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M67 - Fundamentals of RIsk Management > Chapter 1 > Flashcards

Flashcards in Chapter 1 Deck (41):
1

When did the concept of measuring risk originate

the concept of measuring risk dates from the middle of the 17th century

2

Who first proposed the theory of probability

two mathematicians, Fermat and Pascal, first proposed the theory of probability

3

When did we first start expressing the severity of a risk in numerical terms

in the thirteenth century. Previously the numbers 0-9 where not widely used in the Western world.

4

when did basic algebra originate.

basic algebra originated in 1565.

5

who created basic algebra.

a mathematician and physician called Cardano, who produced a mathematical analysis of games of chance.

6

what significant development took place in 1662.

The publication of an analysis of records of births and deaths in London. This was compiled by businessman called John Graunt .

7

What are Renn and Rohrmann’s four levels of risk perception

Renn and Rohrmann’s Framework for risk perception is structured around the following four levels: cultural influences, Media influence, emotional factors and common sense.

8

What are the key elements of risk perception

- voluntariness
- controllability
- delay
- man-made and natural risks
- familiarity
- expected benefits
- media
- dread and unknown risks
- other influences of risk perception

9

what are dread risks

dread risks are characterised by perceived lack of control, catastrophic potential, inequitable distribution of risks and benefits and dreadful consequences

10

what are unknown risks

unknown risks are those less generally known, with limited knowledge of the risk, perhaps with delayed effect and where the risk type is new

11

what is the first level in Renn and Rorhmann's structured framework of risk perception

Common sense
collective reasoning strategies

12

what is the second level in Renn and Rorhmann's structured framework of risk perception

Emotional factors
Knowledge of risk

13

what is the third level in Renn and Rorhmann's structured framework of risk perception

Media influence
Social, political and economic culture

14

what is the fourth level in Renn and Rorhmann's structured framework of risk perception

Cultural influences
Personal identity and views

15

what is speculative risk

speculative risk is where someone deliberately chooses to place money or resources at risk in the hope of obtaining a positive outcome

16

what is pure risk

pure risk is a category of risk in which loss is the only possible outcome: there is no beneficial result

17

Strategic risk - define

associated with long-term objectives of an organisation.

closely related but not the same as speculative risks

18

operational risk - define

operational risk is defined as risk of loss resulting from inadequate or failed internal processes, people and systems or from external events

19

Types of operational risk

- management of fraud (internal and external)
- damage to physical assets
- business disruption
- system failure
- employment practices
- workplace safety
- outsourcing
- supplier disruption
- customer service issues

20

market risk - define

market risk, also referred to as systemic risk, is concerned with the risk of losses in trading positions arising from movements in market prices

21

what is credit risk

credit risk is risk that a counterparty will suffer real or perceived deterioration of financial strength, or be unable to pay amounts when full due.

22

what is liquidity risk

liquidity risk is the risk of running out of cash when it is needed to meet financial obligations (e.g. the payment of valid insurance claims)

23

what is business risk

business risk is the probability of loss inherent to an organisation's operations and environment, such as competition and adverse economic conditions that may impair its ability to provide returns on investment

24

what is insurance risk

insurance risk associated with any one insurance contract is twofold: uncertainty that an insured event will occur, and uncertainty of the amount of any resulting claim

25

what is reputation risk

reputation risk is the possible loss of an organisation's reputation. it is closely associated with brand management

26

what are regulatory risks

regulatory risks are associated with factors an organisation needs to consider because of the regulatory environment in which it operates

27

what are legal risks

legal risks are associated with alleged or actual breach of contract between an organisation and a counterparty

28

what does the EU gender directive 2012 require from insurers

that they reconsider the use of gender-based pricing and cover

29

what is every risk associated with

cause and effect

30

how can we classify risk consequences

once a risk has been evaluated, its consequences can be classified according to whether:
- they can be tolerated
- they can be tolerated with financial compensation (insurance), or
- they are totally unacceptable

31

when did modern risk management originate

modern risk management is a new discipline, effectively dating from the latter part of the 20th century

32

what is risk management based on

risk management is based on fundamental mathematical concepts of risk perception and measurement developed by mathematicians and scientists during the last three hundred years.

33

how far back can we trace mathematical analysis of games of chance

we can trace mathematical analysis of games of chance back to the 16th century. analysis of historical life expectancy data and shipping records can be traced back to the 17th century

34

what did the use of statistics allow which was previously unfeasible

statistics from past data allowed people to judge what may happen in the future and formed the basis of insurance business

35

what developments took place in the 18th and 19th centuries that allowed the development of insurance

The 18th and 19th centuries saw developments saw developments in statistical analysis, analysis of distributions and theorems based on these advances, such as regression to the mean

36

what was first recognised in the 20th century, which was previously adopted as an axiom

by the early 20th century it was recognised that history was not always a reliable guide to future events. Emphasis was placed on dealing with uncertainty and making decisions with a range of possible outcomes

37

when did the discipline of risk management develop as we recognise it today

the discipline of risk management as we recognise it today developed after World War II and was accelerated by technology advances such as the availability of computers.
People stopped relying on insurance and concentrated on preventing or mitigating the effects of risk incidents

38

In addition to the development of risk management, what else developed after WW2

health and safety measures became commonplace. continuity plans came into existence, ensuring business continuity in the event of disaster.

39

how has Government regulation evolved in recent decades

Government regulation has widened and there is growing emphasis on responsibility and accountability for not controlling risk

40

People are more willing to accept risks...

...they think they can control

41

Man-made and natural risks are perceived differently...

...with the latter being more accepted than the former