Dpba 014: Risk Management Question Paper
Dpba 014: Risk Management
Course:Risk Management
Institution: Kenya Methodist University question papers
Exam Year:2008
KENYA METHODIST UNIVERSITY
END OF FIRST TRIMESTER 2008 EXAMINATION
FACULTY : BUSINESS AND MANAGEMENT STUDIES
DEPARTMENT : BUSINESS ADMINISTRATION
COURSE CODE : DPBA 014
COURSE TITLE : RISK MANAGEMENT
TIME : 2 HOURS
INSTRUCTIONS
• Answer Question ONE and any other THREE Questions
Question 1
a) Define risk and list some of the ways in which risk creates a burden for society.
(3marks)
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)
Question 2
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.
(15marks)
Question 3
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)
Question 4
a) Define risk retention and explain why a large corporation may be able to use this technique more effectively than an individual or a small company. (5marks)
b) Giving examples in each case, differentiate between:
i) Planned and unplanned retention.
ii) Funded and unfunded retention
Are all these forms of retention appropriate risk management techniques?
(10marks)
Question 5
a) What are the roles of the transferor and transferee in risk transfer? (3marks)
b) Explain why a hold-harmless agreement may not be legally enforceable. Give an example of a situation in which the agreement likely would not be upheld by the courts. (7marks)
c) How is diversification a form of risk transfer? In what way does it result in risk reduction? (5marks)
Question 6
John your friend has attended an insurance awareness meeting in which one of the speakers has said that there are some specific doctrines that underlie the insurance contract which distinguish them from other contracts. Briefly, but clearly explain him.
(15marks)
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