1What is risk
A calculated possibility of a negative outcome
2Outcomes of pure risk
Loss, No loss
3Outcomes of speculative risk
Loss, No loss/No gain, gain
4Diversifiable risk
Affects individuals and small groups
Can be reduced through diversification
Risks are not correlated
5Nondiversifiable
Affects entire economy and large groups
Can't be reduced through diversification
Government assistance may be needed
Risks are correlated
6What are the different types of risk?
Pure, Speculative, diversifiable, Non-diversifiable, enterprise, and systemic
7What is enterprise risk
All major risks businesses face
8What are the main examples of enterprise risk
pure risk
speculative risk
strategic risk
operational risk
Finanacial risk
9What is systemic risk
It is the risk of collapse of the financial system because of a failure of individuals
10What are the different types of pure risk
Personal risk
Property risk
Legal liabiilty
Loss of business income
cyber security
11What is a personal risk
It directly affects an individual or family
12What is a property risk
The losses when someone destroys or steals property
13What is legal liability risk
Your financial consequences when you cause injury to someone else
14Direct loss
Cost to repair or replace property damaged by peril
15Indirect loss
Financial loss resulting from a consequence of direct loss
16What are the techniques to managing risks
Risk control
Risk financing
17Risk control
Techniques to reduce the frequency or severity of losses
18Risk financing
techniques for funding losses
19What are the types of risk control
Loss prevention
loss reduction
Duplication, separation, and diversification
Avoidance
20Loss prevention
Reduces frequency
21Loss reduction
reduces severity
22Avoidance
Techniques that: a certain loss is never acquired
An existing loss exposure is abandoned
23What are the types of risk financing
Retention
Noninsurance risk transfer
Insurance
24Retention
retaining part or all losses that can occur from a given risk
25How do you apply noninsurance risk trasnfer
Contractual agreement
Hedging
Incorporation
26What are two types of retention
Deliberately retaining risk
Unknowingly retaining risk
27Frequency
How often does the loss occur
28Severity
How much money does the loss cause
30Hazard
A condition that increases the frequency or severity of a loss
31What are the types of hazards
Physical
Attitudinal
Moral
Legal
32What is a physical hazard
A physical condition that increases the frequency/severity of a loss
33What is a moral hazard
dishonesty that causes an increase in the frequency/severity of a loss
34What is attitudinal hazard
Carelessness that causes an increase in frequency/severity of a loss
35What is a legal hazard
characteristics of a legal environment that causes an increase in frequency/severity of a loss
36What is a calculated probability
An outcome that is known or estimated
37What is the frequency equation?
Number of losses / Number of exposures
38What is the severity equation
Total losses in dollars / Number of losses