Risk Management Quiz

Imagine a company where Rakiyah is an executive whose responsibilities include the planning, controlling, preventing, and limiting of business losses and enhancing possibilities for gain. What is Rakiyah's role in the company?

• CRO (chief risk officer)

• CFO (chief financial officer)

• CIO (chief insurance officer)

• COO (chief operations officer)

Answer explanation

An executive responsible for planning, controlling, and preventing business losses is known as a CRO (chief risk officer), making it the correct choice.

When Mizani covers the windows of her bakery with plywood to protect them from approaching hurricane winds, what is she trying to do with the risk?

• accept

• analyze

• mitigate

• transfer

Answer explanation

Bob is trying to mitigate the risk by covering the windows with plywood to protect them from hurricane winds.

Lauren is an insurance agent who is working with Rakiyah, the sole proprietor of a small dental practice, to determine the type of liability insurance she needs. Lauren suggests that Rakiyah needs to purchase insurance that will cover her legal expenses in the event a patient sues her for negligence. What type of liability insurance is Lauren advising Rakiyah to purchase?

• workers' compensation

• commercial

• malpractice

• healthcare

Answer explanation

Anna is advising Tracy to purchase malpractice insurance to cover legal expenses in case of negligence lawsuits from patients.

What will likely occur if Lauren fails to inform her employer about her coworker Jamari's embezzling activities?

• Jamari will be charged with a felony.

• The company's financial risk will increase.

• The company's property insurance premium will increase.

• The government will fine the company for noncompliance.

Answer explanation

If Michelle fails to inform her employer about Ted's embezzling, the company's financial risk will increase due to potential losses and legal implications.

When planning a school event, Rakiyah and Korey are assessing the two dimensions of risk. What are these dimensions?

• impact and avoidance.

• probability and impact.

• probability and avoidance.

• mitigation and acceptance.

Answer explanation

The two dimensions of risk are probability and impact, which assess the likelihood of an event occurring and the consequences if it does.

How is the behavior of a health food company, endorsed by Arnez, that falsely claims its products can cure many diseases considered?

• favorable.

• moral.

• normal.

• unethical.

Answer explanation

The behavior of a health food company falsely claiming its products can cure diseases is considered unethical because it involves deception and can harm consumers.

Which of the following would be a good source of information about the retroactive risks of Korey's new startup?

• environmental scan.

• purchasing manager.

• business incident log.

• local weather forecast.

Answer explanation

The correct choice for a good source of information about the retroactive risks of a business is the business incident log, as it records past incidents and can help identify patterns and potential risks.

Which is true about a captive agent relationship in the context of insurance?

• A captive agent like Mason owns all clients that he/she services.

• The captive agent, such as Lauren, is guided by dual agency guidelines.

• The insurer owns and maintains control of all accounts serviced by the captive agent, like Arnez.

• A captive agent, represented by Mizani, has the right to rewrite the insured if he/she terminates his/her relationship with the insurer.

Answer explanation

The insurer owns and maintains control of all accounts serviced by the captive agent, making this statement true about a captive agent relationship.

Jeremiah, a professional driver, has faced multiple traffic challenges including tickets and accidents. What type of insurance will his insurance company likely consider for him?

• reinsurance

• excess insurance

• standard insurance

• exclusion insurance

Answer explanation

Paulo's driving history indicates a high risk, so his insurance company will need to get reinsurance to cover potential losses.

Mizani, who recently started working at an insurance company, learned that the industry generates the funds needed to pay the claims of policyholders by:

• obtaining loans from financial institutions.

• investing money from premiums.

• consolidating stock portfolios.

• selling related merchandise.

Answer explanation

The insurance industry generates the funds needed to pay the claims of policyholders by investing money from premiums.