Financial Cosequences of Risk

Question 1

What are the 3 financial consequences of risk?

Answer 1

Expected cost of losses or gain.
Expenditures of risk management.
Cost of residual uncertainty.

Question 2

Explain expected cost of losses or gain.

Answer 2

Hidden costs within an incident. (ex. Time, Damage, or financial costs)
Calculating expected cost of losses or gains for speculative risk is much more complex than calculating pure risk.

Question 3

Explain expenditures on risk management.

Answer 3

The most widely used technique used for managing risk is insurance.
Organizations use a wider variety of risk control and risk financing that individuals do.

Question 4

Explain cost of residual uncertainty.

Answer 4

The level of risk that remains after the organization or individual implement their risk management plans.
Influenced by subjective views.
Can have cost influence.
Risk is accepted because of the possibility of substantial rewards.

Question 5

The most widely known risk management technique used by individuals is?

Answer 5

risk financing by purchasing insurance.