Exam 4: Enterprise Risk Management

Terrorists attacked the World Trade Center on September 11,2001.The attack simultaneously created large losses for life insurers,property insurers,workers compensation insurers,health insurers,and liability insurers.What name is given to an event that simultaneously creates large losses in several lines of insurance?

Hedge Fund Company offers a mutual fund to investors.Fund managers are concerned about fund volatility.They analyzed the fund to determine the worst loss likely to occur in a calendar quarter,assuming a 90 percent level of confidence.The worst probable loss is known as the fund's

Enterprise risk management (ERM)programs differ from traditional risk management programs in all of the following ways EXCEPT

Which statement is (are)true concerning catastrophe models? I.Businesses other than insurance companies use catastrophe models. II.Catastrophe models are able to precisely predict disaster occurrences and loss values.

RST Company has production facilities in Salt Lake City and Cleveland.The probability that in any given year a fire will damage the production facility in Salt Lake City is 5 percent.The probability that in any given year a fire will damage the Cleveland production facility is 4 percent.What is the probability that AT LEAST ONE of the production facilities will be damaged by fire in any given year?

Which of the following statements is (are)true with respect to the time value of money? I.Money received today is worth more than the same amount of money received in the future. II.The present value of a future amount is greater than the future amount.

Two buildings are located close together at a production facility.The probability that either of these buildings will experience a fire loss is 4 percent.However,if one building has a fire,the probability that the second building will have a fire is 60 percent.What is the probability that both buildings will have a fire?

A method of characterizing the relationship between two or more variables and then using the characterization to make a prediction is called

Which of the following statements about the scope of risk management is (are)true? I.Traditionally,risk management was limited in scope to speculative loss exposures. II.In the 1990s,some businesses began to expand the scope of risk management to include financial risks.

Jane is risk manager of ABC Manufacturing Company.She is trying to decide whether to self-insure her company's workers compensation exposure or to purchase insurance.Jane would like to use regression analysis to predict the number of workers compensation claims that will occur next year.The number of claims will be the dependent variable in the regression.All of the following would be reasonable independent variables to use EXCEPT

RST Company has production facilities in Salt Lake City and Cleveland.The probability that in any given year a fire will damage the production facility in Salt Lake City is 5 percent.The probability that in any given year a fire will damage the Cleveland production facility is 4 percent.What is the probability that BOTH production facilities will be damaged by fire in any given year?

Reasons to adopt an enterprise risk management plan include all of the following EXCEPT

Which of the following statements is (are)true with regard to the use of technology in risk management programs? I.Risk management Intranets are networks intended for an internal audience. II.Risk management information systems can be used to store and track workers compensation claims data.

A grid charting the potential frequency and severity of losses is called a

Risk managers may use a number of tools.One tool is the analysis of data to generate information that will help make better informed decisions.Such analysis is called

When announcing that an enterprise risk management program would be implemented at XYZ Company,the president of the company observed,"We must overcome the silo mentality for the program to be successful." The "silo mentality" refers to