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RMIN 317 > Midterm 1 > Flashcards

Midterm 1 Flashcards

1
Q

Risk

A

any situation where there’s uncertianty about what outcome will occur

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2
Q

What is the goal of risk management?

A

reduce the cost of risk not eliminate risk

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3
Q

Pure (Hazard) Risk

A
  • everyone involved faces potential for loss, there is no opportunity for profit
  • involve events out of individuals and organizations control -> natural disasters, accidents
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4
Q

Speculative Risk

A
  • possibility for both gain and loss
  • ex: foreign exchange, stock market investments
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5
Q

Pure Loss

A

accidents and unexpected natural disasters producing net loss to society, can be mitigated with insurance

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6
Q

Fundamental (Systematic) Risk

A

risk that affects entire markets or economies, and is beyond control of individual entities -> requires broader risk management and economic considerations

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7
Q

Particular (Unsystematic) Risk

A

risk specific to individual companies or investments that arise from factors internal to those entities -> diversification used to manage

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8
Q

Static Risk

A
  • risk that remian relatively constant or don’t change significantly over time, and are stable and predictable
  • losses brough by acts of nature or malicious and criminal acts of others
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9
Q

Dynamic Risk

A
  • risks that change and evolve over time, can result in gain or loss
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10
Q

Subjective Risk

A

how a person or group of ppl personally feel about the level of risk in a situation
- based on individual perceptions, emotions, and opinions about the potential for something bad to happen

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11
Q

Objective Risk

A

the level of risk in a situation that can be measured or calculated using, facts, data, and statistics

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12
Q

Property Risk

A

potential for financial loss or damage to physical assets

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13
Q

Liability Risk

A

tyope of operational risk, risk of being held liable or responsible for an action or lack of action that results in injury, harm or damages to others or their property

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14
Q

Personal Risk

A

risks faced by individuals or families -> earnings, medical expenses, liability, physical asset, financial asset, longevity

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15
Q

Financial Risk

A

uncertainty over magnitutde of cash flows due to possible changes in prices, asset values, exhange rates, and credit risk

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16
Q

Hazard Risk

A

poses threat to life, health, property, or evironment

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17
Q

Strategic Risk

A

risks associated with org’s ability to achieve their business strategy

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18
Q

Price Risk

A

possible changes in output/input prices -> commodity price risk. exchange rate risk, interest rate risk

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19
Q

Credit Risk

A

risks that firms customers or parties they lent money too will delay or fail to make promised payments

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20
Q

Output Price Risk

A

risk of changes in prices a firm can demand for goods/services

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21
Q

Input Price Risk

A

risk of changes in prices firm pays for labour and materials

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22
Q

Operational Risk

A

emcompasses risk of direct or indirect loss resulting from inadequate or failed internal processes

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23
Q

P.E.A.R

A

People, Environment, Assets, Reputation

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24
Q

Insurance Deductable

A

amount insured required and obligated to pay by the insurance policy

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25
Q

Cyber Risk

A

any risk of disruption or damage to the reputation of an org resulting from failure to protect data of an org, often resulting in financial loss

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26
Q

ex ante

A

before the fact

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27
Q

ex post

A

after the fact

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28
Q

Risk Adverse

A

when deciding between 2 risky alternatives with same outcome, will choose alternative w/ less variability

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29
Q

Cost of Risk

A

Value Without Risk - Value With Risk

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30
Q

Exposure

A

opportunity for loss

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31
Q

Loss Exposure

A

set of circumstances that creates a probability of loss

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32
Q

Peril

A

a specific cause of loss or damage. an event or situation that can lead to harm or damage to property, people, or interests

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33
Q

Physical Hazard

A

something you can see or touch that can cause harm or damage

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34
Q

Moral Hazard

A

when someone takes a risk bc they know someone else will pay for it

35
Q

Property Loss

A

damage, destruction, or disappearance of property (tangible and intangible) -> can occur bc of natural disasters, human actions, accidents or technological issues

36
Q

Physical Damage

A

direct harm to tangible property

37
Q

Theft or Burglary

A

loss due to someone stealing your property

38
Q

Natural Disaster Damage

A

loss resulting from natural events

39
Q

Data Loss

A

loss of digital information from cyber attacks, hardware failures or accidental deletion

40
Q

Loss of Use

A

situations where property can’t be used bc of damages

41
Q

Liability Insurance Contracts

A

agreements that provide financial protection to individuals or businesses if they’re held responsible for causing harm or damages to others

42
Q

Civil Law

A

disputes between ppl or orgs usually involving compensation or an order to do or not to do something

43
Q

Criminal Law

A

crime against community as a whole

44
Q

Torts

A

act or omission that gives rise to injury or harm to another, giving rise to legal liability

45
Q

Libility

A

legal responsibility or obligation of person or entity to compensate another party for harm, injury, or damage that they have caused

46
Q

Vicarious Liability

A

type of strict liability where one person or entity is held responsible for the actions of another, usually employer-employee relationship

47
Q

Product Liability

A

involves holding manufacturers, sellers, or distributors responsible for damages caused by defective or unsafe products

48
Q

Strict Liability

A

legal principle where defendant is liable for damages irrespective of fault or negligence

49
Q

Premise Liability

A

responsibility of property owners for accidents or injuries that occur on their premises due to unsafe conditions

50
Q

What are the 4 elements that must be established to prove negligence?

A
  • Duty
  • Breech of Duty
  • Causation
  • Damages
51
Q

Contributory Negligence

A

personal injury case where plaintiff must prove defendant didn’t behave reasonably in the circumstance, caused injury and should be financially responsible for injury

52
Q

Assumed Risk

A

the assumption that there is some inherent risk in everyday activities

53
Q

Res Ipsa Loquitur

A

the circumstances surrounding the case make it obvious that negligence occured -> incident that caused harm speaks for itself, there’s no need to look more into whether a reasonably competent defendant would have made the same errors

54
Q

Joint and Several Liability

A

liability is shared

55
Q

Contractual Liability

A

when libaility is passed from one party to another through a contract

56
Q

Employer-Employee Liability

A

employers are responsible for keeping their employees safe and can be liable if they don’t

57
Q

Property Owner-Tenant Liability

A

owners and tenents of properties have different levels of responsibility for ppl who enter their property

58
Q

Assumption of Liability by Tenant

A

when renting a property, tenants might take on some responsibility for injuries that happen there

59
Q

Attractive Nuisance Doctrine

A

property owners are liable for injuries to trespassing children if something on the property attracts the children

60
Q

Consumption or Use of Products

A

manufacterers and sellers are responsible for ensuring their products are safe

61
Q

Breach of Warranty

A
  • if product doesn’t meet promised standards, seller can be sued
  • if product is defective and hurts someone, the manufacturer is responsible
62
Q

Professional Acts (Professional Liability)

A

professionals like doctors, lawyers, architects must perform their services with a high standard of care, if they don’t they can be sued for professional negligence or malpractice

63
Q

Principal Agent Liability (Responseat Superior)

A

employers can be held responsible for their employees’ actions while on the job, even if the employee does something against instructions

64
Q

Ownership and Operation of Automobile

A

car owners and drivers have specific responsibilities and can be held liable for accidents

65
Q

Owners’ Liability

A

car owners can sometimes be sued for accidents caused by others driving their car, especially if the driver is a family member or employee

66
Q

Risk Appetite

A

amount of risk organization is willing to accept in pursuit of its objectives

67
Q

Frequency

A

measures number of losses in a given time period

68
Q

Severity

A

measures the magnitude of the concequences of each loss

69
Q

Risk Identification

A

determining where, when, why, and how events could prevent, degrade, delay or enhance the achievement objectives

70
Q

Risk Analysis

A

Quantifying the likelihood and concequences of the risks, usually based on the controls put in place to reduce risk

71
Q

Risk Evaluation

A

comparing existing level of risk to risk criteria established in activity; if the existing level of risk id considered unacceptable, then risk treatment is necessary

72
Q

Risk Control

A

decisions to invest (or forego investing) rescources to reduce expected losses

73
Q

Loss Control

A

actions that reduce the expected cost of losses by reducing frequency and/or severity of losses

74
Q

Loss Prevention

A

actions that affect the frequency of losses

75
Q

Loss Reduction

A

actions that primarly influence the severity of losses

76
Q

What are the 2 approaches to loss control?

A

1) reducing the level of risky activity
2) increasing precautions against loss for activities that are undertaken

77
Q

Risk Avoidance

A

completely eliminating exposure to losses by reducing level of activity to zero

78
Q

Risk Financing

A

decisions about how to pay for losses if they occur

79
Q

Loss Financing

A

methods used to obtain funds to pay for or offset losses

80
Q

What are the 4 broad methods of loss financing?

A

1) retention
2) insurance
3) hedging
4) other contractual risk transfers

81
Q

Retention

A

business or individual retains the obligations to pay for part or all of the losses

82
Q

Insurance

A

purchase of insurance contracts requiring insurer to provide funds to pay for losses

83
Q

Hedging

A

forwards, futures, options, and swaps used to extensively manage vaious types of risk

84
Q
A

RMIN 317 (2 decks)

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