1. One of the elements of risk is uncertainty. Which one of the following best describes the type of uncertainty that risk involves?
Uncertainty as to how to manage potential losses
Uncertainty as to whether a negative outcome is possible
Uncertainty as to the type and timing of the outcome
Uncertainty as to whether insurance is available
2. Risk can be classified as pure or speculative. Which one of the following is the best example of a speculative risk?
Buying a new personal vehicle
Purchasing an insurance policy
Acquiring a new television
Investing in shares of stock
3. The second step in the risk management process is analyzing loss exposures. Which one of the following is true regarding this step?
Loss exposures are analyzed based on loss frequency, loss severity, total dollar losses, and timing in this step.
Loss exposures that could interfere with the achievement of the organization's goals are identified in this step.
A weakness of loss exposure analysis is that it is useful only for those types of losses that an organization has suffered in the past.
A major strength of loss exposure analysis is that the process is generally inexpensive
4. Which one of the following is a noninsurance risk transfer measure?
A finite risk plan
A hold-harmless agreement
A large deductible plan
A rent-a-captive arrangement
5. Current expensing of losses as a planned retention funding measure would be most appropriate for funding which one of the following?
1- Losses that represent a large proportion of the organization's cash flows
2- An auto physical damage deductible
3- Litigated liability claims
4- Losses with a relatively high expected value
6. A hold harmless agreement is a :
1- Risk retention measure.
2- Form of liability insurance.
3- Noninsurance risk transfer measure.
4- Type of risk pooling mechanism.