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Certified Risk Manager Principles Exam questions with answers
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Certified Risk Manager Principles Examquestions with answers
Define Risk (4 definitions) ANS -1. Risk is chance or probability of loss
2. Risk is uncertainty concerning loss
3. Risk is the difference between expected losses and actual losses
4. A possibility of variation of outcomes from a given set of circumstances
Define Pure Risk ANS -there is only a chance for loss or no loss
Define Speculative Risk ANS -There is a chance of loss, no loss, as well as a chance of gain
Define an exposure ANS -A situation, practice or condition that may lead to an adverse financial
consequence
Define a hazard ANS -a condition or circumstance that may give rise to a loss from a given peril
Define a peril, and give an example of one ANS -the cause of a loss, ex: fire, wind, hail, slip and fall
Define an incident ANS -An unplanned event that disrupts normal activities and may become a loss,
claim, or business interruption
Define an accident ANS -An unplanned event definite as to time and place that results in injury or
damage to person or property
Define an occurrence ANS -an accident with the limitation of time removed; an accident that is extended
over a period of time rather than a single observable happening
Define a claim ANS -a demand or obligation for payment as a result of a loss
, Define frequency ANS -the number of losses occurring in a given time period
Define severity ANS -the dollar amount of a given loss or the aggregate dollar amount of all losses for a
given period
Define expected losses ANS -projection of the frequency and/or severity of losses based on loss history,
probability distributions, and statistics
Define Total Cost of Risk (TCOR) ANS -Comprised of all costs related to an organization's risk
management program including those that fund losses, or fund the implementation and monitoring of
the risk management process
TCOR = insurance cost + retained losses + risk management department costs + outside service fees +
indirect costs
Explain the impacts of an effective risk management program on an organization ANS -1. Protects the
organization's reputation and brand
2. Increased Profitability
3.Raises awareness of the importance of Risk management
4. Supports managerial objectives
5. Improves morale and objectivity
6. Improves quality processes and technology
Define Traditional Risk Management (TRM) and Enterprise Risk Management (ERM) ANS -TRM -
functional, siloed view of risks affecting one or more areas of an organization, focuses on pure risk
ERM - cross functional view of risks affecting all areas of an organization, ERM embraces speculative risk
Describe the characteristics of Traditional Risk Management (TRM) ANS -1. Manages downside risks only
2. siloed treatment of risk
3. risk identification and ownership is the risk manager's job
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