IC86 - Risk Management Exam - 5

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Q 1. What is the difference between Strategic Management and Risk Management?

Strategic Management can be considered as a subset of Risk Management

Risk Management focuses on an organization as a whole and not only on loss exposure as Strategic Management

Risk Management encompasses both pure and speculative risks with equal importance

Strategic Management encompasses both pure and speculative risks with equal importance

None of the above

Q 2. A possible alternative to the actual site visit is the completion of a checklist or some sort of questionnaire. Identify the limitation of this risk identification technique.

Easy to change

Feedback may not be on time.

Facilitates quick comparison

Reasonably inexpensive

None of the above 

Q 3. A __________ person reacts to risk in line with its statistical probability i.e. with the likelihood of its occurrence. He tries to neutralize or balance the chance of loss against the chance of gain. 1. Risk Averter 2. Risk Neutral 3. Risk Preferer

Only 1

Only 2

Only 3

Both 2 and 3

Both 1 and 2

Q 4. Identify which is NOT a component of ERM.

Internal environment

Corporate governance

Control Activities

Risk assessment

Objective setting

Q 5. The process of Consequential loss analysis (manufacturing) involves drawing a diagram of the main process. This diagram is known as _______.

Rough Timings Diagram

Critical Path Diagram

Simulation Diagram

Schematic Block Diagram

Flow Chart Diagram

Q 6. Which of these are examples of Natural Perils? 1. Nuclear Fission 2. Avalanche 3. Soil Erosion

Only 1

Only 3

Only 1 and 2

Only 2 and 3

All 1, 2 and 3

Q 7. Business risk can be categorized into which of these categories? 1. Risks that are directly controllable by management 2. Risks that are partially manageable by management 3. Risks that are not under the direct control of management

Only 1

Only 2

Both 1 and 3

Both 2 and 3

All 1, 2 and 3

Q 8. In prioritizing, which are the risks to be addressed first?

Major Risks

Minor Risks

Medium Risks

Moderate Risks

Catastrophe Risks

Q 9. Under which of the following risk attitude categories is a person willing to take a chance of gain against all odds posed by risks? 1. Risk Neutral 2. Risk Averter 3. Risk Preferer

Only 1

Only 2

Only 3

Both 1 and 3

Both 2 and 3

Q 10. Which risk identification technique is a diagrammatic representation of all the events that may give rise to some major event.

Hazard and Operability (HAZOP) study

Event analysis

Fault Tree

Flow charts

Hazard Indices

Q 11. How is the valuation done as per the Reproduction Method?

The value of the property depends upon the present value of income it produces

As per the demand and supply situation in the market

As per the cost of reproducing or replacing the existing property exactly at the current prices

As per the cost of reproducing or replacing the existing property exactly at the old buying prices

Higher fair value less cost to sell or the economic value

Q 12. Prospective Finite Risk Reinsurance covers protect _______. 1. Negative impact of an adverse loss development 2. Contingencies associated with future loss events 3. Accelerated payout of losses already incurred at the inception of the

Only 1

Only 2

Only 3

Both 1 and 3

All 1,2 and 3

Q 13. What would be the effect of a disruption in business operations and services?

Reduction in revenues

Reduction in losses

Long-term reward to brand

Long-term survival of an organisation

Both 1 and 2

Q 14. ______ provides a qualitative approach to risk identification which can be employed at the planning and design stage of a project.

Flow charts

HAZOP

Checklists

Physical inspection

Questionnaire

Q 15. Identify the insurance-based risk financing tools - 1. Weather Derivatives 2. Risk Retention groups 3. Credit securitization

Only 1

Only 2

Only 3

Both 2 and 3

All 1,2 and 3


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