g the probability that a certain event will occur can be an important part of an
ID: 378194 • Letter: G
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g the probability that a certain event will occur can be an important part of analysis in the risk management process. Which one of the following is the term exposure used for probability that is developed based on actual experience? a. Bona fide probability b. Material probability cTheoretical probability d. Empirical probability 15. Which one of the following steps in the enterprise-wide risk management process includes an evaluation of how each of the organization's risk management processes align with its overall objectives? a. Scan the environment b. Monitor and assure c. Identify risks d. Analyze risks 16. There are several factors, both internal and external, that may influence data credibility for an organization. Which one of the following factors is an internal factor? a. Organizational operations b. Natural catastrophes c. Large liability awards d. Terrorists attacks 17. One enterprise risk management (ERM) approach to categorizing risks involves dividing risks into four risk quadrants. The risks categorized as hazard risks are a. Traditionally managed by risk management professionals b. Speculative risks that fall outside the operational risk category c. Traditionally handled by the treasury function d. Fundamental to an organization's existence and business plansExplanation / Answer
14. Bona fide and material probabilities are those which are determined with the help of a probability distribution curve.To calculate their values, an assumption based approach is followed so they aren't calclated on the basis of experience. Similarly, theoritical probability, as the name suggests, is calculated based on the probabilities of similar events, so it is also not experience based. However, Emperical probability is calculated as the ratio of number of favorable events to toal number of events. This is based on the experience with the event for which the probability is being calculated, so Emperical probability is the answer.
15. The steps 'Scan the environment', 'Identify risks' and 'Analyze risks' are more to do with evaluating the risks in the company. With the help of these steps, an effective risk management strategy is formulated. Whereas the step 'Monitor and assure' is a post-strategy formuation step which checks for the performance of the implemented risk management process. So 'Monitor and assure' is the right answer.
16. External factors are those which are not in the organizations control. In the options, Natural catastrophes, Large liability awards and terrorist attacks are the actions which can't be controlled by the company as they are being done by someone outside the organization. But 'organizational operations' can be controlled so it is an internal factor, making it the required answer.
17. Hazard risks are the risks associated with property, liability pr personal loss exposures. Option a, b and c are more of financial risks. As per the definition, option d in the best suited answer
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