
Understanding Business
12th Edition
ISBN: 9781259929434
Author: William Nickels
Publisher: McGraw-Hill Education
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According to the Institute of Internal Auditors, risk is a combination of the probability of an event and its consequence and that consequences can range from positive to negative
True or False?
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- Consider two equity market investors. The first investor is a hedge fund manager that relies on very active trading, and borrows from investment banks in order to leverage their investment. Their remuneration depends on total base fee earned by their fund as a percentage of net assets under management, plus a yearly bonus based on returns generated above a hurdle rate. The second investor is a high net-worth individual who is investing for their own retirement, which they anticipate to occur in 10 years or more. Identify three dimensions of risk that are likely to have significantly different impact on thesetwo investors. Explain the nature of the difference. Suggest aspects that each investor might monitor in order to control the risks most relevant to them.arrow_forwardWhich of these types of risks increases in strong correlation with a rise in interest rates? Credit Risk Operational Risk Off-Balance Sheet Riskarrow_forwardYou own an online shop on a website like Etsy, where you sell laptop stickers you have designed. You have identified five risks you would like to address. When you perform a risk prioritization, you find that all five risks have similar risk scores. You meet your best friend at a local coffee shop to brainstorm about your risks and get your friend's input. While there, you write your reasoning for each risk on a separate note card-one for each risk-and place the cards in order of the priority that you and your friend have agreed on. On the walk back to your apartment, you drop the note cards, and they are now out of order. You need to re-create your prioritization from the coffee shop. Your note card choices are as follows. Notecard Letter A Risk B C D E Reasoning for priority This store is a source of income for you. You need to protect yourself by making sure you do not send merchandise to a customer until the customer's credit card clears the system and the payment is in your…arrow_forward
- All of the following are considerations in risk assessment for framing health policies, except a. Does the outcome vary with degree of exposure, such as higher levels of exposure being more strongly associated with the outcome? b. Which groups are the most exposed to the factor(s) under consideration, and in what maginitude and frequency? c. Will an industry incur loss or see a narrowing of their profit margins if regulations to mitigate adverse health impacts of an associated product are implemented? d. What is the quality of evidence regarding strength of association between a potentially harmful exposure and an outcome?arrow_forwardSince a risk is something that has yet to happen--and may never happen--how much time and effort should be spent planning and preparing for it?arrow_forwardWhich types of events are considered part of a comprehensive risk management plan? Select all that apply, then click Submit below Marriage Illness Liability Disability Death Deductible Property lossarrow_forward
- Please original work What is a real-life examples of mitigating a risk, avoiding a risk, transferring a risk and retaining a risk with which you have personally been involved. For each, talk about the process you undertook to determine the risk and how you went about addressing the risk. Please cite a reference.arrow_forwardMr. and Mrs. Trump have applied to the Trustworthy Insurance Co. for insurance on Mrs. Trump's diamond tiara. The tiara is valued at $97,000. Trustworthy estimates that the jewelry has a 2.8% chance of being stolen in any one year. Use expected values to determine the annual insurance premium p. (Round your answer to two decimal places.) p ≥ $arrow_forwardA category of economic risk is: Liability risk Personal risk Property Risk All of the answers are correct None of the answers are correctarrow_forward
- Effective risk management would attempt to maximize the expected return for a given level of risk. Select one: True Falsearrow_forwardThe at risk rules do not apply to activities carried on for the production of income. True or false.arrow_forwardPlan for the worst-case scenario. Depending on the nature of the issue, a thorough plan for limiting the effect of the risk might take numerous forms?arrow_forward
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