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RMI 2101 Exam 1 with Complete Solutions-(McCloskey)
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RMI 2101 Exam 1 with Complete Solutions-(McCloskey)
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RMI 2101 Exam 1 with CompleteSolutions-(McCloskey)
1)Identify Exposures of loss - ANSWER-Loss exposure- probability of a financial loss
that a entity faces as a result of peril
*shit happens*
MOST CRUCIAL STEP IN PROCESS
must identify exposures or else!
2) Net income loss exposures (aka. business interruption) - ANSWER-a firm suffers a
primary loss- as a result suffers a secondary loss that results in indirect epenses
ex. car crash-> primary loss, have to pay for rental car
ex. milk truck stolen, cost of renting another truck
key supplier has property loss
KEY IS ORIGINAL LOSS FIRST!!!
ex. Japan nuclear plant, Temple closed campus but never suffered primary loss
3) Personell Loss Exposures - ANSWER-personell- the people you have working
-a firm may lose a key employee ex. injury death
-loss of income, medical expenses,
Firm suffers: revenue decrease, sales go down
PERSONELL BECOMES BUSINESS ISSUE
ex. walmart life insurance on employees
Absolute/Strict Liability - ANSWER-legal liability is established regardless of who's at
fault
ex. situations with children, workers comp.
Actual Losses - ANSWER-the losses that actually occur
Animal Liability - ANSWER-strict liability for exotic animals
you are liable no matter what
Bailee Interest - ANSWER-you are in temporary ownership of property, bailer is liable
ex. geting car fixed, dry cleaners
*BAILMENT MUST BE PRESENT* ex. cash exchange
Bodily Injury - ANSWER-compensate for special losses
medical expenses
loss of income
easy to calculate
, Chief Risk Officer (CRO) - ANSWER-CRITICAL
in charge of all risks
seize opportunities
changes in business strategies
continued use interest - ANSWER-you want to live there
Defenses To Liability:
Assumption of risk - ANSWER-one recognizes risk of activity, voluntarily chose to
encounter it
ex. attending hockey game
Defenses To Liability:
Comparative/Contributory Negligence - ANSWER-plantiff was partially to blame for what
happened
Defenses To Liability:
Vicarious Liability - ANSWER-when one person becomes legal liable for the negligent
behavior of another
-employers are held liable for actions of employees acting within capacity of being an
employee
Direct Losses vs. Indirect Losses - ANSWER-Direct: cost of replacing/repairing an asset
Indirect: extra expenses/loss of income
Diversifiable Risk - ANSWER-impacts a small/specific group of individuals
ex. fire
Dynamic Risk - ANSWER-risk that has changed over time
ex. cyber, airport security, car accidents
Enterprise Risk Management - ANSWER-risk-based approach
-entire org. not just individual depts.
very strategic approach
4 Quadrants
1) Hazard Risks- generally pure ex. fire flood
2) Financial Risks- mostly speculative ex. inflation
3) Operational Risks-product issues, employment practices, regulatory issues
4)Strategic Risks- SWOT, mostly speculative, think of Blockbuster
Expected Losses - ANSWER-losses based on experience and data
-what we expect to happen
Financial Consequences of Risk:
1) Expected Cost of a Loss
2)Cost to Manage Risk Mgmt Expenditures
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