Risk and Fraud Analytics unit 1

What is the definition of risk?

• The probability of a positive outcome

• The possibility of a negative outcome or loss

• A certain outcome without any uncertainty

• The guarantee of a financial gain

What is the difference between risk and uncertainty?

• Risk has unknown probabilities, while uncertainty has known probabilities

• Risk involves known probabilities, while uncertainty involves unknown probabilities

• Risk always leads to loss, while uncertainty leads to gain

• Risk and uncertainty are the same

Which of the following is an internal source of risk?

• Market fluctuations

• Regulatory changes

• Operational inefficiencies

• Natural disasters

Which of the following is an external source of risk?

• Human error

• System failures

• Fraud and embezzlement

• Economic downturns

Why is risk management important?

• To guarantee profits

• To eliminate all risks

• To safeguard assets and ensure regulatory compliance

• To avoid making decisions

What does risk avoidance involve?

• Transferring risk to third parties

• Implementing measures to minimize risk

• Accepting the risk

• Eliminating activities that expose the organization to risk

What is an example of risk reduction?

• A company avoids entering a politically unstable market

• Purchasing insurance

• Implementing safety programs and regular maintenance

• Ignoring minor risks

What does risk sharing involve?

• Eliminating risk

• Minimizing risk

• Accepting risk

• Transferring risk to third parties

What does risk retention involve?

• Eliminating risk

• Implementing measures to minimize risk

• Accepting the risk when the cost of mitigation exceeds the benefit

• Transferring risk to third parties

Which risk management approach involves the use of insurance?

• Risk avoidance

• Risk reduction

• Risk sharing

• Risk retention