Chapter 1 Flashcards
The meaning of risk
When did the concept of measuring risk originate
the concept of measuring risk dates from the middle of the 17th century
Who first proposed the theory of probability
two mathematicians, Fermat and Pascal, first proposed the theory of probability
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.
when did basic algebra originate.
basic algebra originated in 1565.
who created basic algebra.
a mathematician and physician called Cardano, who produced a mathematical analysis of games of chance.
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 .
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.
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
what are dread risks
dread risks are characterised by perceived lack of control, catastrophic potential, inequitable distribution of risks and benefits and dreadful consequences
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
what is the first level in Renn and Rorhmann’s structured framework of risk perception
Common sense
collective reasoning strategies
what is the second level in Renn and Rorhmann’s structured framework of risk perception
Emotional factors
Knowledge of risk
what is the third level in Renn and Rorhmann’s structured framework of risk perception
Media influence
Social, political and economic culture
what is the fourth level in Renn and Rorhmann’s structured framework of risk perception
Cultural influences
Personal identity and views
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
what is pure risk
pure risk is a category of risk in which loss is the only possible outcome: there is no beneficial result
Strategic risk - define
associated with long-term objectives of an organisation.
closely related but not the same as speculative risks
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
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
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
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.
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)
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
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
