Ic 86 Practice Test 4
Ic 86 Practice Test 4
EXAM
IC 86 – RISK MANAGEMENT
PRACTICE TEST . 4
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IC 86 – RISK MANAGEMENT
PRACTICE TEST . 4
PRACTICE TEST . 4
Question1 Risks results in injury or loss for number of reasons and often in combination of
________ .
Correct Answer To protect the organisation in the event where operations are rendered unusable
Answer The primary objective is to protect the organisation in the event that all or part of its
Explanation operations and / or services are rendered unusable.
IC 86 – RISK MANAGEMENT
PRACTICE TEST . 4
Question3 Which organisation introduced new regulations following a series of high profile
corporate frauds and accounting scandals?
(a) IRDA
(b) Bank of International Settlements
(c) Committee of Sponsoring Organisations
(d) London Stock Exchange
(e) Hampel Committee
Question4 Combination of values exposed to loss, perils causing loss and financial consequences
of loss lead to ______ .
Question5 When should a descriptive note on the item be made in the column provided at the end
of the checklist?
Question7 Kiran sold finished goods worth Rs. 10000 to Mohit at a selling price of Rs. 13000.
However, all the sold goods were destroyed by fire before their delivery to the
customer. Determine the amount of loss?
Question8 Proper identification and analysis of loss exposures will depend upon three important
factors. Which of the following is not one of these three factors?
Question9 ______ provides a qualitative approach to risk identification which can be employed at
the planning and design stage of a project.
Question11 Under which of the following risk attitude category is a person willing to take a chance
of gain against all odds posed by risks?
1. Risk Neutral 2. Risk Averter 3. Risk Preferer
(a) Only 1
(b) Only 2
(c) Only 3
(d) Both 1 and 3
(e) Both 2 and 3
Question12 Which of the following is the cost of replacing the existing property exactly at the
current price?
Question13 Which risk identification technique has the biggest advantage of having first-hand
information and avoiding reliance on reports from others?
Question14 What does the process of risk management generate for a particular organisation, for a
given community and for the entire economy?
1. Benefits 2. Costs 3. Inflation
(a) Only 1
(b) Only 2
(c) Only 3
(d) Both 1 and 2
(e) Both 2 and 3
Question15 Which risk can arise from ‘confiscation, expropriation, nationalization and deprivation’
of private property by governments?
Question16 The simplest definition of risk management can be the identification, evaluation,
control, prevention and _____ of risk.
(a) Retention
(b) Transfer
(c) Assessment
(d) Protection
(e) Expectation
Question17 _______ concepts are generally understood to be covers combining insurance risks with
financial market risks, such as currency, interest rate or equity market risks.
Question18 Determine the impact on the firm of imagined extreme adverse situations and impacts
include financial, reputational, regulatory, credit ratings etc. What is this process
known as?
Question19 Mega Industries manufactured goods which cost Rs. 50 lakhs and sold these goods to
Sunshine Industries for Rs. 55 lakhs. Unfortunately, all these goods were destroyed in a
fire before they could be delivered. What is the amount of loss for Mega Industries?
(a) No Loss
(b) Rs. 5 lakhs
(c) Rs. 50 lakhs
(d) Rs. 45 lakhs
(e) Rs. 55 lakhs
Question20 Probability of occurrence that an event may take place is measured either as decimal or
a fraction or as a percentage but always in a range. The impossible is assigned a value
of Zero & inevitable is assigned a value of _____ .
(a) Ten
(b) One Hundred
(c) One
(d) Fifty
(e) Zero point one
Question21
Which kind of risk is - 'Losses due to Hurricane' ?
Question22 In his book, "Risk, Uncertainty and Profit" , Prof. Frank Knight has mentioned that for
events where the possibility of occurrence can be calculated either on a rational basis
or on the basis of statistical analysis of a number of similar events that have occurred in
the past , are termed as ______ .
(a) Dangers
(b) Risks
(c) Exposures
(d) Uncertainties
(e) Holocaust
Question23 This risk management team of Morgan Ltd. wants to limit the effect of losses due to a
fire in their godown by recovering the maximum salvage value of its inventory. Which
phase of an event under a risk management programme is this?
Question24 A __________ person reacts to risk in line with its statistical probability i.e. with the
likelihood of its occurrence. He tries to neutralize or balance the chance of loss against
the chance of gain.
(a) Only 1
(b) Only 2
(c) Only 3
(d) Both 2 and 3
(e) Both 1 and 2
Question25 Below is a list of three major industrial disasters. Arrange them in a sequence starting
from the first –
1. Mina Mata Mercury Disaster (Japan)
2. Bhopal Gas Tradegy (India)
3. Triangle Factory Fire - New York (USA)
(a) 3, 1 and 2
(b) 2, 1 and 3
(c) 1, 3 and 2
(d) 3, 2 and 1
(e) 1, 2 and 3
1. Strategic high level goals: designed to support the entity’s mission or vision
2. Operations: Efficiency of operations, including achievement of performance goals
and safe guarding against loss
3. Reporting: reliable financial and operational data and reports
4. Compliance: with laws and regulation
Question28 Which of the following criteria should NOT be taken into consideration while selecting
the best technique for risk management?
(a) Feasibility
(b) Maximizing cash flows
(c) Cost effectiveness
(d) Getting highest profitability
(e) Effectiveness
Correct Answer
Risk financing and Financial market risks techniques
Answer
Integrated risk management concepts are generally understood to be covers combining
Explanation
risk financing and financial market risks techniques. They are the excellent example of
convergence of the insurance and the capital market.
Question30 In Mumbai, during monsoons, flooding can cause a loss. What type of risk is this?
(a) Only 1
(b) Only 2
(c) Only 3
(d) 1 and 2
(e) 1 and 3
Question31 Which of the following objectives are met by Integrated Risk Management ?
(a) Only 1
(b) Only 2
(c) Both 1 and 3
(d) Both 2 and 3
(e) All 1,2 and 3
It’s a risk management approach which is trying to optimize the coverage of risks on the
asset as well as on the liability side of the balance sheet.
Question32 What measures the likely probability of a risk actually occurring and its likely quantum
of loss if the risk were to actually occur.
Question33 As per Enterprise Risk Management (ERM), which of these is a strategy to respond to
risks?
1. Acceptance of risks 2. Avoidance of risks 3. Taking alternative actions
(a) Only 1
(b) Only 2
(c) Only 3
(d) Only 2 and 3
(e) All 1, 2 and 3
Question35 Which of these are considered as Associated Risks for a business organisation?
1. Business interruption
2. Political violence
3. Currency in-convertibility or Non Transfer
(a) Only 2
(b) Both 1 and 2
(c) Both 2 and 3
(d) Both 1 and 3
(e) All 1,2 and 3
(a) Only 1
(b) Only 2
(c) Only 3
(d) Both 2 and 3
(e) All 1,2 and 3
Question37 What is the reason behind the difficulty in comparing the risk management costs with
costs in similar organisation?
1. Because some companies may consider such costs as overhead expenses, whereas
some others may allocate them to different profit centers
2. Because of different system of cost allocation followed by different companies
3. Because some companies spend more on risk management and other companies
spend less
(a) Only 1
(b) Only 2
(c) Only 3
(d) Only 1 and 2
(e) All 1,2 and 3
Some companies may consider such costs as overhead expenses, whereas some others
may allocate them to different profit centers.
Question39 The measures to limit the extent of any loss and to maximize the recovery from loss
is/are - 1. Active 2. Passive 3. Proactive
(a) Only 1
(b) Only 2
(c)
Only 3
(d)
Only 1 and 2
(e)
Only 2 and 3
Correct Answer
Only 2 and 3
Answer There are two basic types to limit the extent of any loss & to maximize the recovery
Explanation from the loss i.e. Passive & Proactive.
Proactive measures to limit the extent of any loss and to maximize the recovery from
loss include burglar alarms and sprinklers installation.
Under passive type, the nature of the measure itself limits the loss without any change
in state i.e. walls, automatic fire doors etc.
Question40 The concept and process of Risk Management does NOT include ______ .
Question41 CAT bonds, Credit securitization, Weather derivatives and Finite risk products - these
are examples of ______ .
1. Risk Retention Groups
2. Alternatives to insurance products
3. Insurance products
(a) Only 1
(b) Only 2
(c) Only 3
(d) Both 1 and 3
(e) All 1,2 and 3
Question42 Mr. Sinha is a very safe driver. he would mostly choose a auto insurance with a ______ .
Question43
________ is not an example of Funded traditional contingent capital tool.
(a)
Captives
(b) Banking products
(c) Income/Asset Swaps
(d) Securitisation
(e) Contingent Debt
Question44 A business faces the possibility that it will be held legally liable for property damage or
personal injuries suffered by others. This is known as ________ .
Question45 Future Engineers Ltd. bought an insurance for its machinery with a 10% deductible.
Which type of two risk management techniques did the management of Future
Engineers Ltd. use?
Question46 _______ is associated with changes in human wants and improvements in machinery or
technological innovations.
Question48 Alternative risk transfer and financing techniques, as we see them today, basically fall
into which of the following categories?
1. Finite Risk Reinsurance
2. Insurance securitisation and insurance derivatives
3. Weighted risk management and insuratisation
(a) 1 and 2
(b) 2 and 3
(c) 1 and 3
(d) All 1,2 and 3
(e) Only 2
Answer Cooperatives, Self-insurance and Reserves, Pools and Risk Retention Groups are
Explanation example of Self-insurance method of mitigating/financing risk. Spread loss treaties are
the examples of Alternate risk financing.
INSURANCE EXAMS
IC 01 – Principles of Insurance
IC 02 – Practice of Life Insurance
IC 11 – Practice of General Insurance
IC 14 – Regulation of Insurance Business
IC 26 – Life Insurance Finance
IC 27 – Health Insurance
IC38 – Insurance Exams
IC 45 – General Insurance Underwriting
IC 46 – General Insurance Accounts
IC 72 – Motor Insurance
NISM EXAMS
NCFM