True or False 1)Lawsuit risk is one of the three major risks attitudes that prev

Question

True or False

1)Lawsuit risk is one of the three major risks attitudes that prevail in our lives

2.During the financial crisis (or great recession) of 2007/2008, many mortgages, including    subprime mortgages, were bundled into new instruments called mortgage-backed securities, which were guaranteed by U.S. government agencies such as Fannie Mae and Freddie Mac  

3.We can attribute the 2007/2008 great recession to global warming and the market collapse in Greece and the collapse to financially risky behavior of a magnitude never before experienced

4) Risk management provides a framework for assessing opportunities for profit, as well as for gauging threats of loss  

5) A “metric” is a system of related measures that helps us quantify characteristics or qualities

Explanation / Answer

1- True- The legal system is designed to mitigate risks and is not intended to create new risks. Under most legal systems, a party can be held responsible for the financial consequences of causing damage to others. One is exposed to the possibility of liability loss by having to defend against a lawsuit when he or she has in some way hurt other people. The responsible party may become legally obligated to pay for injury to persons or damage to property. Product liability is an illustrative example- A firm is responsible for compensating persons injured by supplying a defective product, which causes damage to an individual or another firm.

2- During the financial crises the number of financial agreements called mortgage backed securities (MBS) and debt obligation (DO), which derived their value from mortgage payments and housing prices, greatly increased and contributed to financial crises. Such financial institutions enabled institutions and investors around the world to invest in the U.S. housing market. As housing prices declined, major global financial institutions that had borrowed and invested heavily in subprime MBS reported significant losses.

3- Yes, We can attribute the 2007/2008 great recession to global warming and the market collapse in Greece and the collapse to financially risky behavior of a magnitude never before experienced.

4- True-  Risk management is identification assessment and priortization of risks and provides a framework for assessing opportunities for profit, as well as for gauging threats of loss.Without measuring risk, we cannot ascertain what action of the available alternatives the enterprise should take to optimize the risk-reward tradeoff. The risk-reward tradeoff is essentially a cost-benefit analysis taking uncertainty into account.

5- True- Without risk metrics, enterprises cannot tell whether or not they have reached risk management objectives. Enterprises including businesses hold risk management to be as important as any other objective, including profitability. Without risk metrics to measure success, failure, or incremental improvement, we cannot judge progress in the control of risk.

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