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Which of the following is a financial risk that may be faced by a business organization?

• injuries suffered by employees at the workplace

• lost income after a fire loss

• product liability risk

• currency exchange rate risk

Which of the following statements about the scope of risk management is (are) true?

1. Traditionally, risk management was limited in scope to speculative loss exposures.

2. In the 1990s, some businesses began to expand the scope of risk management to includefinancial risks.

• I only

• II only

• both I and II

• neither I nor II

Mid-States Beef is a commercial feedlot business. Currently, the company has over 10,000 cattlein feedlots. Mid-States is concerned that the price of corn, the grain fed to the cattle, willincrease significantly. The risk that the price of corn may increase and harm the profitability ofMid-States Beef's operations is a(n)

• currency exchange rate risk.

• property risk.

• commodity price risk.

• interest rate risk.

An integrated risk management program is a risk management program which combines

• pure and speculative risks.

• property and liability risks.

• personnel-related risk and property risk.

• direct and indirect loss risk.

Regional Airline (RA) spends millions of dollars each year on jet fuel. The company also hassignificant liability exposures. RA can retain a large portion of its liability exposure if fuel costsare low. The company can pay high fuel costs if retained liability losses are low. RA cannot,however, absorb both high fuel costs and high retained liability claims. RA's insurer designed aninsurance program where the insurer pays only if both contingencies (high fuel costs and highretained liability claims) occur. The contract the insurer designed is called a(n)

• double indemnity rider.

• double trigger option.

• multiple protection policy.

• other insurance provision.

Which statement is (are) true with respect to enterprise risk management programs?

1. They address traditional property, liability, and personnel loss exposures.

2. They do not address financial risks.

• I only

• II only

• both I and II

• neither I nor II

A comprehensive risk management program that addresses an organization's pure risks,speculative risks, strategic risks, and operational risks is called a(n)

• risk management information system.

• financial risk management plan.

• speculative risk management plan.

• enterprise risk management plan.

The property and liability insurance industry is characterized by a repetitive pattern of looseunderwriting standards with low premiums followed by tight underwriting standards with highpremiums. This repetitive pattern is called the

• underwriting by exception method.

• business cycle.

• underwriting cycle.

• account underwriting method.

Which statement is (are) true regarding property and liability insurance market conditions?

1. Premiums are high when the insurance market is "hard."

2. Underwriting standards are tight when the insurance market is "soft."

• I only

• II only

• both I and II

• neither I nor II

Which of the following statements is true regarding insurance market conditions andunderwriting results?

• A combined ratio greater than one (or 100 percent) indicates profitable underwriting.

• In a "soft" insurance market, more retention is used than in a "hard" insurancemarket.

• Insurance rates are high and underwriting standards are tight when the insurancemarket is "hard."

• Property and liability insurance premiums and underwriting standards do notfluctuate over time.