Chapter 1 Flashcards
Risk Source
Element which alone or in combination has the intrinsic potential to give rise to risk
Loss Exposure
Any condition or situation that presents a possibility of loss, whether or not an actual loss occurs
Personal Property
All tangible or intangible property that is not real property
Pure Risk
A chance of loss or no loss, but no chance of gain
Property Loss Exposure
A condition that presents the possibility that a person or organization will sustain a loss resulting from damage (including destruction, taking, or loss of use) to property in which that person or organization has a financial interest
Objective Risk
The measurable variation in uncertain outcomes based on facts and data
Liability Loss Exposure
Any conditon or situation that presents the possibility of a claim alleging legal responsibility of a person or business for injury or damage suffered by another party
Physical Hazard
A tangible characteristic of property, persons, or operations that tends to increase the frequency or severity of loss
Personal loss exposure
Any condition or situation that presents the possibility of a financial loss to an individual or a family by such causes as death, sickness, injury, or unemployment
Pre-loss goals
Goals to be accomplished before a loss, involving social responsibility, externally imposed goals, reduction of anxiety, and economy
Post-loss goals
Risk management program goals that should be in place in the event of a significant loss
Risk Management
The process of making and implementing decisions that will minimize the adverse effects of accidental losses on an organization
Liquidity Risk
The risk that an asset cannot be sold on short notice without incurring a loss
Net Income Loss exposure
A condition that results in a decrease of revenue, an increase in expenses, or both
Subjective Risk
The perceived amount of risk based on an individual’s or organization’s opinion.
Tangible Property
Property that has a physical form.
Personnel loss exposure
A condition that presents the possibility of loss caused by a person’s death, disability, retirement, or resignation that deprives an organization of that person’s knowledge that cannot be readily replaced
Speculative Risk
A chance or loss, no loss, or gain
Probability
The likelihood that an outcome or event will occur
Market Risk
Uncertainty about an investment’s future value due to changes in the market
Hazard
A condition that increases the frequency or severity of a loss
Intangible Property
Property that does not have a physical form
Legal Hazard
A condition of the legal environment that increases loss frequency or severity
Real Property (realty)
Tangible property consisting of land, all structures permanently attached to the land, and whatever is growing on the land
Credit Risk
The risk that customers or other creditors will fail to make promised payments as they come due
Systemic Risk
The potential for a major disruption in the function of an entire market or financial system
Diversifiable Risk
A risk that affects only some individuals, businesses, or small groups
Morale Hazard (attitudinal hazard)
A condition of carelessness or indifference that increases the frequency or severity of a loss
Moral Hazard
A condition that increases the likelihood that a person will intentionally cause or exaggerate a loss
