POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

College of Accountancy and Finance Student Council

CAF Review
FIMA 40053: Risk Management (Midterm Examination)

I. TRUE OR FALSE

1. The determination of how an organization will pay for loss events in the most effective and
least costly way possible.
2. For some risks, the best response may be is to transfer them.
3. If the frequency is high and the consequence is low, to tolerate is the proper hazard
response.
4. Once the risk assessment has been completed, rank the potential risks from least severe to
most.
5. Areas with the highest level of acceptable risk should be the priority.
6. We should always avoid risk.
7. The main principle of risk management is that it delivers value to the organization.
8. The last stage of risk management is reporting and mitigating of risk performance, actions
and events.
9. Business risk is a term that encompasses all risks faced by a business firm.
10. Taking a risk can also result in a positive outcome.
11. All risks can be transferred to a third party like an insurance company.
12. Techniques for managing risk can be classified broadly as either risk control or risk
financing.
13. The purpose of treatment is that, whilst continuing within the organization with the activity
giving rise to the risk, action (control) is taken to constrain the risk to an acceptable level.
14. The risk manager does not work alone.
15. Some risks are taken deliberately by organizations in order to achieve their mission.
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40053: Risk Management (Midterm Examination)

II. MULTIPLE CHOICE

1. The type of risk with potential to enhance the achievement of the mission of the
organization.
A. Opportunity risk
B. Hazard risk
C. Enterprise risk
D. Liability risk

2. Refers to the process that identifies loss exposures faced by an organization and selects the
most appropriate techniques for treating such exposures.
A. Risk monitoring
B. Risk management
C. Risk financing
D. Risk mitigation

3. A situation in which there are only the possibilities of loss or no loss.

A. Speculative risk
B. Enterprise risk
C. Pure risk
D. Strategic risk

4. Which among these are included in the 4Ts of hazard response?

A. Tolerate, Transfer, Think, Try
B. Treat, Terminate, Tolerate, Transfer
C. Transfer, Try, Tell, Tolerate
D. Terminate, Think, Try, Treat
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40053: Risk Management (Midterm Examination)

5. A risk that affects only individuals or small groups and not the entire economy.
A. Diversifiable risk
B. Operational risk
C. Financial risk
D. Non-diversifiable risk

6. Which of the following are included in establishing internal context?

I. The organization itself
II. Business sector
III. Opportunities and threats
IV. Strengths and weaknesses
A. I, II, III
B. IV only
C. I only
D. I and IV

7. A strategy to prepare for and lessen the effects of threats faced by a business.
A. Risk control
B. Risk mitigation
C. Risk management
D. Risk monitoring

8. Aims to eliminate the source of the risk altogether.

A. Risk control
B. Loss prevention
C. Loss reduction
D. Avoidance
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40053: Risk Management (Midterm Examination)

9. To reduce the severity of a loss after it occurs – knowing that a loss is inevitable.
A. Risk control
B. Loss prevention
C. Loss reduction
D. Avoidance

10. The techniques that reduce the frequency or severity of losses.

A. Risk control
B. Loss prevention
C. Loss reduction
D. Risk financing

11. The techniques that provide for the payment of losses after they occur.
A. Risk control
B. Risk mitigation
C. Risk financing
D. Risk monitoring

12. STATEMENT 1: The exposure may be tolerable without any further action being taken.
STATEMENT 2: Some risks will only be treatable, or containable to acceptable levels.
A. Both statements are true.
B. Both statements are false.
C. Only statement 1 is true.
D. Only statement 2 is true.
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40053: Risk Management (Midterm Examination)

13. The act of watching projects and the associated risks for changes in the impact of the
associated risks.
A. Risk control
B. Risk financing
C. Risk mitigation
D. Risk monitoring

14. STATEMENT 1: Identify potential events and event sequences where risk is presented.
STATEMENT 2: Risks can be in the form of existing vulnerabilities in the organization
or known threats.
A. Both statements are true.
B. Both statements are false.
C. Only statement 1 is true.
D. Only statement 2 is true.

15. Which of the following is/are incorporated with property loss exposures?
I. Building, plants, and other structures
II. Company vehicles, planes, boats, and mobile equipment
III. Defective products
IV. Liability suits
A. I only
B. I and II
C. I, II, III, IV
D. I and III
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40053: Risk Management (Midterm Examination)

16. Involves the recognition of risks and the rating of them to determine the significant risks
facing the organization, project or strategy.
A. Risk assessment
B. Risk control
C. Risk identification
D. Risk mitigation

17. Which component of internal context does the following issues included?
I. Availability of adequate funds to fulfill strategic plans
II. Correct allocation of funds for investment
III. Internal financial control environment
A. Infrastructure component
B. Reputational component
C. Marketplace component
D. Financial component

18. A situation in which either profit or loss is possible.

A. Pure risk
B. Speculative risk
C. Diversifiable risk
D. Non-diversifiable risk

19. Affects the entire economy or large numbers or persons or groups within the economy.
A. Pure risk
B. Speculative risk
C. Diversifiable risk
D. Non-diversifiable risk
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40053: Risk Management (Midterm Examination)

20. Uncertainty of loss because of adverse changes in commodity prices, interest rates, foreign,
exchange rates, and the value of money.
A. Strategic risk
B. Enterprise risk
C. Financial risk
D. Operational risk

21. Which among the following is/are the cause of unemployment?

A. Business cycle downswings
B. Technological and structural changes in the economy
C. Imperfections in the labor market
D. All of the above

22. A risk wherein you held liable if you do something that results in bodily injury or property
damage to someone else.
A. Property risk
B. Liability risk
C. Personal risk
D. Operational risk

23. STATEMENT 1: Risk may have positive or negative outcomes or may result in
uncertainty.
STATEMENT 2: Risk may be considered to be related to an opportunity or a loss or the
presence or uncertainty for an organization.
A. Both statements are true
B. Both statements are false
C. Only statement 1 is true
D. Only statement 2 is true
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40053: Risk Management (Midterm Examination)

24. Physical damage risk to property (at the enterprise level) such as caused by fire, flood,
weather damage are example of what kind of risk?
A. Pure risk
B. Speculative risk
C. Diversifiable risk
D. Non-diversifiable risk

25. Which of the following is not an example of physical hazard?

A. Slippery roads
B. Poorly lit stairwells
C. Old wiring
D. Leaving a door unlocked

26. An arson case from an insured business that is losing money is an example of what hazard?
A. Physical hazard
B. Moral hazard
C. Morale hazard
D. Legal hazard

27. Refers to the exposures that result from environmental conditions that the firm commonly
cannot influence, such as the regulatory environment and market conditions.
A. Internal risks
B. External risks
C. Opportunity risks
D. Pure risk
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40053: Risk Management (Midterm Examination)

28. STATEMENT 1: Hazard is the cause of loss.

STATEMENT 2: Peril is the condition that creates or increases the frequency or severity
of loss.
A. Both statements are true.
B. Both statements are false.
C. Only statement 1 is true.
D. Only statement 2 is true.

29. Statutes that require insurers to include coverage for certain benefits in health insurance
plans such as coverage for alcoholism, is an example of?
A. Legal Hazard
B. Physical hazard
C. Moral Hazard
D. Attitudinal Hazard

30. Means that an individual or a business firm retains part or all of the losses that can result
from a given risk.
A. Risk control
B. Risk mitigation
C. Risk retention
D. Risk financing

31. Practice in which no funds are set aside on a mathematical basis to pay for expected losses.
A. Passive retention
B. Active retention
C. Non-insurance transfers
D. Insurance
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40053: Risk Management (Midterm Examination)

32. Which of the following is/are the values that the organization is willing to put at risk?
A. Hazard tolerance
B. Control acceptance
C. Opportunity investment
D. All of the above

33. Aims at reducing the probability of loss so that the frequency of losses is reduced.
A. Avoidance
B. Loss prevention
C. Loss reduction
D. None of the above

34. This is the act of protecting one’s self against a particular loss by setting aside specific
funds to pay for it in the event that it should occur.
A. Passive retention
B. Non-insurance transfers
C. Insurance
D. Active retention

35. Which among these shows the proper risk management cycle?
A. Identify the risk – Assess the risk – Mitigate the risk – Monitoring and Review
B. Assess the risk – Mitigate the risk – Monitoring and Review
C. Identify the risk – Assess the risk – Monitoring and Review – Mitigate the risk
D. Identify the risk – Mitigate the risk – Assess the risk – Monitoring and Review

36. Which of the following is/are an example of business income loss exposure?
A. Extra expenses
B. Continuing expenses after a loss
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40053: Risk Management (Midterm Examination)

C. Both A and B
D. Neither A nor B

37. Which of these is not included in the stages of risk management?

A. Recognition
B. Ranking
C. Reaction
D. Reassuring

38. The prospect of loss resulting from inadequate or failed procedures, systems, or policies.
A. Pure risk
B. Strategic risk
C. Operational risk
D. Financial risk

39. Which of the following is/are example(s) of non-diversifiable risk?

I. Rapid Inflation
II. War
III. Hurricane
IV. Car theft
A. I only
B. II and III
C. I, II, III
D. I, II, III, IV

40. STATEMENT 1: Premature death refers to the death of a family head with unfulfilled
financial obligations.
STATEMENT 2: A death of a kindergarten boy is an example of a premature death.
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40053: Risk Management (Midterm Examination)

A. Both statements are true.

B. Both statements are false.
C. Only statement 1 is true.
D. Only statement 2 is true.

41. Business firms own valuable business property that can be damaged or destroyed by
numerous perils.
A. Property risk
B. Liability risk
C. Enterprise risk
D. Operational risk

42. Is the combination of the probability of an event and its consequence.

A. Hazard
B. Peril
C. Risk
D. Loss

43. The probability that an event will occur.

A. Peril
B. Loss
C. Risk
D. Hazard

44. Which of the following is/are an example(s) of objective probability?

A. Tossing a coin
B. Winning a lotto since its your birthday
C. Both A and B
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40053: Risk Management (Midterm Examination)

D. Neither A nor B

45. Faking an accident to collect from an insurer, is an example of what type of hazard?
A. Physical hazard
B. Moral hazard
C. Morale hazard
D. Legal hazard

46. Which of the following is/are importance of risk management?

I. Reputation becomes more and more important
II. High-profile losses and failures ruin reputations
III. Reputational damage - especially to worldwide brands
IV. Regulatory pressures continue to increase
A. I only
B. II only
C. I, II, III
D. I, II, III, IV

47. What does the acronym PACED in principles of risk management stands for?
A. Proportionate, Aligned, Comprehensive, Embedded, Dynamic
B. Proportionate, Assurance, Comprehensive, Effective, Decision Making
C. Proportionate, Achieve, Control, Enhanced, Dynamic
D. Proportionate, Aligned, Control, Embedded, Dynamic

48. Uncertainty regarding the firm’s financial goals and objectives.

A. Enterprise risk
B. Operational risk
C. Strategic risk
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40053: Risk Management (Midterm Examination)

D. Financial risk

49. Which of the following is/are included in the reputational component of external context?
A. Public perception
B. Competitors
C. Both A and B
D. Neither A nor B

50. A death or disability of key employees, is an example of?

A. Crime loss exposure
B. Liability loss exposure
C. Human resources loss exposure
D. Property loss exposure

51. Are methods other than insurance by which a pure risk and its potential financial
consequences are transferred to another party.
A. Non-insurance transfers
B. Insurance
C. Risk retention
D. Risk financing

52. The most practical method for handling major risks.

A. Non-insurance transfers
B. Insurance
C. Risk retention
D. Risk financing
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40053: Risk Management (Midterm Examination)

53. STATEMENT 1: If the frequency is low and the consequence is also low, you need to
treat the risk.
STATEMENT 2: If the frequency is low and the consequence is high, you need to tolerate
the risk.
A. Both statements are true.
B. Both statements are false.
C. Only statement 1 is true.
D. Only statement 2 is true.

54. Which among these is/are the barriers of implementation?

I. Lack of understanding of risk management and belief that it will
suppress entrepreneurship.
II. Establish a shared understanding, common expectations, and a
consistent, language of risk in the organization.
III. Identify a sponsor on the main board of the organization and confirm
shared and common priorities.
IV. Agree a strategy that sets out the anticipated outcomes and confirms
the benchmarks for anticipated benefits.
A. I and II
B. I only
C. II only
D. I, II, III, IV

55. The individual’s personal estimate of the chance of loss.

A. Objective probability
B. Attitudinal hazard
C. Subjective probability
D. Moral hazard
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40053: Risk Management (Midterm Examination)

56. STATEMENT 1: The organization is required to identify each specific external, internal
and risk management context issue that could impact the organization.
STATEMENT 2: The context factors present and take appropriate actions to mitigate the
risk and embrace the opportunities.
A. Both statements are true.
B. Both statements are false.
C. Only statement 1 is true.
D. Only statement 2 is true.

57. Which of the following is/are example(s) of crime loss exposures?

A. Murder
B. Fraud
C. Both A and B
D. Neither A nor B

58. Damage to the company’s public image is an example of?

A. Employee benefit loss exposure
B. Intangible property loss exposure
C. Foreign loss exposure
D. Business income loss exposure

59. What does the acronym MADE2 in the benefits of risk management stands for?
A. Management, Aligned, Dynamic, Effective and Efficient
B. Mandatory, Assurance, Description, Embedded and Effective
C. Mandatory, Assurance, Decision making, Effective and Efficient
D. Management, Assurance, Decision making, Ensure and Efficient
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40053: Risk Management (Midterm Examination)

60. A house burns because of fire. The peril in that situation is the _____.
A. Owner of the house
B. House
C. The firemen
D. None of the above
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40053: Risk Management (Midterm Examination)

III. Key to Corrections

True or False

1. True 6. False 11. False

2. True 7. True 12. True
3. False 8. False 13. True
4. False 9. False 14. True
5. False 10. True 15. True

Multiple Choice

1. A 21. D 41. A
2. B 22. B 42. C
3. C 23. A 43. B
4. B 24. A 44. A
5. A 25. D 45. B
6. D 26. B 46. D
7. B 27. B 47. A
8. D 28. B 48. C
9. C 29. A 49. A
10. A 30. C 50. C
11. C 31. A 51. A
12. A 32. D 52. B
13. D 33. B 53. B
14. A 34. D 54. B
15. B 35. A 55. C
16. A 36. C 56. A
17. D 37. D 57. B
18. B 38. C 58. B
19. D 39. C 59. C
20. C 40. C 60. D