to identifying and
addressing risks
Rationale: A risk management program helps organizations take a
systematic approach to identifying, assessing, and managing risks in a
way that reduces uncertainty and minimizes negative outcomes.
(quizlet.com)
5. Which of the following is a characteristic of pure risk?
, A. Possibility of gain or loss
B. Only the possibility of loss
C. Can be managed through speculation
D. Associated with entrepreneurial ventures
Answer: B) Only the possibility of loss
Rationale: Pure risk involves situations where there is only a chance of
loss or no loss, with no potential for gain.
Studypool
6. Which of the following best describes the risk financing technique of
‘self-insurance’?
A. Transferring risk to an external insurance company
B. Retaining risk but setting aside funds to cover potential losses
C. Reducing risk through safety programs
D. Avoiding risks altogether
Answer: B) Retaining risk but setting aside funds to cover potential
losses
Rationale: Self-insurance involves an organization retaining its risks
while setting aside funds to cover potential losses rather than
purchasing insurance. (quizlet.com)
7. Which of the following would be an example of a financial risk?
A. A hurricane causing damage to a company’s assets
B. A change in government regulations that affects business operations
C. A decrease in a company’s stock price due to poor earnings
A. A hazardous chemical spill due to improper handling
B. An employee suing the company for workplace injuries
C. A natural disaster damaging business property
D. A poorly written contract leading to a lawsuit
Answer: D) A poorly written contract leading to a lawsuit
Rationale: Legal hazards refer to the potential for legal consequences
arising from actions or inactions, such as a poorly written contract.
(quizlet.com)
2. What is meant by risk financing in the context of risk management?
A. The methods used to allocate funds to cover potential financial
losses from risks
B. The process of eliminating all risks from an organization
C. The strategy to increase the frequency of risk events
D. The method of transferring all risks to insurance companies
Answer: A) The methods used to allocate funds to cover potential
financial losses from risks
Rationale: Risk financing refers to the methods used to allocate funds
to cover potential financial losses from
3. In a business, what does 'enterprise risk management' (ERM) aim to
do?
,A. Focus solely on financial risks while ignoring operational risks
B. Identify and manage all types of risks across the entire organization
C. Only address risks related to external factors like competitors or
market trends
D. Focus on individual risks rather than organizational-level risk
strategies
Answer: B) Identify and manage all types of risks across the entire
organization
Rationale: ERM is a holistic approach to managing all risks, including
financial, operational, and strategic risks, across an entire organization.
(quizlet.com)
4. What is the primary benefit of implementing a risk management
program in an organization?
A. It eliminates all risks from the organization
B. It helps to increase the likelihood of risky events occurring
C. It provides a structured approach to identifying and addressing risks
D. It helps to reduce the organization’s exposure to financial losses
Answer: C) It provides a structured approach to identifying and
addressing risks
Rationale: A risk management program helps organizations take a
systematic approach to identifying, assessing, and managing risks in a
way that reduces uncertainty and minimizes negative outcomes.
(quizlet.com)
5. Which of the following is a characteristic of pure risk?
, A. Possibility of gain or loss
B. Only the possibility of loss
C. Can be managed through speculation
D. Associated with entrepreneurial ventures
Answer: B) Only the possibility of loss
Rationale: Pure risk involves situations where there is only a chance of
loss or no loss, with no potential for gain.
Studypool
6. Which of the following best describes the risk financing technique of
‘self-insurance’?
A. Transferring risk to an external insurance company
B. Retaining risk but setting aside funds to cover potential losses
C. Reducing risk through safety programs
D. Avoiding risks altogether
Answer: B) Retaining risk but setting aside funds to cover potential
losses
Rationale: Self-insurance involves an organization retaining its risks
while setting aside funds to cover potential losses rather than
purchasing insurance. (quizlet.com)
7. Which of the following would be an example of a financial risk?
A. A hurricane causing damage to a company’s assets
B. A change in government regulations that affects business operations
C. A decrease in a company’s stock price due to poor earnings
