Risk correct answers any uncertainty regarding financial loss thus entity (personal) or enterprise (business) wide in scope
Business Interruption correct answers Any event, whether anticipated (i.e., public service strike) or unanticipated (i.e., blackout) which disrupts the normal course of bus...
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Risk correct answers any uncertainty regarding financial loss thus entity (personal) or enterprise
(business) wide in scope
Business Interruption correct answers Any event, whether anticipated (i.e., public service strike)
or unanticipated (i.e., blackout) which disrupts the normal course of business operations at an
organization location
example: can't sell sandwiches because the building needs to be fixed
pure vs speculative
static vs dynamic
objective vs subjective
diversifiable vs non-diversifiable vs systematic correct answers what are common risk
classifications?
Pure Risk correct answers loss or no loss
ex: you either wrecked car or didn't
Speculative Risk correct answers loss, no loss, or gain
example: you lost $20,000 but INSCO pays you $25,000 or buying stock
can be affected by market taste
Static Risk correct answers unchanging over time or don't change meaningfully enough over
time
Dynamic Risk correct answers changes especially with technology
example: didn't have to worry about dying from car crash 200 years ago
Objective Risk correct answers statistical variation from expectation of risk
can put statistical probability/likelihood on you getting in car crash today
no human element
Subjective Risk correct answers individual perception/psychology of risk
people behave differently given risk
, example: being scared to fly
Diversifiable Risk correct answers uncorrelated (random) gains/losses affecting only one/few
individuals or groups
get rid of in portfolio
Non-Diversifiable Risk correct answers correlated (simultaneous) gains/losses affecting several
groups/segments
Systematic Risk correct answers Non-diversifiable risk that may impact an entire market or
financial system
No, it is a tool you can use to analyze risk correct answers Is risk the same as probability?
actual cost of losses
opportunity costs
mental anguish correct answers what are the primary burdens of risk?
individuals and society (losses in productivity)
current and future premiums (insurance rates go up after wreck)
loss control and compliance costs (added cost of installation/maintenance and compliance with
laws/rules/regulations) correct answers what/how do actual cost of losses affect concerning risk?
scarce resources (have to choose what is most important)
risk/return trade-offs (appear in everything we want to do) correct answers what/how do
opportunity costs affect concerning risk?
Exposure correct answers thing of value subject to being lost
Maximum Probable/Possible Loss
These are NOT the same thing correct answers What does MPL stand for?
3.5 billion of coverage for each tower vs for one tower of Twin Towers
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