19 Questions
What is Loss Frequency a measure of?
How often the loss occurs
Which technique is considered the best approach if possible?
Avoidance
What does Maximum Probable Loss refer to?
The most likely loss for an activity
Which method is the most widely used for transferring risk?
Insurance
What is a critical aspect for the risk manager to have in order to be effective?
Periodic review
Why is continual evaluation of every step important in risk management?
To adapt to technological changes
When should a business consider purchasing insurance coverage according to the text?
When the premium is lower than the present value of expected loss
Which characteristic defines fortuitous losses in insurance?
Accidental and unintentional
What do insurance companies provide related to risk, according to the text?
Indemnification and fortuitous loss coverage
What is Loss Severity a measure of in risk evaluation?
How big the loss is
In risk management, what is the critical aspect of understanding both loss frequency and loss severity for a risk manager?
Evaluating risk
Which measure in risk evaluation deals with the largest possible loss for an activity without the element of chance?
Maximum Possible Loss
What is the most commonly used technique in risk management for transferring risk according to the text?
Insurance
Why is cooperation with other departments critical for a risk manager?
To effectively handle contracts and risk exposures
What is the main reason behind businesses purchasing insurance coverage according to the text?
To transfer risk to another party for a sum certain
What distinguishes fortuitous losses from intentional losses in insurance coverage?
Fortuitous losses involve accidental and unintentional events
What does the law of large numbers primarily contribute to in insurance?
Greater predictability of actual losses
Why can't insurance be purchased for an intentional loss according to the text?
Because intentional losses involve hitting someone with a car
What is one of the key reasons why continual evaluation of every step is emphasized in risk management?
To ensure that base assumptions remain valid
Explore key concepts in evaluating potential losses and risks, such as loss frequency, variance, skewedness, correlations, and loss severity. Understand how these factors impact risk assessment and management.
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