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Dms 200 Insurance And Risk Management Question Paper
Dms 200 Insurance And Risk Management
Course:Diploma In Business Management
Institution: Kca University question papers
Exam Year:2014
UNIVERSITY EXAMINATIONS: 2013/2014
STAGE V ORDINARY EXAMINATION FOR THE DIPLOMA IN
BUSINESS MANAGEMENT
DMS 200 INSURANCE AND RISK MANAGEMENT
DATE: APRIL 2014
TIME: 1 1/2 Hours
INSTRUCTION: Answer any THREE questions
QUESTION ONE: (20 MARKS)
a) Define the following terms:
i. Risk
ii. Liability Insurance
iii. Risk Management
(3 Marks)
b) Identify three financial products a firm can use to reduce or eliminate exposure to
specific risk
(3 Marks)
c) Discuss the principles of insurable interest and its application in the insurance business
operations.
(2 Marks)
d) Differentiate between
i.
A Peril and a hazard.
ii. Frequency and Severity of Risk.
iii. Pensions and annuities.
(6 Marks)
e) You have been proposed two projects with the following predictions
Project A
Assumptions (states of nature)
Pessimistic
Moderately successful
Optimistic
Project B
Assumptions (states of nature)
Pessimistic
Moderately successful
Optimistic
Net Present Value Sh`000''
300
600
900
Net Present Value Sh`000''
500
600
700
Probability
0.4
0.3
0.3
Probability
0.5
0.2
0.3
i. Find the Expected value of each project
ii. Compare the risks of the two projects using standard deviation
(3 Marks)
(3 Marks)
QUESTION TWO: (20 MARKS)
a) Discuss the four steps in risk management process and summarize the approach used
in each step.
(12 Marks)
b) There are several factors that limit individuals from insuring their risks with local
insurance companies. Discuss any such FOUR factors in the local scene. (8 Marks)
QUESTION THREE: (20 MARKS)
a) Discuss three types of derivative instruments and how they are used in risk
management.
(6 Marks)
b) With reference to a company you are familiar with discuss the functions and benefits
of an insurance company.
(8 Marks)
c) Highlight six principles of risk management that risk managers should always adhere
to in their organizations.
(6 Marks)
QUESTION FOUR: (20 MARKS)
a) Discuss four types of financial Risks
(4 Marks)
b) Given the following Expected values and Standard deviations for two projects.
Compare the risk of the two using the coefficient of variation
(4 Marks)
Expected Value Standard Deviation
Project A 10,000,000 1,500,000
Project B 4,000,000 300,000
c) With reference to a company that you well know of, describe the risks it’s exposed
to using:
i.
Macroeconomic Risk Analysis;
(6 Marks)
ii.
Industry Risk analysis.
(6 Marks)
QUESTION FIVE: (20 MARKS)
a) Using the Porters Five Forces Analysis, discuss giving examples, the risk that an
organization may be exposed to.
( 6 Marks)
b) Discuss any FOUR salient features of an insurable risk
(6 Marks)
c) Risk management is a holistic activity that encompasses everybody in an
organization and not just the risk manager. Discuss.
(8 Marks)
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