RIMS Risk Control & Mitigation Strategies 2 — Questions and Answers
Question 1: Which risk control technique involves restructuring operations so that a single event cannot cause a total loss?
- Risk avoidance
- Separation of exposures (Correct answer)
- Risk transfer
- Loss prevention
Correct answer: Separation of exposures
Separation of exposures spreads assets or operations across locations so no single event destroys the entire value.
Question 2: A company installs automatic sprinkler systems in its warehouses. This is an example of:
- Risk avoidance
- Loss prevention
- Loss reduction (Correct answer)
- Risk transfer
Correct answer: Loss reduction
Loss reduction measures reduce the severity of a loss after it begins; sprinklers limit fire damage once ignition occurs.
Question 3: Which of the following best describes a 'pre-loss' risk control objective?
- Restoring operations to normal after a loss
- Minimizing the financial impact of losses that occur
- Preventing losses before they happen (Correct answer)
- Transferring residual risk to insurers
Correct answer: Preventing losses before they happen
Pre-loss objectives focus on preventing losses from occurring in the first place, not responding after the fact.
Question 4: A pharmaceutical company decides to outsource its hazardous chemical storage to a licensed third party. Which risk control strategy does this represent?
- Loss prevention
- Risk avoidance
- Contractual risk transfer (non-insurance) (Correct answer)
- Separation
Correct answer: Contractual risk transfer (non-insurance)
Outsourcing hazardous activities to a third party via contract shifts the liability exposure without using an insurance policy.
Question 5: The 'domino theory' of accident causation, developed by H.W. Heinrich, suggests that most accidents result from:
- Random uncontrollable events
- A sequence of factors starting with social environment and ending in injury (Correct answer)
- Inadequate insurance coverage
- Management's failure to purchase safety equipment
Correct answer: A sequence of factors starting with social environment and ending in injury
Heinrich's domino theory proposes a five-factor chain—social environment, fault of person, unsafe act/condition, accident, injury—where removing any domino prevents the injury.
Question 6: Which loss control strategy is most appropriate when the frequency of losses is high but severity is low?
- Risk avoidance
- Loss prevention (Correct answer)
- Risk retention with no controls
- Catastrophe modeling
Correct answer: Loss prevention
Loss prevention is most cost-effective for high-frequency, low-severity losses because reducing occurrence frequency directly lowers total loss costs.
Question 7: A business continuity plan (BCP) primarily addresses which post-loss objective?
- Reducing the probability of a loss
- Ensuring survival of the organization after a loss (Correct answer)
- Transferring catastrophic risk to reinsurers
- Eliminating all identified hazards
Correct answer: Ensuring survival of the organization after a loss
A BCP is a post-loss tool designed to maintain critical functions and ensure organizational survival following a disruptive event.
RIMS Risk Control & Mitigation Strategies 2
Which risk control technique involves restructuring operations so that a single event cannot cause a total loss?