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Assignment 1 Introduction to Risk Management Educational Objective 1 Three important concepts in the context of risk are: Uncertainty Uncertainty implies the potential for either favorable or unfavorable outcomes.

Possibility Possibility of loss is often discussed in terms of loss exposures, such as liability, personal, or human exposures, but it can also be the possibility of loss of goodwill or missed opportunities.

Loss exposures can be circumstances or conditions that present the possibility of a financial loss, regardless of whether or not an actual loss occurs. Possibility compared with probability The distinction may hinge upon the degree of likelihood.

Possibility means that something could happen; probability means that something is likely to happen. Key Word and Phrase 1. Probability is the likelihood that an event will occur. Probability can be measured and is often stated in mathematical terms as a decimal, a fraction, or a percentage. For credible results, measurement must be done in a stable environment with sufficient experience.

Review Questions The two elements of risk are the possibility of loss and an uncertain outcome. Possibility differs from probability. Possibility means that there is the chance something could happen. The event will not necessarily happen. A person could be struck by lightning on a golf course or he could not be struck.

By contrast, probability is the Keir Educational Resources. Probability is typically expressed as a percentage or a fraction. One example of probability arises from tossing a coin. When an organization comprehends the probabilities of various outcomes, it can focus its efforts on manageable risks. In addition, entities can utilize probabilities to determine which operations and risks are worth doing and which risk management techniques might be selected and implemented to reduce loss frequency and severity.

Atwell is also uncertain about whether it will be able to compete successfully with its major competitors. The new buses make it possible for Atwell to provide a higher level of service and better overall performance than its competitors. Introduction to Risk Management 1. Which of the following elements is included in the definition of risk? Text 1. If a risk presents a chance of loss, gain, or no loss, it is what kind of risk? What kind of risk have risk managers traditionally managed?

When a particular event has severe effects, such as the damage from an earthquake, people are likely to: Text 1. B Overstate the probability of death from such event. C Perceive more accurately the likelihood of deaths from such event. D Assign lower probability of deaths when the event is covered by the media. Which of the following risks are pure risks?

Assignment 1 Introduction to Risk Management 1. B is the answer. The definition of risk includes two elements: uncertainty of outcome and possibility of a negative outcome. A probability of negative outcome means that it is likely to occur and is not the uncertainty associated with risk. Risk is the possibility of injury or loss. Risk may or may not be quantified or measurable. A is the answer.

Speculative risk offers the chance of loss, gain, or no loss. Pure risk only offers chance of loss or no loss.

C is the answer. Risk managers have traditionally managed the hazard risks that involve pure risks, not business risks that involve speculative risks. Credit risk and liquidity risk are speculative risks. People tend to overstate the probability of deaths from an event that has severe effects such as an earthquake.

Media coverage can cause people to assign a higher probability of deaths. D is the answer. Diversifiable risks tend to occur randomly, without correlation. Risks that occur simultaneously tend to be nondiversifiable.

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Z 3rd Risk and Emergency Preparedness Assessment. Jump to Page. Search inside document. By contrast, probability is the Keir Educational Resources relative frequency with which an event can be expected to occur in the long run in a stable environment.

Application Question Atwells risks include: a Atwell faces uncertainty about whether it will be awarded some of the annual contracts, and it faces uncertainty over which contracts it will be awarded in the coming year.

Diversifiable risks tend to occur: Text 1. Simultaneously Collectively In correlation Randomly Which of the following risks are pure risks? What is residual uncertainty? Hrh Saddiquah. Raajkumar Chensooriyan. Corey Smith. Prasoon Banerjee. Muhammad Abdul Wajid Rai. Moumita Pal. Sudhir Bansal. Anupam Bali. Guido Lavespa. Prithi Agarwal. Glennizze Galvez. Yauma Ihsan. More From Jesus Kossonou. Kasia Brys. Jesus Kossonou. Ani Thomas. Andy Murray.

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