Risk

Question 1

Pure RIsk

Answer 1

A loss with 100% chance of happening

Question 2

Impossible loss

Answer 2

has zero percent chance of happening
Ex) A hurricane destorying two data centers on oppisite sides of the world

Question 3

Pure Risk

Answer 3

Results in either loss or no loss
Ex) Fire, flood, death

Question 4

Speculative Risk

Answer 4

Gain, loss, or no gain or loss
Ex) Buying a stock, gambling

Question 5

Static Risk

Answer 5

Does not significantly change over time

Question 6

Dynamic Risk

Answer 6

Arises out of changing circumstances

Question 7

Diversifiable Risks

Answer 7

Not highly correlated (separate incidents that don’t affect each other)

Question 8

Non diversifiable

Answer 8

One event impacts a lot of different things
Ex) Hurricane wipes out hundreds of homes

Question 9

Objective Risk

Answer 9

Measurable variation in uncertain outcomes based on facts and data

Question 10

Subjective Risk

Answer 10

An individual’s view of uncertainty or the situation involving risk

Question 11

Expected Loss (EL)

Answer 11

What we expect to lose - based on experience, data, or other means

Question 12

Actual Losses (AL)

Answer 12

Losses that actually occur

Question 13

How does one measure risk (formula)

Answer 13

(AL - EL)/EL

Question 14

Peril (1st factor)

Answer 14

• The immediate cause of the loss
  Ex) Fire, flood, theft

Question 15

Frequency of the loss (2nd factor)

Answer 15

How often do losses occur
- What is the likelihood of a loss

Question 16

Severity of the loss (3rd Factor)

Answer 16

How bad was the loss in terms of $$$

Question 17

Hazard (4th Factor)

Answer 17

The “Why”

Question 18

Physical Hazard

Answer 18

Location, construction, or use
Ex) Living at the beach, building made out of wood, university classroom vs a church

Question 19

Moral Hazard

Answer 19

When someone behaves differently because they know they have insurance

Question 20

Morale Hazard

Answer 20

Carelessness concerning loss
- Has nothing to do with whether the person has insurance or not

Question 21

Expected Cost of Loss

Answer 21

Money that comes from losses

Question 22

Cost to manage/Risk management expenditures

Answer 22

• Cost to prevent a risk from happening
  Ex) Money spent to make a place safe, research on vaccine

Question 23

Damage to Society/Loss of Goods or Services

Answer 23

What is lost as a result of the risk
Ex) Loosing jobs, loved ones, mental health issues