Risk Management Quiz

Identifying potential business risks and attempting to avert them is known as _________________.

Situations that cannot be avoided, but can be minimized by purchasing insurance or creating a risk management plan are known as _________________.

Situations that cannot be predicted or covered by purchasing insurance are known as ___________________.

____________________ is caused by acts of nature. This is a controllable risk and insurance can help recover from losses (flood, fire, storm, freeze, drought).

__________________ occurs when business activities suffer due to changes in the US or world economy. Local, national, and world economic and political conditions can affect the success of a business; it is very hard to predict and is, therefore, uncontrollable.

_________________ is the potential that the target market for new goods and services is much less than originally projected. This is an uncontrollable risk.

____________________ is a negative situation caused by the actions of people (shoplifting, embezzlement, and use of stolen credit cards). This includes risk caused by employees such as fraudulent behavior. Some of these risks are controllable and insurable.

_________________ is a risk with a possibility of loss, but no possibility of gain. Insurance protection is necessary to cover these losses.

____________________ is a risk that can result in either financial gain or financial loss. Most of these risks are not insurable because they are choices or risks taken to make a profit.

List the four ways to properly practice risk management and provide an example of how to effectively implement each.

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Answer explanation

Avoid Risk: Avoiding certain climates, not hiring felons, not accepting personal checks as payments.

Reduce Risk: Installing security cameras, ensuring OSHA safety standards are in place to avoid worker injury, shoveling/salting the sidewalk to reduce customer accidents.

Transfer Risk: Using an insurance company to insure against risk.

Assume Risk: Economic and market risks, creating new products or markets,