1. Key decision criteria related to risk management planning includes (a) Safety

Question

1. Key decision criteria related to risk management planning includes (a) Safety-first rule (b) Production risk (c) Attitude toward risk (d) Product diversification 2. A risk-loving manager would most likely choose the alternative with the following expected value (a) EV = . I 0( 10,000) + .90( 100)-$ 1,090 (b) EV = .80( 1,000) + .20(900)-$980 (c) EV = .60 (1,000) + .40(900)-$960 (d) None of the above 3. Risk management strategies can (a) Reduce risk within the operation (b) Transfer risk outside the operation (c) All of the above (d) None of the above

Explanation / Answer

1. The correct alternative is: (D)

Reason: one of the most important principle of risk management is product diversification.

2. The correct answer is: a)

Reason: A risk lover is ready to face higher risks provided the investment offers higher returns. Here, the option a) gives the highest return and has the highest risk. Thus, the risk lover will choose this option.

3. The correct answer is: (C)

Reason: because risk management strategies are concerned with dealing with any kind of risk that the firms faces, be it's internal or external.

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