IC86 Mock Test sample 6
Risk management focuses on identifying, evaluating and controlling exposures that may affect organisational objectives and profitability. Businesses analyse property values, financial assets and operational activities to assess possible losses. Risks may arise from environmental, commercial, financial or social factors. Techniques like risk avoidance, risk control, risk audit and finite risk reinsurance help organisations minimise uncertainty and stabilise profits and cash flows. Fundamental, speculative and dynamic risks are classified according to their nature and impact. Captives and rent-a-captives are alternative risk financing tools. Effective risk management supports continuity, protects assets and improves financial performance through systematic identification, evaluation, prevention and control of risk factors.
1. Proper identification and analysis of loss exposures will depend upon which of the following factors?
- Classification scheme for identifying all possible exposures
- Degree of these exposures in terms of impact on objectives
- Employing proper methods
a) Only 1
b) Only 2
c) Both 1 and 2
d) All 1, 2 and 3
2. Property values at risk should be detailed for each block of _____________ in a consequential loss analysis of a manufacturing company.
I. Stock
II. Buildings
III. Plants and machinery
a) Only I
b) I and II
c) II and III
d) I, II and III
3. Prospective Finite Risk Reinsurance covers provide protection against _______.
- Negative impact of adverse loss development
- Contingencies associated with future loss events
- Accelerated payout of losses already incurred at inception
a) Only 1
b) Only 2
c) Only 3
d) Both 1 and 3
4. Protected cell companies and Rent-a-captives are examples of ________.
a) Finite Risk
b) Transferred Risk
c) Contingent Capital
d) Captives
5. Read the statements carefully and choose the correct ones about fundamental risks.
I. These risks arise from natural disasters or political/economic changes
II. They are caused by an individual
III. These risks affect society at large
a) I and II
b) Only I
c) Only II
d) I and III
6. RENTAL VALUE LOSS is an example of ________.
a) Reduction in Receivables
b) Contingent business interruption
c) Increase in expenses
d) Consequential Loss Analysis
7. Risk associated with ‘Chance of gain as well as loss’ can be classified as which type of risk?
a) Fundamental Risk
b) Speculative Risk
c) Static Risk
d) Liability Risk
8. Risk associated with ‘Changes in human wants’ is classified as which type of risk?
a) Liability Risk
b) Particular Risk
c) Fundamental Risk
d) Dynamic Risk
9. Risk audit reviews risk management capabilities. It covers identification, measurement, evaluation of control and ________.
a) Planning
b) Financing
c) Budgeting
d) Transferring
10. Risk avoidance can be considered as the best risk management technique when the chance of loss is ____ and the loss severity is _____.
a) High, High
b) Low, Low
c) Low, High
d) High, Low
11. Risk avoidance is the ideal risk management technique when the chance of loss is ______ and the loss severity is ______.
a) Low, Low
b) High, High
c) High, Low
d) Low, High
12. Risk control has often been regarded as synonymous with ________.
a) Risk Avoidance
b) Risk Control
c) Wealth Management
d) Risk Management
13. Risk exposure to Money, Share Certificates, Debt, Derivatives etc. is which type of risk exposure?
a) Financial Assets Exposure
b) Speculative Assets Exposure
c) Physical Assets Exposure
d) Human Assets Exposure
14. Risk is created by the following activities:
I. Environmental
II. Financial
III. Commercial
a) Only I
b) Only II
c) I and II
d) I, II and III
15. Risk is created by which of the following?
I. Social scenario
II. Constructional activities
III. Laws and regulations
a) Only III
b) I, II and III
c) I and II
d) I and III
16. Risk is created by which type of activities?
- Environmental
- Financial
- Commercial
a) Only 3
b) 1 and 2
c) 2 and 3
d) All 1, 2 and 3
17. Risk Management can ______ the fluctuations in annual profits and cash flows.
a) Increase
b) Reduce
c) Stabilise
d) Alter
18. Risk Management can contribute directly to business profits by _______.
- Reducing fluctuations in annual profits and cash flows
- Cash flows retainment
- Increasing stock levels
a) Only 1
b) Only 3
c) 1 and 2
d) All 1, 2 and 3
19. Risk Management contributes directly to business profits by which of the following ways?
I. Retaining cash flow
II. Increasing stock level
III. Reducing fluctuations in annual profits and cash flows
a) Only I
b) Only II
c) Only III
d) I and III
20. Risk Management is the ___________ of risk factors.
a) Identification, Avoiding, Control and Prevention
b) Prevention, Evaluation and Control
c) Reviewing, Monitoring and Managing
d) Identification, Evaluation, Control and Prevention
