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Flashcards

Intro to Risk Management

crystiewhchic English 46 cards

Cards in this deck (46)

  1. 1What is RISK?Uncertainty about whether a loss will occur.
  2. 2What is RISK MANAGEMENT?Process to best handle uncertainty about whether losses will occur.
  3. 3What is LOSS FREQUENCY?Refers to how often losses occur and is used to predict the likelihood of similar losses in the future.
  4. 4What is LOSS SEVERITY?Refers to the amount of damage resulting from losses and is used to predict how costly future losses are likely to be.
  5. 5What is PURE RISK?Can only result in a loss or no loss. Presents no opportunity for gain.
  6. 6What is SPECULATIVE RISK?Can result in loss, no loss, or gain.
  7. 7What is LOSS?Occurs when an item of property or a right owned by a person or an organization has declined in slue or a capacity to perform has been diminished.
  8. 8What is LOSS EXPOSURE?Possibilities of accidental losses with measurable financial consequences.
  9. 9What is PERIL?Cause of loss.
  10. 10What is REAL PROPERTY?Means land, buildings, and other structures attached to the land.
  11. 11What is PERSONAL PROPERTY?Includes everything but real property.
    I.e. Furniture, fixtures and inventory.
  12. 12What are the 4 types of loss exposures?1. Property
    2. Liability
    3. Personnel
    4. Net income
  13. 13What is PROPERTY LOSS EXPOSURE?Ownership of real or personal property.
  14. 14What is LIABILITY LOSS EXPOSURE?An individual or organization is legally responsible - liable - for the injury or damage suffered by another person or organization.
  15. 15What is PERSONNEL LOSS EXPOSURE?Employing personnel represents a personnel loss exposure through possible death, disability or injury of an employee.
  16. 16What is NET INCOME LOSS EXPOSURE?The amount of revenues over expenses that is generated in a specific accounting period.
  17. 17What are the elements of a loss exposure?1. Value exposed to loss - property, liability, personnel, net income
    2. Cause of loss or peril
    3. Financial consequences
  18. 18What are risk management benefits?1. Prevention of losses
    2. Reduction of the financial consequences of losses
    3. Peace of mind
  19. 19Classify as either (a) a pure risk, (b) a speculative risk, (c) unclassifiable based on the information given. The possibility that a house you own will be damaged or destroyed by earthquake.a. a pure risk
  20. 20Classify as either (a) a pure risk, (b) a speculative risk, (c) unclassifiable based on the information given. The possibility that the market value of a house you own will be other than the price you paid for it.b. a speculative risk
  21. 21Classify as either (a) a pure risk, (b) a speculative risk, (c) unclassifiable based on the information given. The possibility that a business you own will be found legally liable for injury to a customer form a product that your business manufactures.a. a pure risk
  22. 22Classify as either (a) a pure risk, (b) a speculative risk, (c) unclassifiable based on the information given. The possibility that a business you own might gain or lose an important contract to supply services.b. a speculative risk
  23. 23Classify each of the following loss exposures as (a) property, (b) liability, (c) personnel, or (d) net income. Jim might damage his car if it skids on an icy road and hits a tree.a. property
  24. 24Classify each of the following loss exposures as (a) property, (b) liability, (c) personnel, or (d) net income. Jim might cause injury to a passenger in his car as a result of an accident where his car skids on an icy road and his a tree.b. liability
  25. 25Classify each of the following loss exposures as (a) property, (b) liability, (c) personnel, or (d) net income. Jim might be injured in the accident and be unable to work.c. personnel
  26. 26Classify each of the following loss exposures as (a) property, (b) liability, (c) personnel, or (d) net income. Sarah owns an apartment house that might be damaged by a hurricane.a. property
  27. 27Classify each of the following loss exposures as (a) property, (b) liability, (c) personnel, or (d) net income. Sarah might lose rental income from her tenants because of damage caused by the hurricane.d. net income
  28. 28What are the 5 steps of the risk management process?1. Identifying and analyzing loss exposures.
    2. Examining the feasibility of alternative techniques available for treat in those exposures.
    3. Selecting the most appropriate combination of those techniques.
    4. Implementing the selected techniques.
    5. Monitoring results and considering the need for change or improvement.
  29. 29What is a HAZARD?Anything that increases the possible frequency or severity of a loss.
  30. 30What is a RISK CONTROL TECHNIQUE?Intended to prevent losses, to minimize the frequency or severity of losses, or to make losses more predictable.
  31. 31What is a RISK FINANCING TECHNIQUE?Intended to pay for those losses that occur despite the best risk control efforts.
  32. 32What are the 4 Risk Control Techniques?1. Avoidance
    2. Loss prevention
    3. Loss reduction
    4. Segregation of exposures - separation & duplication
    5. Contractual transfer of an asset or activity
  33. 33What is AVOIDANCE?Involves choosing not to own an asset or engage in an activity that gives rise to the possibility of loss.
  34. 34What is LOSS PREVENTION?Techniques that try to reduce the frequency of a particular loss.
  35. 35What is LOSS REDUCTION?Techniques that try to decrease the severity of a particular loss.
  36. 36What is SEGREGATION OF EXPOSURES?Accomplished by separation or by duplication.
  37. 37What is CONTRACTUAL TRANSFER FOR RISK CONTROL?Transferring the legal and financial responsibility for a loss from one individual or organization to another.
  38. 38What are the 2 Risk Financing Techniques?1. Retention
    2. Transfer
  39. 39What is RETENTION?Individuals or organizations plan to generate the funds to pay for losses themselves.
  40. 40What are the 5 types of retention?1. Current Expensing of Losses
    2. Unfunded Reserve
    3. Funded Reserve
    4. Borrowing
    5. Captive Insurer
  41. 41What is TRANSFER?Shifts the financial responsibility for losses from one party to another through a contract.
  42. 42What are the 3 types of transfer?1. Contractual Transfer for Risk Financing
    2. Commercial Insurance
    3. Hedging (for Business Risk Only)
  43. 43What is the most common type of non-insurance transfer?Hold Harmless Agreement - transfers the responsibility for losses arising from those operations to the contractor.
  44. 44What is INSURANCE?A system by which a risk is transferred by a person or an organization to an insurance company in exchange for a periodic payment, the insurance premium.
  45. 45What are the methods used to identify and analyze loss exposures?1. Surveys or questionnaires
    2. Financial statements
    3. Records and files
    4. Flowcharts
    5. Personal inspections
    6. Consulting experts
  46. 46—

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Flashcards on Intro to Risk Management, created by crystiewhchic on 13/09/2015.
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crystiewhchic
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