Risk Management Chapter 1 (Exam 1)

any situation or circumstance in which a loss is possible, regardless of whether a loss occurs

the relative variation of actual loss from expected loss

uncertainty concerning the occurence of a loss

as the number of exposure units increases, the more closely the actual loss experience will approach the expected loss experience

uncertainty based on a person's mental condition or state of mind

the probability that an event will occur

the long-run relative frequency of an event based on the assumptions of an infinite of observations of an infinite number of observations and of no change in the underlying conditions

the individual's personal estimate of the chance of loss

the cause of loss

a condition that creates or increases the frequency or severity of loss

a physical condition that increases the frequency or severity of loss

dishonesty or character defects in an individual that increase the frequency or severity of loss

carelessness or indifference to a loss, which increases the frequency or severity of a loss

characteristics of the legal system or regulatory environment that increase the frequency or severity of losses

a situation in which there are only the possibilities of loss or no loss

a situation in which either profit or loss is possible

a risk that affects only individuals or small groups and not the entire economy

a risk that affects the entire economy or large numbers of persons or groups within the economy

a term that encompasses all major risks faced by a business firm

the uncertainty of loss because of adverse changes in commodity prices, interest rates, foreign exchange rates, and the value of money

combines into a single unified treatment program all major risk faced by the firm

risks that directly affect an individual

defined as the death of a family head with unfulfilled financial obligations

the risk of having property damaged or lost from numerous causes

a financial loss that results from the physical damage, destructive, or theft of the property

a financial loss that results indirectly from the occurence of a direct physical damage or theft loss

another important type of pure risk that most persons face

one technique for managing risk. For example, you can avoid the risk of being mugged in a high-crime rate area by staying out of the area; you can avoid the risk of divorce by not marrying

another technique for managing risk. Certain activities that reduce the frequency or severity of losses

a technique for transferring the risk of unfavorable price fluctuations to a speculator by purchasing and selling future contracts on an organized exchange, such as the Chicago Board of Trade or New York Stock Exchange

a risk that can be transferred