Chapter 8: Risk Treatment - Vocabulary

Question 1

Loss prevention

Answer 1

A risk control technique that reduces the frequency of a particular loss

Question 2

Loss reduction

Answer 2

A risk control technique that reduces the severity of a particular loss

Question 3

Retention

Answer 3

A risk financing technique that involves assumption of risk in which gains and losses are retained within the organization

Question 4

Risk financing

Answer 4

A conscious act or decision not toa ct that generates the funds to offset the variability in cash flows that may occur as an outcome of risk

Question 5

Transfer

Answer 5

In the context of risk management, a risk financing technique by which the financial responsibility for losses and variability in cash flows is shifted to another party

Question 6

Hazard risk

Answer 6

Risk from accidental loss, including the possibility of loss or no loss

Question 7

Risk

Answer 7

Uncertainty about outcomes that can be either negative or positive

Question 8

Hold-harmless agreement (or indemnity agreement)

Answer 8

A contractual provision that obligates one of the parties to assume the legal liability of another partyF

Question 9

Futures contract

Answer 9

An exchange-traded agreement to buy or sell a commodity or security at a future date at a price that is fixed at the time of the agreement