CH 0 - 7 Managing risk

Question 1

🔹 Two Positive Perspectives on Risk:

Answer 1

1. Risk is an opportunity!
   o Risk can be priced, allowing profit opportunities (e.g., in insurance).
   o If one party accepts risk at a lower price than another’s perceived cost, mutual benefit through risk transfer is possible.
   o These price differences often reflect varying risk appetites.
2. We can manage risk successfully!
   o Through the Actuarial Control Cycle, we identify, mitigate, and monitor risks.

Question 2

🔹 Risk Mitigation:

Answer 2

• Not all risks can be eliminated, but they can be:
  o Avoided
  o Minimised and accepted
  o Shared
  o Transferred

Question 3

🔹 Examples of Risk and Mitigation Strategies:

Answer 3

Risk – Mitigation Strategy
* Death – Buy life insurance
* Unemployment – Build savings to cover jobless periods
* Illness – Use state healthcare services

⚠️ Note: These strategies may reduce but not remove the risk, and can introduce new risks (e.g., insurer default, savings insufficiency).

Question 4

🔹 Key Takeaway:

Answer 4

Risks are not just threats—they can be opportunities for profit and strategically manageable.
The choice of mitigation depends on individual preferences, resources, and risk appetite.