Risk Identification & Evaluation Flashcards
7 cards from real RIMS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Risk Identification & Evaluation flashcards as text
Which risk evaluation concept measures the maximum loss an organization could sustain while still remaining solvent?
Answer: Probable maximum loss (PML)
Probable maximum loss (PML) estimates the largest loss likely to occur under realistic worst-case conditions, stopping short of the absolute maximum.
The PESTLE framework is used in risk identification to analyze risks arising from:
Answer: Political, Economic, Social, Technological, Legal, and Environmental factors
PESTLE is a strategic scanning tool that identifies external macro-environmental risks across six dimensions: Political, Economic, Social, Technological, Legal, and Environmental.
A risk manager applies Value at Risk (VaR) at the 95% confidence level and calculates $2M. This means:
Answer: There is a 5% chance that losses will exceed $2M in the specified period
A 95% VaR of $2M means that in 5% of scenarios (the worst 5%), losses are expected to exceed $2M over the given time horizon.
Emerging risks differ from known risks primarily because they:
Answer: Are still developing and lack sufficient historical data for quantification
Emerging risks are novel or evolving threats with limited historical data, making them difficult to quantify using traditional actuarial methods.
Which of the following is a leading indicator used in risk evaluation?
Answer: Near-miss incident rate
Near-miss rates are leading indicators because they signal potential future losses before an actual loss event occurs.
In scenario analysis, a 'stress test' is designed to:
Answer: Evaluate organizational resilience under extreme but plausible adverse conditions
Stress tests assess how an organization would perform under severe but credible scenarios, revealing vulnerabilities that normal conditions would not expose.
When evaluating risks, the concept of 'risk correlation' is significant because:
Answer: Multiple correlated risks may materialize simultaneously, amplifying aggregate losses
Highly correlated risks tend to occur together, meaning that diversification provides less protection and aggregate losses can be much larger than individual risk estimates suggest.