Elements of Risk Management Practice Test

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• Which term is a pre-event arrangement that prevents an insurer from seeking recovery from a third party after a claim?
• Which term refers to insurance purchased to pay for losses that fall outside an organization's risk appetite?
• Which of the following is NOT a typical method to mitigate liquidity risk?
• How is operational risk defined?
• The part of Risk Administration in which a desired risk management plan is initiated.
• Risks associated with people and property are categorized as which class?
• What is a risk appetite statement and what should it include?
• Identify the concept defined as the shifting of financial responsibility for a loss from the insured to another party before a claim.
• Which activity ensures ongoing improvement of risk management?
• What is the PDCA cycle and how does it apply to risk management?
• The process of adjusting historical losses with factors such as inflation; this allows historical losses to be valued in current dollar amounts
• Which term is used for the calculation of money's value over time, considering interest rates?
• Establishing backups for critical systems or operations is best described as which concept?
• Which option lists the seven steps of the risk management process in the correct order?
• Identify the term used when payments for losses are funded by parties other than the insurer, rather than through recovery from third parties after the loss.
• Which term describes risks arising from internal operations, general economic conditions, external competition, and entrepreneurial activities?
• Distinguish between risk appetite and risk tolerance.
• Which term describes risks arising from decisions by judges and juries, or adverse trends in the legal climate?
• Which term describes the risk category tied to people and property?
• What are key risk indicators (KRIs) and how are they used?
• Which term refers to a planned financing solution in which internal funds can be used to pay losses?
• What is regulatory risk and give an example?
• Insurance purchased to pay for losses that fall outside an organization's risk appetite and ability is called?
• A factor that increases the likelihood a peril will occur
• Which value is used to adjust known claims to determine an anticipated value for claims over a specific time period?
• Which option best describes the use of external funds to pay losses in risk management?
• The party in a hold harmless agreement that assumes liability.
• Which of the following is a common cyber risk category?
• Which elements are essential components of clear risk ownership?
• How does organizational culture influence risk management effectiveness?
• Which term describes the magnitude of potential losses in a risk scenario?
• Which term describes a strategy that precludes or discontinues an activity to avoid the chance of loss, eliminating both positive and negative outcomes?
• How is Monte Carlo simulation used in risk assessment?
• Which concept refers to a reduction in asset value?
• A finance plan where the insurance cost is fixed and adjusted by modifiers?
• An 'accident' that occurs over an extended period of time is called what?
• What does a bow-tie diagram illustrate in risk management?
• Which concept refers to the extra amount of risk an organization may retain beyond its budgeted retention?
• A contract that releases one party from liability before an incident happens is known as?
• What is the role of insurance as a risk transfer mechanism?
• Which term refers to a risk financing program in which an insured elects to reimburse the insurer for losses up to a stated amount?
• Which term denotes the shift of responsibility of certain liabilities to another party, including exculpatory agreements, waivers of subrogation, limit of liability clauses, and hold harmless agreements?
• Name the three core elements of ISO 31000's risk management framework.
• Which term describes a prioritization of risks based on a scale of anticipated potential impact?
• Which term refers to the regular examination and evaluation of the results of a risk management plan?
• How can reputational risk arise and be mitigated?
• What is the role of assurance activities in risk management?
• What is scenario analysis in risk assessment used for?
• An action taken to minimize the severity, or budgetary impact, of an unprevented loss
• Which analysis is most suitable for identifying root causes of a top-level risk event?
• Which option best describes operational risk?
• What is the difference between qualitative and quantitative risk analysis?
• An organization's level of ability or inability to self-insure or assume financial responsibility for loss.
• Which statement best defines strategic risk?
• Which concept is the shift of physical or contractual risk to another party?
• Which factor determines whether a control is effective?
• What is the primary objective of business continuity planning?
• Which statement best describes residual risk after controls are in place?
• Which term describes the use of external funds to pay losses?
• A graphic depiction of an organization's financial ability and risk appetite.
• An action taken after a loss is called what?
• Which concept involves setting thresholds for KRIs and projects that align with strategic objectives?
• What does integrated risk management mean?
• Which of the following is a common mitigation for supply chain risk?
• Which term refers to a risk financing plan where the insured reimburses the insurer for losses up to a specified amount?
• Which term is the third step in the risk management process, applying methods intended to minimize or avoid the impact of loss?
• Which term is a visual representation that uses colors to indicate risk patterns?
• A condition of either positive or negative uncertainty arising from a given set of circumstances.
• Distinguish between disaster recovery and business continuity.
• An organization's internal people exposure.
• The use of historical loss data to predict future risk frequency and severity; also called loss forecast
• What term describes an unexpected and unintentional event that tends to result in damage or injury?
• What characterizes a qualitative risk matrix?
• Which term describes the distribution of exposures or activities over several locations?
• Use of internal funds to pay losses.
• Which concept refers to the possibility of loss, no loss, or chance of gain?
• What are typical components of a project risk management plan?
• Which of the following is NOT a primary risk treatment strategy?
• What is a contract clause that limits damages available before a dispute occurs?
• Which option would best describe the idea that an insurer agrees not to seek reimbursement from a third party for payments it has made?
• What is the term for a pre-event agreement that prevents an insurance carrier from recovering payments it makes on a claim from a third party?
• Which term describes a contract clause that caps damages payable in a dispute?
• What is the primary role of a risk governance structure in an organization?
• Which term describes the party protected from liability under a hold harmless agreement?
• Which term is defined as the overall practice of coordinating activities to manage risk across an organization?
• A risk an underwriter may perceive as having little chance of occurring and low severity should it occur.
• An action taken prior to loss is called what?
• What is the term for a pre-event agreement that prevents an insurer from seeking recovery from a third party?
• What does risk appetite mean in organizational governance?
• A visual representation of complex sets of data interpretations which uses colors to indicate patterns or groupings of how risk will impact an organization
• Which term describes a guaranteed cost plan that offers dividends returning a portion of the premium when an insurer has had an overall good year and the insured meets a loss ratio criterion?
• A provision that prevents an insurer from pursuing recovery against a third party after a claim is called what?
• A chance of loss or no loss.
• Which term describes the process of adjusting historical losses with factors such as inflation to value in current dollar amounts?
• Which term measures the time required to recover the cost of an investment?
• Which statement best describes risk appetite in organizational governance?
• Which term describes the approach that avoids a risk by not engaging in the activity?
• Event tree analysis is best described as?
• Which term represents a class of risks associated with changes in law and government policy?
• Which term describes the action designed to minimize the frequency of losses?
• Which term is used to describe the action taken after a loss?
• Which term denotes liability arising from negligence?
• Which action isolates an exposure from other exposures, perils, or hazards?
• An unplanned financing solution in which internal funds are used to pay losses is called what?
• In a risk register, who is typically responsible for actively managing a risk?
• Which calculation sums all costs and expenses associated with risks and risk management within an organization?
• A tool that measures the length of time needed to recover the cost of a capital investment is known as what?
• Establishing the context entails which of the following?
• Which term focuses on vulnerabilities from technology and digital dependence?
• What is the purpose of risk assessment within a project risk management plan?
• Which option describes relocating the responsibility for paying a loss to another party to manage risk?
• Which term is used for the process of comparing total benefits of a risk management action against its costs?
• Which activity is NOT typically used to manage compliance risk?
• A promise of compensation for specified losses in exchange for payment of premium.
• Which document is described as an arrangement whereby one party assumes liability to relieve another?
• Which visual analytical tool identifies all risks to an organization and indicates their frequency on a scale from low to high, and their potential impact on a scale from low to high?
• What information is typically captured in a risk register?
• Which statement best describes the role of risk criteria in risk assessment?
• Which term describes adjusting data to account for lag time to settle claims, recognize frequency development, and index for inflation?
• An action designed to minimize the frequency of losses.
• Which term describes the property that can be seen or touched, including buildings and equipment?
• Which term describes a risk that an underwriter may perceive as unlikely but could affect an organization?
• Which concept involves shifting financial responsibility for a loss to another party before it occurs?
• Which step of the risk management process involves analyzing exposures identified in the risk identification step to assess potential impacts on a client, using qualitative and quantitative methods?
• A pre-event exoneration of one party for events that may result in any loss to another party is called?
• How does a quantitative risk matrix differ from a qualitative one?
• Which concept defines legal responsibility for careless actions resulting in harm?
• Which term designates the party that takes on liability in a hold harmless arrangement?
• How does incident management relate to risk management?
• Which term describes the process of forecasting future claims by applying historical data?
• Which approach uses numeric values and distributions to compute numerical risk scores?
• Which term describes the risk category that includes economic conditions and competitive pressures?
• Which component of a project risk management plan defines who is responsible for each risk and when actions are taken?
• What constitutes strategic risk in an enterprise?
• Why is change management important in risk management?
• In risk management, which concept involves using funds from external sources to cover losses instead of insurance recovery?
• Which term represents the portion of expected losses an organization is willing and able to retain?
• The number of claims that occur, or an insurer expects to occur, within a given period is termed?
• What does KRIs stand for in risk dashboards?
• Which term describes the action to minimize the severity of a loss that cannot be prevented?
• Which term defines the aggregate dollar amount of all losses for a given period of time?
• A cause of loss is called what?
• What is the primary purpose of a risk management program?
• Risks arising from changes in the law, reinterpretations or changes in governmental policy, politics, and diplomacy, and conflict and global governance are categorized as which class?
• How is risk prioritization typically achieved in risk management practice?
• Which term refers to an organization's capacity to self-insure or assume financial responsibility for loss?
• Which term refers to an arrangement that allows a party to pay for losses using funds from outside the insurer without seeking recovery from the third party?
• An action taken to minimize the severity, or budgetary impact, of an unprevented loss.
• Which term encompasses the total cost of risk management activities within an organization?
• Which term is a guaranteed cost plan that pays dividends based on performance?
• Why is robust documentation critical in risk management?
• Name the four primary risk treatment strategies.
• What distinguishes leading versus lagging KRIs?
• Which term is primarily concerned with shifting liability for paying a loss before it occurs?
• What is the primary purpose of fault tree analysis?
• Which term is the first step in the risk management process, involving the identification and examination of all exposures?
• Which term describes a complete retention plan where risk financing is accomplished by maintaining access to funds rather than purchasing an insurance policy?
• Which analysis maps outcomes after an initiating event and shows probabilities of consequences?
• The shift of some or all of an operational function or exposure to an outside source or third party is known as what?
• Which class of risks covers compliance-related liability and common law/statutory liability?
• What makes risk dashboards useful for governance?
• What is the primary purpose of ISO 31000 in risk management?
• Which term describes the shifting of some or all operational exposure to an outside source?
• Which type of KRI signals risk exposure before any actual impact is observed?
• Which term describes the distribution of exposures or activities across multiple locations?
• What is the purpose of a crisis management plan?
• Which term is defined as a measurement of total anticipated benefits after costs are subtracted?
• Which term describes a systematic method for identifying the root cause of incidents to prevent recurrence?
• Which metric is used to multiply known claims to forecast an anticipated value over a period?
• Which term describes a financing approach that relies on self-insurance and reserves rather than traditional insurance?
• A situation, practice, or condition that may lead to an insured's susceptibility to adverse financial consequences or loss is called?
• Which term describes a contract that provides compensation for specified losses in exchange for a premium?
• Which class covers risks arising from technology and emerging tech developments?
• An estimate of total losses of a given type that an insurance company can 'expect' in a given period is known as?
• Which element is essential for risk ownership to ensure timely responses?
• What is compliance risk and how is it managed?
• Which term describes a diagram showing an organization's financial ability and risk appetite?
• Which term is the process of minimizing the uncertainty of exposures that can affect assets and financial well-being?
• Which of the following is least likely to reduce overall risk?
• A finance plan for organizations that have low risk appetites, desire little variability in cost of risk, and have little or no ability to manage services. The rate is multiplied by the exposure and is then adjusted by both the experience modifier and any scheduled and/or discretionary credits/debits.
• Which term denotes a demand for payment or a company's obligation to pay as a result of a loss or occurrence?
• Which of the following is considered an independent assurance activity for evaluating control effectiveness?
• What is residual risk?
• Which term is used to classify risks tied to social stability and public relations?
• Which term is another name for a hold harmless agreement?
• Which term involves ranking risks based on potential impact to help prioritize mitigation actions?
• The party in a hold harmless agreement that is relieved of liability.
• Which term is a systematic method for drilling down to the root cause of an incident?
• Which term describes the process of comparing estimated risk against risk criteria to determine if the risk is acceptable?
• A willingness to accept or tolerate risks, or simply, the extent of aversion to risk.
• Which practice most directly supports learning and repeatability in risk management?
• Which term is defined as the tool that measures the percentage return of average annual cash flows on the initial investment?
• The second step in the risk management process; using the exposures identified in the Risk Identification step to assess the potential impact of those exposures upon a client; it takes two forms—qualitative and quantitative.
• How do inherent risk and residual risk differ?
• Property that has value but no physical form.
• Which term describes forecasting the expected loss amounts for future periods using past data?
• Which term is the measurement of return defined as the accounting rate of return (ARR)?
• Which term describes the fourth step in the risk management process, involving the acquisition of internal and external funds to pay losses?
• Name three subcategories of financial risk and a typical mitigation approach for each.
• An event that may lead to a loss or a claim, or may cause a business interruption.
• Which measure captures how money's value changes over time when interest is considered?
• Another name for a hold harmless agreement.
• In crisis communication, what is the role of a designated spokesperson?
• How do scenario planning and stress testing help an organization?
• The fifth step in the risk management process; the ongoing implementation and monitoring of a risk management program.
• What distinguishes risk transfer via insurance from hedging?
• Which phrase describes an agreement that blocks an insurer’s right to recover payments from a third party?
• What term means the chance that something will happen?
• How can organizations articulate risk tolerance at strategic and operational levels?
• What is essential in crisis communications during a risk event?