RMI 2302 FSU NYCE EXAM 1 (Q&A)
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Risk Likelihood ✔✔Frequency - the probability that a loss can occur.
What 3 ways can Risk Likelihood be categorized ✔✔High - an event is expected to happen in most circumstances Medium - an even will probably happen in many circumstances Low - an event may occur at some point
Risk Impact ✔✔Severity - the potential effect that a loss could have if it arises.
Risk prevention methods are best applied to what? ✔✔Frequency of losses
Risk reduction methods are best applied to what? ✔✔Severity of losses
Do risk reduction methods have costs that are both monetary and nonmonetary? ✔✔Yes. It requires putting a value on human life. (Consider how to balance risk/reward of how much it is worth spending to save one life. What is the quality of life if you did save them) 1 / 3
The frequency states that there is a 25% chance of 1 accident, a 50% chance of 2 accidents, and a 25% chance of 3 accidents. The severity states that it costs $10,000 per accident. What is the expected loss? ✔✔(how often it occurs * how bad it is when it occurs)
(.25*10,000)+(.50*10,000)+(.25*10,000) = $20,000
Pure risk ✔✔"will there be a loss or no loss" only involve 2 possible outcomes
Speculative Risk ✔✔"will there be a loss, no loss, or a gain?"
What are the eight categories of risk? ✔✔Static Dynamic
Core Secondary
Fundamental 2 / 3
Particular
Speculative Pure
What are the 4 sources of risk? ✔✔Personal Property Liability Financial
What are the 2 types of Hazards? ✔✔Physical (tangible) and Intangible Hazards
What are the three types of intangible hazards? ✔✔Moral Morale Societal
What are the three attitudes towards risk? ✔✔Risk Averse Risk Seeker
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