Cpcu 500 Chapter 1

Front 1

pure risk

Back 1

a chance of loss or no loss but no chance of gain

Front 2

speculative risk

Back 2

a chance of gain

Front 3

credit risk

Back 3

risk that customers will fail to make payment

Front 4

subjective risk

Back 4

assessment based on opinion

Front 5

objective risk

Back 5

assessment based on fact

Front 6

diversifiable risk

Back 6

occur randomy, spread of risk

Front 7

probability

Back 7

the likelyhood that an outcome will occur

Front 8

2 elements of risk

Back 8

1. uncertainty of outcomes

2. possibility of negative outcome

Front 9

possibility

Back 9

an outcome may or may not occur

Front 10

subjective & objective risks differ

Back 10

* familiiarity & ontrol (flying vs driving)

* severiy over frequency

* consequences over likelyhood

* risk awareness

Front 11

+

diversible v non diversible

Back 11

diversible is random and spreadout

non diversible is simultaneous

Front 12

quandrants of risk

Back 12

hazard

oprational

financial

strategic

Front 13

3 components that constiture financial conequence

Back 13

1. expected cost of loss/gains

2. expenditures on risk management

3. cost of residua uncertainty

Front 14

reseidual uncertainty

Back 14

level of risks that remains after risk managment plan is implemented

Front 15

risk management

Back 15

effors of indivdual or organization to efficiently and effectively assess, control, finance risks in order to minimize losses

Front 16

traditiional risk management

Back 16

associated with pure as opoosed to speculative risks (insurance, safety, etc.)

Front 17

enterprise wide risk management

Back 17

broader view of risk mangement. intent is to maximize value

Front 18

loss exposure

Back 18

any condition that presents a posibility of a loss

Front 19

hazard

Back 19

a condition that increase the frequency or seveity of a loss

Front 20

moral hazard

Back 20

a condision that increases the likelihood that a person will intentionally cause a loss

Front 21

morale hazard

Back 21

condition of carelessneess that measures the frequency/severity of a loss

Front 22

physical hazard

Back 22

tangible characteristic of property, persons, or operaions that tend to increase the frequency/severity of loss

Front 23

legal hazard

Back 23

a condition of the lega envirnment that increases severity/frequency

Front 24

property loss expsure

Back 24

damage to physical property

Front 25

tangible property

Back 25

property that can be physically touched

Front 26

real property

Back 26

tangible property consisting of land, sheds, ataced to land and plants

Front 27

persoanl property

Back 27

all tangible property that is not real propety

Front 28

intangible property

Back 28

property without physical form

Front 29

liability loss exposure

Back 29

pssibiliy of claim alleging lega responsibility

Front 30

business income exposure

Back 30

loss caused by person's deth, diability,

Front 31

personanel loss exposured

Back 31

loss caused by death, retirement, disability, ect.

Front 32

3 elements ooto describe loss exposure

Back 32

1. an asset exposed to loss

2. cause of loss

3. financial consequencces

Front 33

,4 classificcations of hazard

Back 33

1. moral (unhonest person - theif)

2. morale - care or awareness (not clearing isc)

3. physical - damage to property

4. legal - lawsuits

Front 34

3 factors that affect financial

Back 34

1. type of loss

2. cause of loss

3. loss fruency and severity

Front 35

cost used to compute overall financial consequences for a risk

Back 35

1. cost of the value lost bc of actual events

2. cost of resources

3. cost of residual uncertainty[

Front 36

pre loss goals

Back 36

goals to accomplish before a loss

Front 37

post loss goals

Back 37

risk management program goals in place in event of a loss

Front 38

4 pre loss operational goals

Back 38

1. economy of operation

2. tolarable uncetainty

3. legality

4. social responsibility

Front 39

6 post loss goals

Back 39

1. survival

2. continuity of operations

3. profitability

4. earnings of stability

5. social responsiblity

6. growth

Front 40

steps organization take to forstall intolerable shut down

Back 40

1. identify activities whose interuptions can't be tolerated

2. identify types of events that could interupt activities

3. determine standby resources that must be immediatly available

4. ensure availablity of standby resources

Front 41

6 steps in risk managment process

Back 41

1. identify loss exposure

2. analyze loss exposure

3. examine feasibility of risk management technique

4. select appropriate risk management technique

5. implement the selected techniquie

6. monitor results and revise

Front 42

4 diminsiouns for loss exposure

Back 42

1. loss frequency

2. loss severity

3. total dollar losses

4. timing

Front 43

forecast of organization1.

Back 43

1. forecast of diminsions of expected losses

2. forecast of each feasible combination of risk management

3. forecast of after tax cost

Front 44

4 steps to monitor reisk maangement program

Back 44

1. establish standards of acceptable results

2. compare actual results w the standards

3. correcting substandard performance

4. evaluating stands that have been exceeded