Question 1

Loss reduction and loss prevention are not the same thing.

Accepted Answer

A) True 
 B)False

Question 2

All of the following can result from a damaged reputation, except:

Accepted Answer

A)  declined earnings 
B)  lower cost of capital 
C)  lower credit rating 
D)  smaller market share 
A)  declined earnings 
B)  lower cost of capital 
C)  lower credit rating 
D)  smaller market share

Question 3

All of the following legal doctrines result in more individuals being held liable for negligence except:

Accepted Answer

A)  last clear chance rule 
B)  contributory negligence 
C)  comparative negligence 
D)  vicarious liability 
A)  last clear chance rule 
B)  contributory negligence 
C)  comparative negligence 
D)  vicarious liability

Question 4

Enterprise risk management is concerned with:

Accepted Answer

A)  both pure and speculative risks 
B)  insurance contracts 
C)  pure risks 
D)  subjective risks 
A)  both pure and speculative risks 
B)  insurance contracts 
C)  pure risks 
D)  subjective risks

Question 5

Which of the following is true about indirect losses?

Accepted Answer

A)  Includes smoke damage to a building 
B)  Is unrelated to business interruption 
C)  Often results as a consequence of a direct loss 
D)  Is a non-financial loss 
A)  Includes smoke damage to a building 
B)  Is unrelated to business interruption 
C)  Often results as a consequence of a direct loss 
D)  Is a non-financial loss

Question 6

According to a survey, which of the following is the most challenging risk to manage?

Accepted Answer

A)  Human resource risk 
B)  Third-party liability 
C)  Speculative risk 
D)  Reputation risk 
A)  Human resource risk 
B)  Third-party liability 
C)  Speculative risk 
D)  Reputation risk

Question 7

The ultimate objective of ERM does not include the following:

Accepted Answer

A)  hedge against a drop in the stock price of the firm 
B)  eliminate product recalls 
C)  minimize interruption in the firms supply chain 
D)  survival of the company 
A)  hedge against a drop in the stock price of the firm 
B)  eliminate product recalls 
C)  minimize interruption in the firms supply chain 
D)  survival of the company

Question 8

The plaintiff in a negligence suit is the party who allegedly injured the defendant.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is true about external risks?

Accepted Answer

A)  They deal with issues related to the operations of the firm. 
B)  They are beyond the control of the risk manager. 
C)  They are easier to manage than external risks. 
D)  They are predictable. 
A)  They deal with issues related to the operations of the firm. 
B)  They are beyond the control of the risk manager. 
C)  They are easier to manage than external risks. 
D)  They are predictable.

Question 10

To estimate potential property losses, risk managers must know:

Accepted Answer

A)  the accounting book value of property 
B)  the replacement cost of property 
C)  the actual cash value of property 
D)  the original purchase price of property 
A)  the accounting book value of property 
B)  the replacement cost of property 
C)  the actual cash value of property 
D)  the original purchase price of property

Question 11

An ethics violation is an example of a strategic risk.

Accepted Answer

A) True 
 B)False

Question 12

Damages awarded to compensate for pain and suffering are called:

Accepted Answer

A)  punitive damages 
B)  personal injuries 
C)  non-bodily injury damages 
D)  exemplary damages 
A)  punitive damages 
B)  personal injuries 
C)  non-bodily injury damages 
D)  exemplary damages

Question 13

Which of the following is not a risk identified in a typical Vulnerability Map?

Accepted Answer

A)  Hazard Risks 
B)  Negligence Risks 
C)  Operational Risks 
D)  Financial Risks 
A)  Hazard Risks 
B)  Negligence Risks 
C)  Operational Risks 
D)  Financial Risks

Question 14

Which of the following is not true about liability risks?

Accepted Answer

A)  Liability risk is where the firm may be legally responsible for the harm it causes to another person. 
B)  Liability risks are sometimes overlooked due to their intangible nature. 
C)  Only a breach of contract and criminal acts can lead to liability risk for a firm. 
D)  A tort can lead to a liability risk. 
A)  Liability risk is where the firm may be legally responsible for the harm it causes to another person. 
B)  Liability risks are sometimes overlooked due to their intangible nature. 
C)  Only a breach of contract and criminal acts can lead to liability risk for a firm. 
D)  A tort can lead to a liability risk.

Question 15

Assume Gerald is injured because his landlord, Barbara, fails to replace burned-out light bulbs in the hallway of his apartment building. If Gerald trips and falls and then sues Barbara for his injuries, the basis of his suit most likely will be:

Accepted Answer

A)  negligence 
B)  intentional interference 
C)  res ipsa loquitor 
D)  breach of contract (lease) 
A)  negligence 
B)  intentional interference 
C)  res ipsa loquitor 
D)  breach of contract (lease)

Question 16

A breach of contract legally is known as a "tort."

Accepted Answer

A) True 
 B)False

Question 17

In a negligence lawsuit, the jury's primary function is to:

Accepted Answer

A)  assist the judge in interpreting the law 
B)  determine the facts 
C)  decide guilt or innocence 
D)  make sure neither plaintiff nor defendant cheats in presenting their case 
A)  assist the judge in interpreting the law 
B)  determine the facts 
C)  decide guilt or innocence 
D)  make sure neither plaintiff nor defendant cheats in presenting their case

Question 18

Which of the following is not true about property risks?

Accepted Answer

A)  They can cause financial harm to the firm. 
B)  They encompass tangible and intangible property. 
C)  They do not include the reputation of a firm. 
D)  They also refer to damage to the property of others. 
A)  They can cause financial harm to the firm. 
B)  They encompass tangible and intangible property. 
C)  They do not include the reputation of a firm. 
D)  They also refer to damage to the property of others.

Question 19

Which of the following statements about financial risks is not true?

Accepted Answer

A)  Many financial risks are attributable to fluctuations in value. 
B)  Financial risks arise from events that prevent a firm from conducting its normal scope of operations. 
C)  An example of a financial risk is one associated with unfavorable credit rating. 
D)  Price risks associated with input costs are a form of financial risk. 
A)  Many financial risks are attributable to fluctuations in value. 
B)  Financial risks arise from events that prevent a firm from conducting its normal scope of operations. 
C)  An example of a financial risk is one associated with unfavorable credit rating. 
D)  Price risks associated with input costs are a form of financial risk.

Question 20

Kim's automobile is struck by a negligent motorist. She suffers bodily injuries that cause her to have $73,000 in medical expenses. She is unable to work for several weeks and loses $10,000 in wages. The repair bill to fix her car is $20,000. Choose the true statement from the following answer choices:

Accepted Answer

A)  Her medical bills and lost wages are personal injuries. 
B)  Her repair bill for her automobile is an example of property damage. 
C)  Her lost wages are personal injuries, while her medical bills are bodily injuries. 
D)  ALL of her losses in this scenario are classified as personal injuries, since they were caused by another person. 
A)  Her medical bills and lost wages are personal injuries. 
B)  Her repair bill for her automobile is an example of property damage. 
C)  Her lost wages are personal injuries, while her medical bills are bodily injuries. 
D)  ALL of her losses in this scenario are classified as personal injuries, since they were caused by another person.

Exam 2: Risk Identification

Loss reduction and loss prevention are not the same thing.

All of the following can result from a damaged reputation, except:

All of the following legal doctrines result in more individuals being held liable for negligence except:

Enterprise risk management is concerned with:

Which of the following is true about indirect losses?

According to a survey, which of the following is the most challenging risk to manage?

The ultimate objective of ERM does not include the following:

The plaintiff in a negligence suit is the party who allegedly injured the defendant.

Which of the following is true about external risks?

To estimate potential property losses, risk managers must know:

An ethics violation is an example of a strategic risk.

Damages awarded to compensate for pain and suffering are called:

Which of the following is not a risk identified in a typical Vulnerability Map?

Which of the following is not true about liability risks?

Assume Gerald is injured because his landlord, Barbara, fails to replace burned-out light bulbs in the hallway of his apartment building. If Gerald trips and falls and then sues Barbara for his injuries, the basis of his suit most likely will be:

A breach of contract legally is known as a "tort."

In a negligence lawsuit, the jury's primary function is to:

Which of the following is not true about property risks?

Which of the following statements about financial risks is not true?

Introduction to Enterprise Risk Management and Insurance

Risk Assessment and Pooling

Risk-Handling Techniques: Loss Control, Risk Transfer, and Loss Financing

Risk-Handling Techniques: Diversification and Hedging

Fundamentals of Insurance

Insurable Perils and Insuring Organizations

Insurance Functions

Insurance Markets: Economics and Issues

Insurance Regulation

Insurance Contracts

The Personal Auto Policy

Homeowners Insurance

Professional Financial Planning

Life Insurance Policies

Standard Life Insurance Contract Provisions and Options

Annuities

Health Insurance and Disability Income

Employee Benefits

Social Security

Unemployment and Workers Compensation Insurance

Commercial Property Insurance

Commercial Liability Insurance

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