a) Define risk and list some of the ways in which risk creates a burden for society.
b) Differentiate between the following types of risks, giving an example in each case.
i) Pure versus Speculative risk.
ii) Static versus Dynamic risk
iii) Subjective versus Objective risk. (3marks)
c) Define risk management and briefly explain four steps in the risk management process. How does enterprise risk management differ form traditional risk management? (6marks)
d) Define the term insurance and distinguish insurance from risk transfer. (3marks)
Due to the introduction of new transport regulations, many investors have discovered that this sector is a viable investment opportunity in Kenya. Your friend has purchased a Nissan matatu operating on Nairobi – Thika route. He has now discovered that he faces the risk of losing his Nissan matatu through a road accident. Advise him on the various alternatives available for managing this risk.
a) Explain the concept of risk avoidance. When is it an appropriate risk management technique? (5marks)
b) Identify five important elements in risk evaluation. (5marks)
c) Briefly discuss the general categories of costs and benefits that firms might consider in analyzing potential investments in loss control. (5marks)
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