Risk Management and Statistics Quiz

Risk-Based Auditing

• Risk-based auditing prioritizes using an organization's limited internal audit resources in areas posing the greatest risk.
• It emphasizes auditing to business objectives, focusing on material risk, and identifying threats to business goals.

Risk Management and Organizational Alignment

• Risk management provides insurance and risk management solutions to control or contain losses and satisfy customers.
• Common objectives include balancing risk and reward, supporting decision-making, and achieving goals such as uncertainty, legal compliance, and profitability.

Underwriting

• Underwriting helps insurers develop and maintain a profitable book of business by minimizing adverse selection, ensuring adequate policyholder surplus, and enforcing guidelines.
• Underwriters select insureds, classify and price accounts, recommend coverage, manage the book of business, and support producers and insureds.

Staff Underwriters

• Staff underwriters research the market, formulate underwriting policy, revise guidelines, evaluate loss experience, and conduct audits.
• They also develop coverage forms, review rates, and arrange reinsurance.

Underwriting Policy

• Underwriting policy supports an insurer's mission statement by guiding individual and aggregate policy selection.

Essential Knowledge for Underwriters

• Successful underwriters possess knowledge in insurance principles, practices, loss exposures, pricing, loss analysis, and internal/external information sources.

Rating

• Rating involves applying an applicable rate and plan to an exposure to calculate the premium.

Moral Hazard

• Moral hazard increases the likelihood of intentional loss or exaggeration.

Property Application

• Underwriters assess loss history, COPE elements, and property values in property applications.

Supplemental Information

• Supplemental information like risk management programs, financial statements, risk control reports, and valuation guides helps underwriters assess property accounts.

COPE and Loss Run

• COPE elements consist of construction, occupancy, protection, and external exposures and are analyzed by commercial property underwriters.
• Loss runs detail an insured's claims history over a specific period.

Morale Hazard

• Morale hazard is carelessness or indifference that increases loss frequency or severity.

Fire Protection and Division

• Underwriters analyze loss exposures from neighboring properties and the surrounding area.
• A fire division is a section of a structure that cannot spread fire to another section.

Public and Private Fire Protection

• Public fire protection is government-provided equipment and services.
• Private fire protection is undertaken by property owners to protect their assets from fire loss.

Residential and Occupational Loss Exposures

• Underwriters evaluate residential loss exposures by considering hazards that increase liability from invited guests.
• Personal insurance applications require questions about occupation to determine potential loss frequency and severity.

Rating Plan

• A rating plan specifies criteria for exposure base, exposure units, and rate per unit to determine premiums for a specific insurance line.

Combined Ratio

• A combined ratio below 100 indicates underwriting profit; above 100 indicates loss.

Nonfinancial Measures

• Nonfinancial metrics monitor underwriting performance like selection, pricing, product mix, retention ratio, hit ratio, and customer service.

Retention Ratio

• The percentage of expiring policies an insurer renews.

Hit Ratio

• A measure of how well underwriters meet sales goals by comparing policies written to applications quoted.

Physical Controls

• Physical controls limit individual access to protected information or facilities (e.g., locks, doors, fences).

Technical Controls

• Technical controls (logical controls) include operating systems, applications, databases, and firewalls.

Directive Control

• Directive control specifies employee behaviors and policies, like acceptable use policies.

Deterrent Control

• Deterrent control discourages security policy violations due to effort and/or consequences (e.g., CCTV monitoring).

Preventative Control

• Preventative control stops security incidents, such as background screenings.

Compensating Control

• Compensating control mitigates risk by an agreed upon exceptional process.

Detective Control

• Detective control alerts professionals to attempted security violations.

Corrective Control

• Corrective control responds to security violations by removing their impact.

Hazard

• A hazard is a condition or activity potentially causing harm.

Risk

• Risk is the chance or probability of harm from a hazard.

Incident

• An incident is a work-related injury, illness, or fatality.

Risk Response Strategies

• Strategies for responding to risk include avoidance, transfer, retention, and reduction.

Risk Assessment

• Risk assessment involves risk identification, analysis, and evaluation.

ALARA and ALARP

• ALARA (As Low As Reasonably Achievable)
• ALARP (As Low As Reasonably Practical)

Loss Control Measures

• Examples include hazcom training, machine guards, and confined space programs.

Domino Theory

• All accidents are caused by a chain of events, removal of any chain prevents the accident.

Petersen's Accident/Incident Theory

• Accident/incident causes are human error and/or system failure.

Risk Analysis vs. Risk Management

• Risk analysis estimates risk, while risk management determines whether the risk is acceptable and how it will be reduced.

Hazard Analysis

• Hazard analysis is used to identify three categories of hazards.

Primary Methods for Reducing Accidents

• Prevention (loss control) and financial (cost reduction).

Objectives of Risk Management

• Business objectives include reducing anxiety, meeting corporate citizenship responsibilities, and continued growth.

Poka-Yoke

• Lean manufacturing technique aimed at designing fail-safe systems to minimize human error.

Kaizen, 5-S

• Japanese term for continuous improvement, housekeeping technique.

Risk Management Techniques

• Risk control and risk financing.

Implementing Risk Management Techniques

• Risk financing includes considering losses, insurance types, deductibles, operations, customer/employee safety, and reputation.
• Risk control is done by risk management and operations professionals.

Retention Ratio

• Percentage of expiring policies an insurer renews.

Hit Ratio

• Measuring underwriter performance toward sales and quoted applications.

Insurance

• Rating plans, combined ratio, and non-financial measures.

Reinsurance

• Transferring risk to another insurer through a contractual agreement (facultative).

Underwriting Guidelines

• Written manuals communicating an insurer's policy.

Qualitative and Quantitative Risk Assessment

• Qualitative assessment uses non-numeric risk estimates; quantitative assessment uses numerical estimates.

Risk Assessment Formulas

• ARO (Annual Rate of Occurrence) estimates frequency and EF (Exposure Factor) calculates percentage of asset loss.

EPA Human Health Risk Assessment

• Four steps: hazard identification, dose-response assessment, exposure assessment, and risk characterization.

Underwriting Elements

• Limits of liability and deductibles are frequently required.

Loss Analysis

• In-depth understanding of an insured's operations is needed to determine appropriate experience.

Reinsurance

• A process of transferring risk to another insurer through agreement.

Predictive Modeling

• Computer programs that estimate future losses from catastrophic events.

Insurance Types

• Catastrophe insurance covers high-cost, low-probability events; reinsurance is between primary and secondary insurers.

Human Factors Theory

• Accident causes fall into three categories: overload, inappropriate worker response, and inappropriate activities.

Vicarious Liability and Incident Investigation

• Legal assignment of liability related to an injury.

Hazard Analysis

• Identifies hazards and ways to reduce them during intended use activities.

Inductive and Deductive Reasoning

• Inductive reasoning goes from specific to general; deductive goes from general to specific.

Fault Tree Analysis (FTA)

• A deductive technique that identifies the causes of an undesired outcome.

Hazard and Risk

• Hazardous conditions increase loss frequency/severity. Risk is the chances of those hazards occurring.

Incident and Risk Response Strategies

• Strategies include avoiding, transferring, retaining, or reducing risk.

Risk Assessment and Evaluation

• Process of identifying, analyzing, and evaluating risk.

Loss Control Measures

• Examples include training, machine guards, and confined space programs.

Domino Theory

• All accidents are caused by a chain of events, and eliminating a single step can prevent the accident.

Risk Management Techniques

• Options for dealing with risk.

Risk Identification and Analysis

• Tools and methods for identifying and analyzing organizational risks.

Risk Treatment Techniques

• Ways to treat loss exposures (avoid, modify).

Ethical Principles

• Elements of ethical practice in risk management, like fair presentation, confidentiality, and due professional care.

Pure Risk

• Risks leading only to loss, not gain (e.g., fire).

Other Risk Concepts

• Whole person theory and indemnity, in conjunction with evaluating persons' lost wages.
• Residual risk is risk remaining after risk treatment.
• ISO 19011 standards for auditing.

Risk Management

• Process of handling uncertainty and loss frequency/severity.

Types of Risk

• Pure risks involve only potential loss, and speculative risks can result in loss or gain.

Safety and Health Goals

• To prevent injuries, illnesses, and deaths, and resulting suffering.
• Recommended practices use a proactive approach.

System Hazard Analysis

• Analysis of interrelationships within a system to determine potential and real hazards.

Failure Analysis

• Common cause failure, and sneak circuit analysis.

Inductive and Deductive Analysis

• Inductive goes from specific to general; deductive goes from general to specific.

Preliminary Hazard Analysis

• Formal evaluation used early in the product design process.

Failure Rate and Success Rate

• Failure rate is failures/attempts; success rate is successes/attempts.

Critical Incident Technique

• Method to identify errors and unsafe conditions that cause accidents.

Insurance

• Includes reinsurance, retrocession, and indemnification.

Human Factors Theory

• David Yates' theory details categories related to accidents: overload, inappropriate worker response, and improper activities.

Incident Investigation

• Front line supervisors are responsible.

Petersen's Accident/Incident Theory

• Human error and system failure frequently cause accidents/incidents.

Vicarious Liability

• Legal assignment of liability for an injury to a person who is not the actual cause of the injury. This person held a legal relationship to the person who acted negligently.

Risk Communication

• Seven Cardinal Rules of Risk Communication to enhance risk communication (Covello and Allen).

Risk Calculation

• Elements include compensation, loss ratio, and CBA ratio.

Experience Modification Rate (EMR)

• EMR is less than 1 is a very favorable risk metric.

Behavior-Based Safety Process

• Steps, including forming assessment teams, analyzing past incidents, defining behaviors, and creating boundaries.

Risk Management and Controls

• Strategies to manage risk include ranking departments for resource allocation based on the composite score, and understanding the abc's of behavior: antecedent, behavior, and consequence.

Types of Controls

• Educational, physical, and avoidance are the categories of controls.

Management Principles

• People are often promoted to a level of incompetence when they are inadequate for the new position, work expands to fill all available time, and 20% of staff are responsible for 80% of work/accidents.

System Safety

• Fail safe concepts.

Statistical Concepts

• Measures of central tendency (Z-score, t-test, chi-square).

Poka-Yoke and Process Safety Management

• Mistake proofing and proactive measures.

Criteria for Controls and Safety Programs

• Key elements include support, standards, training, leadership, and individual safety and health.

Risk Assessment

• General steps of all assessments, NIOSH's three-step process, EPA Human Health Risk Assessment, and types of risk assessments (generic, specific, and dynamic).

Risk Communication

• Seven Cardinal Rules of Risk Communication are used to define best practices.

Insurance and Liability

• Includes occurrence and claims-made insurance, and reinsurance.

Human Factors and Accident Theories

• Human error and system failure are often causes of accidents.

Incident Investigation

• The front-line supervisor is often responsible for this crucial step.

Vicarious Liability

• Liability assigned to someone who didn’t cause the injury but is legally related to the person who acted negligently.

Risk Calculation

• Explains the various aspects of cost/benefit and compensation calculations.

Behavior-Based Safety Process

• Detailed steps are given for a behavior-based safety process to understand the process steps for observation, data collection, analysis, feedback.

Five Conditions for Success in Safety Programs

• Five conditions for improving the success rate of safety programs are outlined.

Resources for Extraction of Critical Behaviors

• Describes required resources.

Consequences in Modern Management Theory

• Consequences should be positive, immediate, certain, or negative, with a significant impact on employee behavior.

Modern Management Theory

• Consequences in modern management theory should be considered when implementing any risk management program.

ISO 19011

• Describes seven principles of auditing.

Auditing Principles

• Details of audit principles are given.

Risk Definition and Analysis

• Definition and analysis of risk are included.

Analysis Techniques

• Used for ranking risks and identifying errors in products and processes.

Safety and Hazard Analysis

• Includes various types of safety and hazard analysis, such as system hazard analysis, common cause failure analysis, and sneak circuit analysis.

Safety Management

• Includes preliminary hazard analysis (PHA), and safety performance metrics such as Compensation cost, Loss ratio, and CBA Ratio.

Criteria for Controls

• Criteria for effective controls include support (personnel, equipment etc), standards, training, and leadership, as well as individual safety and health.

Behavior-Based Safety

-This segment describes behavior-based safety as a process and its various criteria.

Risk Assessment

• Describes risk assessment approaches and includes descriptions of important concepts (such as risk definition and analysis, societal risk, and individual risk) and categories of risk.

Test your knowledge on key concepts in risk management and statistics with this quiz. Explore various terms, principles, and measures relevant to the fields of risk assessment and management. Perfect for students and professionals seeking to enhance their understanding of these essential topics.