Risk Identification and Analysis Flashcards

A risk manager asks 'why' repeatedly after a warehouse fire until reaching the underlying management system failure. This is an example of:

Answer: Root cause analysis

Root cause analysis seeks the fundamental cause of an event so corrective action prevents recurrence.

Which of the following is an example of a net income loss exposure?

Answer: Lost revenue during a shutdown after a fire

Net income loss exposures involve reduced revenues or increased expenses following an event, such as business interruption.

An organization faces the possibility that a supplier's plant fire will stop deliveries. This is BEST classified as:

Answer: A contingent business income exposure

Loss of income caused by damage at a supplier's or customer's premises is a contingent (dependent property) business income exposure.

Which type of risk offers ONLY the possibility of loss or no loss?

Answer: Pure risk

Pure risks have no possibility of gain, which makes them generally insurable.

When two or more loss exposures are likely to be affected by the same event, they are said to be:

Answer: Correlated

Correlated exposures tend to move together, increasing the potential for a single event to cause aggregated losses.

Which risk identification method uses specialists such as engineers or attorneys to evaluate specific exposures?

Answer: Expert opinion

Consulting experts provides specialized insight into technical, legal, or regulatory exposures that general methods may miss.

Why is a range of possible outcomes often more useful than a single expected loss figure when analyzing risk?

Answer: It shows the variability and potential for severe outcomes

A distribution or range shows how far actual results may deviate from the average, informing retention and transfer decisions.