IC86 Mock Test sample 2
Risk management focuses on identifying, analysing, controlling and financing risks to reduce losses and ensure business stability. Loss control management aims to minimise total loss costs through prevention, protection and recovery measures. Businesses face different risks such as personal, operational, financial and market-related risks. Techniques like surveys, inspections and threat analysis help identify risks effectively. Concepts such as self-insurance, risk retention and finite risk reinsurance support financial protection. Operational objectives, compliance and social responsibility are important parts of a sound risk management programme. Effective risk management improves confidence, supports decision-making and allows organisations to handle uncertainties while maintaining continuity and achieving long-term objectives.
1. The purpose of loss control management is ________.
a) To minimise the total cost of losses
b) To prevent all type of losses
c) To transfer the risk
d) To pay for the losses
2. The purpose of Loss Control Management is to limit the total cost of losses to the lowest possible level by implementing which of the following measures?
- Protect people from loss
- Maximise the recovery from any loss that has occurred
- Preventing losses from occurring
a) Only 3
b) Both 1 and 2
c) Both 2 and 3
d) All 1, 2 and 3
3. The reason for physical depreciation of tangible asset is ____________.
I. Changes in fashion
II. Age of the asset
III. Wear and tear
a) Only II
b) I and II
c) II and III
d) I and III
4. The reduction in revenues as a result of an accidental loss to property include:
I. Reduction in receivables
II. Loss of rent
III. Contingent business interruption
a) I and II
b) II and III
c) I and III
d) Only II
5. The Retrospective finite risk reinsurance covers provide protection against the ____ .
- Negative impact of an adverse loss development
- Accelerated payout of losses already incurred at inception of the cover
- Contingencies associated with future loss events
a) Only 1
b) Only 3
c) Both 1 and 2
d) Both 2 and 3
6. The revised Basel Capital Accord that is the 'Basel II' Accord - 2004 has incorporated various revisions and this includes ____ .
- Changes in the treatment of Expected and Unexpected losses
- Changes in the approach and usage of Insuratization
- Changes in use of alternative risk management methods like finite risk reinsurance
a) Only 1
b) Only 2
c) Only 3
d) Both 1 and 3
7. The risk assessment is done by compiling a list of threats to the business, under which method of risk identification?
a) Study and enquiry
b) Threat analysis
c) Checklists / questionnaires
d) Physical inspection / Surveys
8. The risk control measures can be divided into which of these?
- Eliminate or reduce risk
- Prevent loss
- Detect and reduce the extent of the loss
a) Only 1 and 2
b) Only 2 and 3
c) Only 1 and 3
d) All 1, 2 and 3
9. The risk management programme must also support the operational objectives of management which relate to:
- Achieving economy of operations
- Compliance with statutes
- Good citizenship and social responsibility
a) Only 1
b) Only 2
c) Only 2 and 3
d) All 1, 2 and 3
10. The risk management technique of _________ is an example of Self Insurance.
a) Indemnity
b) Avoidance
c) Acceptance
d) Retention
11. The risk of loss due to change in consumer behaviour is _______.
- Directly controllable by management
- Not directly controllable by management
- Partially controllable by management
a) Only 1
b) Only 2
c) Only 3
d) Both 2 and 3
12. The risk of potential loss to persons is what type of risk?
a) Personal Risk
b) Liability Risk
c) Speculative Risk
d) Market Risk
13. The risk retention groups are authorised by the _________________________.
a) Insurance Act, 1938
b) IRDAI Act, 1999
c) Companies Act, 2013
d) Liability Risk Retention Act, 1986
14. The risk transfer of exclusively financial, credit/weather-related or other capital market risks from capital to insurance market is structured in the form of a reinsurance solution. What is this concept called?
a) Insuratization
b) Capital Markets
c) Finite Market Reinsurance
d) Retrospective Finite Risk
15. The risks faced by a business enterprise fall into three main categories. Which of the following is NOT one of the categories?
a) Directly controllable by management
b) Fully controllable by management
c) Partially controllable by management
d) Manageable by social, political and physical environment
16. The selection criteria of risk control and risk financing technique should also take into consideration:
- Cost effectiveness
- Feasibility
- Financial Objectives
a) Only 1
b) Only 2
c) Only 3
d) All 1, 2 and 3
17. The simplest definition of risk management can be the identification, evaluation, control, prevention and _____ of risk.
a) Retention
b) Transfer
c) Assessment
d) Protection
18. The situation which permits an organisation to investigate and assume attractive speculative risks that they might otherwise avoid is the peace of mind and confidence gained ____________.
a) By managing the social risk
b) By managing the financial risk
c) By managing the political risk
d) By managing the pure risk
19. The Specialty Guide on Enterprise Risk Management was prepared by ________.
a) CRISIL
b) Group of the American Society of Actuaries
c) London Chambers of Commerce ERM Group
d) Group of London Underwriters
20. The three steps of Risk Management process are listed below. Arrange them in proper order from first to last.
- Risk Treatment
- Risk Analysis
- Risk Financing
a) 3, 2, 1
b) 3, 1, 2
c) 2, 1, 3
d) 2, 3, 1
