RISK MANAGEMENT MODULE 1
EXAM QUESTIONS AND ANSWERS
Risk - answer- uncertainty regarding loss
There are different magnitudes of risk based on the ________ _____. - answer-
decision maker
decision makers include: - answer- organizations, society, individuals
Danger does not _____ risk. Information does not _____ risk. . - answer- equal; alter
to The Scientific View of Risk's definition of risk: - answer- the probability of a person
suffering an adverse effect from an activity or exposure over a given period of time.
(The time element can differ because statistics can change with time and vary with
habits)
Risk is a ___________ and is expressed as a ________ or _____ of the number of
people who experienced the _______ effect divided by the number of people who
engaged in the activity. - answer- probability; fraction; ratio; adverse
Uncertainty is when you.... - answer- do not know the outcome or have doubt in the
ability to predict future outcomes
Multiple outcomes can lead to ___________. - answer- uncertainty
Because uncertainty is __________, it can differ across individuals even when the
risk is the same. - answer- subjective
Uncertainty can be altered by ___________. - answer- information
Ex. an event such as a hurricane doesn't change the likelihood of another hurricane,
yet our ___________ and biases about another one occurring are now present. -
answer- uncertainty
Loss - answer- what you could have had, but don't
What is the definition of risk on the individual level? - answer- uncertainty regarding
loss
"Uncertainty regarding loss and things that prevent the organization from reaching
their objectives" is the definition of risk on the _____________ level. - answer-
organizational
____ adversely affects the achievements of an organization's objectives. - answer-
risk
, What is the definition of risk on the society level? - answer- Uncertainty regarding
loss and things that effect society as a whole; It has to effect a large portion of its
constituents; (Note - individuals and society have their own way of handling risk. )
Frequency/ Likelihood
"how _____ is something to occur?", "over what ____ _____?" - answer- often; time
frame
(How often something happens is usually compared to how many times it could have
happened.)
Severity/Impact
"how bad is it when it happens?" - answer- is often measured in terms of financial
loss
Expected severity - answer- what we expect the loss to be when it occurs
Expected Value/ Loss (formula) - answer- How often it occurs multiplied by how bad
it is when it occurs
Risk likelihood (frequency) - answer- the probability that a loss will occur; this can be
described as high, medium, or low
Risk impact - answer- the potential effect that a loss could have if it arises
Risk prevention methods are best applied to what? - answer- frequency of losses
Risk reduction methods are best applied to what? - answer- severity of losses
Do risk reduction methods have costs that are both monetary and nonmonetary? -
answer- Yes. It requires putting a value on human life. (Consider how to balance
risk/reward of how much it is worth spending to saving one life. What is the quality of
life they would have if you did save them?)
How do you figure out what is riskier? - answer- consider relative variation of actual
from expected loss (aka variation aka standard deviation).
categories of risk: - answer- pure, speculative, static, dynamic, fundamental,
particular, core, secondary
Pure Risk - answer- ("will there be a loss or no loss?")
there are clear expectations; these risks only involve two possible outcomes
speculative risk - answer- will there be a loss, no loss, or a gain
static risk - answer- these risks do not change through time
dynamic risk - answer- the chances of something happening now and something
happening later are different; they change through time
EXAM QUESTIONS AND ANSWERS
Risk - answer- uncertainty regarding loss
There are different magnitudes of risk based on the ________ _____. - answer-
decision maker
decision makers include: - answer- organizations, society, individuals
Danger does not _____ risk. Information does not _____ risk. . - answer- equal; alter
to The Scientific View of Risk's definition of risk: - answer- the probability of a person
suffering an adverse effect from an activity or exposure over a given period of time.
(The time element can differ because statistics can change with time and vary with
habits)
Risk is a ___________ and is expressed as a ________ or _____ of the number of
people who experienced the _______ effect divided by the number of people who
engaged in the activity. - answer- probability; fraction; ratio; adverse
Uncertainty is when you.... - answer- do not know the outcome or have doubt in the
ability to predict future outcomes
Multiple outcomes can lead to ___________. - answer- uncertainty
Because uncertainty is __________, it can differ across individuals even when the
risk is the same. - answer- subjective
Uncertainty can be altered by ___________. - answer- information
Ex. an event such as a hurricane doesn't change the likelihood of another hurricane,
yet our ___________ and biases about another one occurring are now present. -
answer- uncertainty
Loss - answer- what you could have had, but don't
What is the definition of risk on the individual level? - answer- uncertainty regarding
loss
"Uncertainty regarding loss and things that prevent the organization from reaching
their objectives" is the definition of risk on the _____________ level. - answer-
organizational
____ adversely affects the achievements of an organization's objectives. - answer-
risk
, What is the definition of risk on the society level? - answer- Uncertainty regarding
loss and things that effect society as a whole; It has to effect a large portion of its
constituents; (Note - individuals and society have their own way of handling risk. )
Frequency/ Likelihood
"how _____ is something to occur?", "over what ____ _____?" - answer- often; time
frame
(How often something happens is usually compared to how many times it could have
happened.)
Severity/Impact
"how bad is it when it happens?" - answer- is often measured in terms of financial
loss
Expected severity - answer- what we expect the loss to be when it occurs
Expected Value/ Loss (formula) - answer- How often it occurs multiplied by how bad
it is when it occurs
Risk likelihood (frequency) - answer- the probability that a loss will occur; this can be
described as high, medium, or low
Risk impact - answer- the potential effect that a loss could have if it arises
Risk prevention methods are best applied to what? - answer- frequency of losses
Risk reduction methods are best applied to what? - answer- severity of losses
Do risk reduction methods have costs that are both monetary and nonmonetary? -
answer- Yes. It requires putting a value on human life. (Consider how to balance
risk/reward of how much it is worth spending to saving one life. What is the quality of
life they would have if you did save them?)
How do you figure out what is riskier? - answer- consider relative variation of actual
from expected loss (aka variation aka standard deviation).
categories of risk: - answer- pure, speculative, static, dynamic, fundamental,
particular, core, secondary
Pure Risk - answer- ("will there be a loss or no loss?")
there are clear expectations; these risks only involve two possible outcomes
speculative risk - answer- will there be a loss, no loss, or a gain
static risk - answer- these risks do not change through time
dynamic risk - answer- the chances of something happening now and something
happening later are different; they change through time
