Managing Unmeasurable Risks

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Questions and Answers

What is an example of a social risk mentioned in the text?

  • Strategic risk
  • Interest rate risk
  • Trust and governance risk (correct)
  • Currency exchange risk

How has globalisation impacted the complexity of markets and risks according to the text?

  • It has no impact on markets and risks
  • It has simplified markets
  • It has reduced risks
  • It has increased the complexity of markets and risks (correct)

What is a distinguishing feature of effective modern ERM according to the text?

  • Minimizing return
  • Ignoring organizational objectives
  • Maximizing return and risk-taking within the organization's risk appetite (correct)
  • Avoiding all risk

What is one reason why organizations may have a unique relationship with risk and risk management?

<p>Their past history including mergers, acquisitions, and notable successes or failures (A)</p> Signup and view all the answers

How has the understanding of risk-adjusted returns evolved according to the text?

<p>It is now a common concept used for evaluation (A)</p> Signup and view all the answers

What type of products have rapidly developed in the financial industry, as per the text?

<p>Financial products including the use of derivatives (A)</p> Signup and view all the answers

What type of assets are likely to be invested in when facing short-term, highly uncertain payments?

<p>Conservative, highly liquid assets (C)</p> Signup and view all the answers

What factor influences the amount of tolerance for the mismatch between assets and liabilities?

<p>Risk and return objectives (B)</p> Signup and view all the answers

What may Regulators require a business to hold for a particular investment strategy?

<p>X total capital (C)</p> Signup and view all the answers

What is an example of a regulatory restriction related to asset classes?

<p>Not allowing entities to invest in unethical projects (D)</p> Signup and view all the answers

How can customer-driven strategies impact investment decisions?

<p>By influencing the choice of a suitable investment strategy (B)</p> Signup and view all the answers

What is an example where investment strategies are guided by customer expectations about future returns or selected investment options?

<p>Investment-linked policies (C)</p> Signup and view all the answers

What is the main focus of stock analysts when compared to credit rating agencies?

<p>Analyzing publicly traded organizations (A)</p> Signup and view all the answers

What distinguishes the perspective of stock analysts from that of credit rating agencies?

<p>Focus on a smaller universe of organizations (C)</p> Signup and view all the answers

How do governments aim to balance their involvement in regulating businesses?

<p>By encouraging industry growth while protecting stakeholders' interests (A)</p> Signup and view all the answers

What is the typical outcome of most legislation according to the text?

<p>Increased costs in the short term (A)</p> Signup and view all the answers

What is the primary objective of stock analysts when providing opinions to their clients?

<p>Informing clients on factors affecting share prices (D)</p> Signup and view all the answers

How do stock analysts differ from credit rating agencies in terms of organizational focus?

<p>Focus on publicly traded organizations (B)</p> Signup and view all the answers

Which of the following is NOT a method for managing unmeasurable risks?

<p>Ignoring them (C)</p> Signup and view all the answers

Which of the following is NOT a long-term risk for a life insurance company?

<p>Changes in consumer preferences (A)</p> Signup and view all the answers

Which of the following is a benefit of good risk management?

<p>Meeting objectives in difficult circumstances (C)</p> Signup and view all the answers

Which of the following is NOT a potential consequence of a risk event?

<p>Certain future outcomes (D)</p> Signup and view all the answers

Which of the following is NOT a reason why past risk events can be poorly understood?

<p>Changes in environmental factors (C)</p> Signup and view all the answers

Which of the following is NOT a part of managing risks?

<p>Avoiding all future uncertainty (D)</p> Signup and view all the answers

What is a key feature of rating agencies' business model?

<p>They are paid by the organizations they evaluate. (C)</p> Signup and view all the answers

How do credit ratings affect a company's cost of capital?

<p>Credit ratings affect the rates at which a company can borrow money. (C)</p> Signup and view all the answers

What is the role of an Appointed Actuary under CPS320?

<p>The role of the Appointed Actuary under CPS320 is not specified. (B)</p> Signup and view all the answers

How do legal advisors help minimize an organization's risks?

<p>All of the above. (D)</p> Signup and view all the answers

What is a common feature of actuarial and investment advice?

<p>They are heavily regulated and may have education or other professional requirements. (B)</p> Signup and view all the answers

Which of the following is NOT a type of advisor mentioned in the text?

<p>Environmental advisors (C)</p> Signup and view all the answers

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