Managing Unmeasurable Risks

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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?

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

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

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

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

Financial products including the use of derivatives (A) Signup and view all the answers

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

Conservative, highly liquid assets (C) Signup and view all the answers

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

Risk and return objectives (B) Signup and view all the answers

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

X total capital (C) Signup and view all the answers

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

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

How can customer-driven strategies impact investment decisions?

By influencing the choice of a suitable investment strategy (B) 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?

Investment-linked policies (C) Signup and view all the answers

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

Analyzing publicly traded organizations (A) Signup and view all the answers

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

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

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

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

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

Increased costs in the short term (A) Signup and view all the answers

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

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

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

Focus on publicly traded organizations (B) Signup and view all the answers

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

Ignoring them (C) Signup and view all the answers

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

Changes in consumer preferences (A) Signup and view all the answers

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

Meeting objectives in difficult circumstances (C) Signup and view all the answers

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

Certain future outcomes (D) Signup and view all the answers

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

Changes in environmental factors (C) Signup and view all the answers

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

Avoiding all future uncertainty (D) Signup and view all the answers

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

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

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

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

What is the role of an Appointed Actuary under CPS320?

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

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

All of the above. (D) Signup and view all the answers

What is a common feature of actuarial and investment advice?

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

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

Environmental advisors (C) Signup and view all the answers