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Questions and Answers
Which of the following is a financial risk that may be faced by a business organization?
What risk may harm the profitability of Mid-States Beef's operations if the price of corn increases significantly?
One category of risk considered in an enterprise risk management program is the risk associated with an organization's property, liability, and personnel-related loss exposures. What is this risk called?
Businesses face several operational risks. Which operational risk is associated with deviations from the organization's regular practices and procedures?
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Which statement is (are) true with respect to enterprise risk management programs? I. They address traditional property, liability, and personnel loss exposures. II. They do not address financial risks.
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Which of the following is true regarding a comprehensive risk management program?
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What is the repetitive pattern of loose underwriting standards with low premiums followed by tight underwriting standards with high premiums called in the property and liability insurance industry?
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In which insurance market condition are insurance rates high and underwriting standards tight?
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What is the term used to describe the relative level of surplus in the insurance industry?
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What is the chart called that lists all risks along with pertinent information such as risk category, responsible party, and risk severity scores?
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What is the probability that any vehicle in a fleet of 200 vehicles will be damaged in any given year if 50 vehicles on average experience property damage per year?
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Study Notes
Financial Risk
- Increase in corn price is a financial risk that may harm the profitability of Mid-States Beef's operations.
Categories of Risk
- Property, liability, and personnel-related loss exposures are categories of risk considered in an enterprise risk management program.
Operational Risk
- Deviations from regular practices and procedures are an operational risk faced by businesses.
Enterprise Risk Management Programs
- Enterprise risk management programs address traditional property, liability, and personnel loss exposures, as well as other risks.
- They are comprehensive and consider various types of risk.
Insurance Industry
- The repetitive pattern of loose underwriting standards with low premiums followed by tight underwriting standards with high premiums is called the underwriting cycle.
- Hard market conditions exist when insurance rates are high and underwriting standards are tight.
- The term "capacity" describes the relative level of surplus in the insurance industry.
Risk Management Tools
- A risk register or risk inventory is a chart that lists all risks along with pertinent information such as risk category, responsible party, and risk severity scores.
Probability and Statistics
- The probability that any vehicle in a fleet of 200 vehicles will be damaged in a given year is 50/200 or 25% if 50 vehicles on average experience property damage per year.
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Description
Test your knowledge of financial risks faced by business organizations with this quiz. Identify different types of financial risks and their potential impact on business operations.
