RISK MANAGEMENT GROUP 5

What is the primary goal of risk management?

• 
  To identify potential risks and implement measures to help clients achieve their financial goals despite these risks

• To avoid all investments that carry any risk

• To guarantee that no financial loss will ever occur

• 
  To focus only on gaining maximum returns without considering risks

Which of the following best describes a pure risk?

• A risk that always results in a financial profit

• A risk related to investment returns that can be positive or negative

• A risk where there is only a possibility of loss or no loss, but no chance of gain, such as a car accident

• 
  A risk that guarantees a financial gain if it occurs

What is the best definition of risk in financial planning?

• The chance of gaining profit from investment

• Uncertainty about financial loss from an exposure

• The certainty of losing money in the stock market

• The amount of money saved for retirement

Which of the following is an example of a moral hazard?

• Leaving a house unlocked during a holiday

• A slippery road increasing accident chances

• Fire damaging a house

• Faking an accident to make a personal accident claim

What type of risk involves either loss or no loss, with no possibility of gain?

• Pure risk

• Financial risk

• 
  Speculative risk

• Market risk

Which of the following is NOT considered a personal risk?

• Unemployment

• Premature death of a breadwinner

• Deterioration of health

• Theft of a factory machine

What is a direct loss in property risk?

• Financial loss resulting from physical damage or theft of property

• 
  Emotional distress caused by property loss

• Financial loss due to loss of income after property damage

• Legal fees from a lawsuit related to property damage

Which of the following best describes the second step in the six-step risk management process?

• 
  Developing a risk management plan to address identified risks

• 
  Reviewing and monitoring the risk management plan regularly

• Setting the overall risk management objectives aligned with financial goals

• Gathering information to identify the client’s loss exposures during different life phases

What is the first thing to do when analyzing risks in financial planning?

• 
  Ignore small risks that might happen

• Identify and understand the risks that could cause financial loss

• 
  Buy insurance for everything immediately

• Review the risk management plan

What does risk retention mean?

• 
  Accepting and paying for the loss yourself if it happens

• Avoiding risk by not doing risky activities

• 
  Sharing risk with other people

• Transferring risk to an insurance company