Free AAP Risk Management Questions and Answers

Question 1

Risk management program goals are typically divided into two categories: pre-loss goals and post-loss goals. Which one of the following describes one of these categories of goals?
Choose one answer.

Accepted Answer

Post-loss goals broadly describe the degree of recovery that an organization will strive to reach following a loss.

Answer

Pre-loss goals are risk management goals that allow the organization to prepare for future losses.

Answer

Pre-loss goals include profitability, earnings stability, and loss prevention.

Answer

Post-loss goals include immediate restoration of operations, tolerable uncertainty, and loss mitigation.

Question 2

Risk is a term that is regularly used and that is generally understood in context. As used in this discussion, which one of the following is one of the two elements within the definition of risk?

Accepted Answer

Uncertainty of outcome

Answer

Likelihood of injury or damage to property

Answer

Probability of financial loss

Answer

Opportunity for profit

Question 3

The second step in the risk management process is analyzing loss exposures. Which one of the following is true regarding this step?
Choose one answer.

Accepted Answer

Loss exposures are analyzed based on loss frequency, loss severity, total dollar losses, and timing in this step.

Answer

Loss exposures that could interfere with the achievement of the organization's goals are identified in this step.

Answer

A weakness of loss exposure analysis is that it is useful only for those types of losses that an organization has suffered in the past.

Answer

A major strength of loss exposure analysis is that the process is generally inexpensive.

Question 4

After identifying and analyzing loss exposures and evaluating and selecting the appropriate risk management techniques, the next step in the risk management process is to
Choose one answer.

Accepted Answer

Implement the selected techniques.

Answer

Monitor the results.

Answer

Revise the risk management program.

Answer

Decide on risk financing techniques.

Question 5

Which one of the following risk control techniques will reduce loss severity and make losses more predictable, without increasing loss frequency?
Choose one answer.

Accepted Answer

Duplication

Answer

Diversification

Answer

Loss prevention

Answer

Separation