RMN 5950 EXAM LATEST UPDATES -2025/2026-
ACTUAL QUESTIONS AND CORRECT ANSWERS
ALREADY GRADED A+ GUARANTEED SUCCESS
ERM takes a narrow view of risks. T/F?
False
what is an increasingly important risk in the past 5 years due to increased customer
competition, expansion of networks, and increased scrutiny from regulators?
Reputation risk
1st generation risk managers
insurance buyers
2nd generation risk managers
started using multiple methods to manage pure risks
3rd generation risk managers
evolving toward ERM
the importance of risk in a particular situation is a function of 3 things
1. the magnitude of a negative impact
2. the probability of occurrence
3. the degree of uncertainty
pure risk
the chance of a loss or no change
speculative risk
comes with a chance for a loss or a gain
, beta =
systematic
theta =
nonsystematic/firm-specific
economic costs of risk
the total cost incurred by an organization because of the possibility of an accidental
loss
what is included in the economic costs of risk?
- costs of unexpected losses
- costs of uncertainty
- the reduction in values and costs devoted to managing risk
the reduction in values and costs devoted to managing risks is the sum of the
following:
- unreimbursed accidental losses from insurance
- insurance premiums and noninsurance expenses
- cost of risk control techniques
- cost of administering a RM program
ERM view of RM
-RM should be concerned with ALL risks and is a general management function
- concerned with the BROAD implications of risk
Expected utility theory
states that individuals are willing to pay extra costs to remove uncertainty in some
situations because they are risk averse
St. Petersburg Paradox
states that expected value doesn't provide a realistic picture of why individuals
manage risk
- individuals can't afford to bet on Expected Value because it is too high
ACTUAL QUESTIONS AND CORRECT ANSWERS
ALREADY GRADED A+ GUARANTEED SUCCESS
ERM takes a narrow view of risks. T/F?
False
what is an increasingly important risk in the past 5 years due to increased customer
competition, expansion of networks, and increased scrutiny from regulators?
Reputation risk
1st generation risk managers
insurance buyers
2nd generation risk managers
started using multiple methods to manage pure risks
3rd generation risk managers
evolving toward ERM
the importance of risk in a particular situation is a function of 3 things
1. the magnitude of a negative impact
2. the probability of occurrence
3. the degree of uncertainty
pure risk
the chance of a loss or no change
speculative risk
comes with a chance for a loss or a gain
, beta =
systematic
theta =
nonsystematic/firm-specific
economic costs of risk
the total cost incurred by an organization because of the possibility of an accidental
loss
what is included in the economic costs of risk?
- costs of unexpected losses
- costs of uncertainty
- the reduction in values and costs devoted to managing risk
the reduction in values and costs devoted to managing risks is the sum of the
following:
- unreimbursed accidental losses from insurance
- insurance premiums and noninsurance expenses
- cost of risk control techniques
- cost of administering a RM program
ERM view of RM
-RM should be concerned with ALL risks and is a general management function
- concerned with the BROAD implications of risk
Expected utility theory
states that individuals are willing to pay extra costs to remove uncertainty in some
situations because they are risk averse
St. Petersburg Paradox
states that expected value doesn't provide a realistic picture of why individuals
manage risk
- individuals can't afford to bet on Expected Value because it is too high
