IC86 Mock Test sample 4
Risk management involves identifying, evaluating and controlling risks to minimise losses and ensure business continuity. Concepts like ART, business continuity planning and catastrophic risk management help organisations prepare for unexpected events. Risks may be classified as fundamental, market, particular, property or static risks depending on their nature and impact. Written policy statements improve communication, coordination and achievement of organisational objectives. Risk financing methods include insurance, hedging and alternative risk transfer mechanisms. Stress testing and disaster phase management support effective crisis handling. Businesses must carefully decide between risk transfer and retention based on potential loss severity. Overall, risk management strengthens operational resilience and long-term stability.
1. What is 'Rental Value Loss' an example of?
a) Consequential Loss Analysis
b) Reduction in Receivables
c) Loss on profits of finished goods
d) Contingent business interruption
2. What is a business continuity plan?
a) A comprehensive statement of profit and loss for the past three years
b) A comprehensive statement of consistent actions to be taken before, during and after a disaster
c) A comprehensive statement of risk management procedures
d) A comprehensive statement of insurance plan to mitigate losses
3. What is ART in respect to insurance and related risk management?
a) Actual Risk Theory
b) Accepted Risk Transfer
c) Alternative Risk Transfer
d) Aggregate Risk Training
4. What is defined as variation in the outcome that occurs over a specified period in a given situation?
a) Probability
b) Uncertainty
c) Risk
d) Expected Value
5. What is Fundamental Risk?
a) Risk connected with losses caused by irregular natural forces or human mistakes
b) Risk in which there is a chance of gain as well as loss
c) Risk associated with groups, impersonal in origin and effect
d) Risk associated with changes in human wants and technology
6. What is market risk?
a) Chance of gain as well as loss
b) Risk associated with technological improvements
c) Risk arising due to price reduction or purchase and sale constraints
d) Existence of chance of loss only
7. What is PARTICULAR RISK?
a) Risk associated with groups and impersonal effects
b) Risk associated with changes in human wants and machinery
c) Risk involving chance of gain as well as loss
d) Risk associated with individuals
8. What is property risk?
a) Probability of potential loss to the person
b) Probability of potential loss to the property
c) Probability of potential liability for an individual or institution
d) Risk arising due to natural phenomena like storms and floods
9. What is STATIC RISK?
a) Risks associated with individuals
b) Risks associated with changes in human wants and machinery
c) Risk arising due to price reduction or sales constraints
d) Risk connected with losses caused by natural forces or human misdeeds
10. What is the advantage of a written policy statement?
a) It organises the risk management objectives
b) Coordinates operations between departments
c) Improves communication channels and MIS
d) Achieves general objectives of a risk management programme
11. In respect to the risk triangle, the apex or tip indicates risks having the most devastating effect. What are such risks termed as?
a) Organisational Risks
b) Catastrophe Risks
c) Minor Risks
d) Major Risks
12. In Risk Financing, which of these are examples of Risk Transfer?
- Hedging
- Forming a trust
- Commercial Insurance
a) Only 1
b) Only 2
c) Only 3
d) Both 2 and 3
13. In the book “Risk, Uncertainty and Profit”, which term describes events for which probability of occurrence can be calculated?
a) Risks
b) Uncertainties
c) Disasters
d) Exposures
14. In the case of accidental loss to property, identify which among the following will result in reduction in revenue.
- Reduction in Receivables
- Loss of Rent
- Contingent Business Interruption
a) Only 1
b) Both 1 and 2
c) Both 2 and 3
d) All 1, 2 and 3
15. In the process of Catastrophic Risk Management, determining the impact of imagined extreme adverse situations is called ________.
a) Trend analysis
b) Stress testing
c) Problem post mortem
d) Contingency planning
16. In which of the following circumstances would risk retention not be a good alternative?
a) Where the cost of potential loss is minor
b) Where the cost of potential loss is uncertain
c) Where risk is difficult to identify
d) Where the cost of potential loss is large
17. In which phase of disaster does management assess the situation and decide whether to activate the Business Continuity Plan (BCP)?
a) Emergency response phase
b) Crisis phase
c) Recovery phase
d) Restoration phase
18. Insurable risk area includes all of the following except ________.
a) Military Risks
b) Cultural Risks
c) Personal Risks
d) Political Risks
19. Insurance securitization and other techniques of risk transfer to capital markets are used ________.
- As a means of covering insurance risks
- As tools for additional and alternative capacity
- As a tool for combining insurance risks with financial market risks
a) Only 1
b) Only 3
c) Both 1 and 2
d) All 1, 2 and 3
