IC86 Mock Test sample 5
Risk management involves identifying, analysing and controlling exposures that may affect an organisation’s assets, earnings and operations. Concepts such as integrated risk management, risk financing and insurance securitisation help businesses manage financial uncertainty effectively. Risks may arise from perils, hazards, utilities failure or economic conditions. Techniques like fault tree analysis assist in identifying causes and impacts of losses. Businesses evaluate losses based on cost, selling price and property valuation principles. Risk responses include reduction, transfer, avoidance and retention depending on the situation. Proper risk management ensures continuity, minimises financial impact and improves operational efficiency while protecting organisational resources and long-term objectives.
1. Insurers generally use the word 'risk' in two distinctive meanings viz. as a subject matter of insurance and different types of _____.
a) Perils
b) Losses
c) Hazards
d) Exposures
2. Integrated Risk Management concepts are generally understood to be covers combining ______ and ______.
a) Risk financing and Risk Elimination techniques
b) Risk identifying and Risk transfer techniques
c) Risk financing and Financial market risks techniques
d) Risk transfer and Risk mitigation techniques
3. Kiran sold finished goods worth Rs. 10,000 to Mohit at a selling price of Rs. 13,000. However, all goods were destroyed by fire before delivery. Determine the amount of loss.
a) Rs. 10,000
b) Rs. 13,000
c) Rs. 23,000
d) Rs. 3,000
4. List down the advantages of the Fault Tree method of risk identification.
a) It can judge system sensitivity to changes
b) It calculates ways in which a main event can occur
c) It describes complicated processes effectively
d) All of the above
5. Loss of gas supply is an example of ______.
a) System failure
b) Man made disaster
c) Environmental disaster
d) Loss of utilities and services
6. Mega Industries manufactured goods costing Rs. 50 lakhs and sold them for Rs. 55 lakhs. The goods were destroyed before delivery. What is the amount of loss?
a) No Loss
b) Rs. 5 lakhs
c) Rs. 50 lakhs
d) Rs. 55 lakhs
7. Moral hazard means that the act of insuring _______ that the desired outcome will occur.
- Increases likelihood
- Guarantees
- Decreases likelihood
a) Only 1
b) Only 2
c) Only 3
d) Both 1 and 2
8. Mr. Anil has incurred some costs for risk management. Guide him on how these costs should be treated.
- Allocate expenses to different profit centres
- Create a business vertical for risk management
- Treat them as overhead expenses
a) Only 1
b) Only 2
c) Both 1 and 2
d) All 1, 2 and 3
9. Mr. Madan manufactured goods costing Rs. 10,000 and sold them for Rs. 13,000. The goods were destroyed before delivery. What is the amount of loss?
a) Rs. 10,000
b) Rs. 13,000
c) Rs. 3,000
d) Rs. 23,000
10. Mr. Mehra runs a hotel at a tourist place. Due to geographical tensions, he plans ways to attract tourists and reduce costs. Identify the type of risk response.
a) Acceptance
b) Transfer
c) Reduction
d) Avoidance
11. Mr. Sinha is a very safe driver. He would mostly choose auto insurance with a _______.
a) High premium and Low deductible
b) Low premium and Low deductible
c) High premium and Nil deductible
d) Low premium and High deductible
12. Name the tools that transfer insurance risk in an insurance bond or derivative format to capital market investors rather than the reinsurance market.
a) Equity shares only
b) Insurance securitisation only
c) Derivatives only
d) Insurance securitisation and derivatives
13. Net Contribution for a company is calculated as:
a) Sales – (Gross Profit + Variable Cost)
b) Sales – (Gross Profit + Factory Fixed Cost)
c) Sales – Gross Profit – Factory Fixed Cost
d) Sales – (Gross Profit – Variable Cost – Factory Fixed Cost)
14. One of the basic components of risk management is Risk Financing. It means ________.
a) Determining cost of risk and ensuring adequate financial resources
b) Measures to avoid occurrence of risk
c) Estimating probability and severity of risks
d) Recognition and anticipation of risks threatening business assets
15. One of the commonly quoted definitions of Risk Management is the protection of assets, earnings, liabilities and people of an enterprise with ______ efficiency and at a ______ cost.
a) Maximum, Maximum
b) Minimum, Minimum
c) Maximum, Minimum
d) Minimum, Maximum
16. Perils are usually classified into which of the following three categories?
I. Social perils
II. Human perils
III. Natural perils
IV. Political perils
V. Economic perils
a) I, II and V
b) I, IV and V
c) II, III and V
d) I, II and III
17. Physical depreciation of an asset is due to _______.
- Change in fashion
- Ageing of the asset
- Wear and Tear
a) Only 1
b) Only 2
c) Only 3
d) Both 2 and 3
18. Praveen has machinery with the following details: Cost Rs. 25 lakhs, Installation Rs. 8 lakhs, Transportation Rs. 1 lakh. What is the valuation?
a) Rs. 17 lakhs
b) Rs. 25 lakhs
c) Rs. 34 lakhs
d) Rs. 33 lakhs
19. Probability of occurrence is measured between Zero and _____.
a) Ten
b) One Hundred
c) One
d) Fifty
20. Proper identification and analysis of loss exposures depends upon three important factors. Which of the following is NOT one of them?
a) Classification scheme for identifying exposures
b) Employing proper methods
c) Establishing organisational objectives
d) Degree of exposures in terms of impact on objectives
