PGI Risk Management Principles 1

Question 1

What is the 'risk management process' and what are its key steps?

Accepted Answer

Risk identification, risk assessment, risk treatment, and monitoring and review — a continuous cycle

Answer

The risk management process is a continuous cycle: identify risks, assess their likelihood and impact, determine appropriate treatment (avoid, reduce, transfer, or accept), implement treatment, and monitor and review effectiveness on an ongoing basis.

Question 2

What are the four main risk treatment strategies?

Accepted Answer

Avoidance, reduction, transfer (including insurance), and retention (acceptance)

Answer

The four main risk treatment strategies are: Avoidance (eliminating the risk), Reduction/Mitigation (reducing likelihood or impact), Transfer (e.g., via insurance or contracts), and Retention/Acceptance (keeping the risk, often with a contingency fund).

Question 3

What is 'enterprise risk management' (ERM) and how does it differ from traditional risk management?

Accepted Answer

ERM takes a holistic, organization-wide view of all risk categories in an integrated framework, rather than managing risks in silos

Answer

ERM integrates all categories of risk across the entire organization into a single coherent framework, considering interdependencies between risks. Traditional risk management often addresses individual risk types in separate departments without considering the bigger picture.

Question 4

What is 'risk appetite' and how does it guide an organization's risk management?

Accepted Answer

The amount and type of risk an organization is willing to accept in pursuit of its strategic objectives

Answer

Risk appetite defines how much risk an organization is willing to take in pursuing its goals. It guides decision-making, resource allocation, and risk treatment choices — risks within appetite may be accepted; those outside it must be treated.

Question 5

What is the purpose of a 'risk register' in organizational risk management?

Accepted Answer

A documented record of identified risks, their assessment, ownership, and treatment plans, serving as the central tool for risk management

Answer

A risk register is a central document recording all identified risks, their likelihood and impact ratings, risk owners, current controls, and treatment plans. It provides visibility across the organization and enables monitoring of risk management activities.

PGI Insurance Practice Test

PGI Insurance Practice Test

PGI Risk Management Principles 1