Chapter 1

Question 1

Risk Source

Answer 1

Element which alone or in combination has the intrinsic potential to give rise to risk

Question 2

Loss Exposure

Answer 2

Any condition or situation that presents a possibility of loss, whether or not an actual loss occurs

Question 3

Personal Property

Answer 3

All tangible or intangible property that is not real property

Question 4

Pure Risk

Answer 4

A chance of loss or no loss, but no chance of gain

Question 5

Property Loss Exposure

Answer 5

A condition that presents the possibility that a person or organization will sustain a loss resulting from damage (including destruction, taking, or loss of use) to property in which that person or organization has a financial interest

Question 6

Objective Risk

Answer 6

The measurable variation in uncertain outcomes based on facts and data

Question 7

Liability Loss Exposure

Answer 7

Any conditon or situation that presents the possibility of a claim alleging legal responsibility of a person or business for injury or damage suffered by another party

Question 8

Physical Hazard

Answer 8

A tangible characteristic of property, persons, or operations that tends to increase the frequency or severity of loss

Question 9

Personal loss exposure

Answer 9

Any condition or situation that presents the possibility of a financial loss to an individual or a family by such causes as death, sickness, injury, or unemployment

Question 10

Pre-loss goals

Answer 10

Goals to be accomplished before a loss, involving social responsibility, externally imposed goals, reduction of anxiety, and economy

Question 11

Post-loss goals

Answer 11

Risk management program goals that should be in place in the event of a significant loss

Question 12

Risk Management

Answer 12

The process of making and implementing decisions that will minimize the adverse effects of accidental losses on an organization

Question 13

Liquidity Risk

Answer 13

The risk that an asset cannot be sold on short notice without incurring a loss

Question 14

Net Income Loss exposure

Answer 14

A condition that results in a decrease of revenue, an increase in expenses, or both

Question 15

Subjective Risk

Answer 15

The perceived amount of risk based on an individual’s or organization’s opinion.

Question 16

Tangible Property

Answer 16

Property that has a physical form.

Question 17

Personnel loss exposure

Answer 17

A condition that presents the possibility of loss caused by a person’s death, disability, retirement, or resignation that deprives an organization of that person’s knowledge that cannot be readily replaced

Question 18

Speculative Risk

Answer 18

A chance or loss, no loss, or gain

Question 19

Probability

Answer 19

The likelihood that an outcome or event will occur

Question 20

Market Risk

Answer 20

Uncertainty about an investment’s future value due to changes in the market

Question 21

Hazard

Answer 21

A condition that increases the frequency or severity of a loss

Question 22

Intangible Property

Answer 22

Property that does not have a physical form

Question 23

Legal Hazard

Answer 23

A condition of the legal environment that increases loss frequency or severity

Question 24

Real Property (realty)

Answer 24

Tangible property consisting of land, all structures permanently attached to the land, and whatever is growing on the land

Question 25

Credit Risk

Answer 25

The risk that customers or other creditors will fail to make promised payments as they come due

Question 26

Systemic Risk

Answer 26

The potential for a major disruption in the function of an entire market or financial system

Question 27

Diversifiable Risk

Answer 27

A risk that affects only some individuals, businesses, or small groups

Question 28

Morale Hazard (attitudinal hazard)

Answer 28

A condition of carelessness or indifference that increases the frequency or severity of a loss

Question 29

Moral Hazard

Answer 29

A condition that increases the likelihood that a person will intentionally cause or exaggerate a loss