question

risk/reward

answer

Individuals Measured using expected utility How much reward is necessary to induce you to take risk? Similarly, how much are you willing to pay to avoid risk? This is actually the entire basis of insurance, people willing to pay to avoid riskOrganizations Orgs. use expected value, not expected utility No natural risk aversion Opportunity cost or cost of capital Most organizations project future cash flows from investments/opportunities Discount those cash flows back to present value based on cost of capital Cost of capital is commensurate with riskiness of firmGov't/Society Measuring reward to society is difficult (reward of national parks?) Many times government is the only entity able to take on risk, regardless of reward

question

Risk/Reward

answer

Organizations CAPM Only reward systemic risk Not diversifiable risk Efficient frontier

question

Bias

answer

What is a bias? Subjective view/probability - different from objective Many sources Alter the decision making Problem when it ends up being significantly different from the model

question

Types of Bias

answer

Age biases Cultural biases Experience biases Gender biases Media biases

question

Incentives

answer

Now that we know how people make decisions, how do we get them to make decisions that are advantageous to us? Incentives! Things that motivate individuals to perform an action. Incentives can be at the individual level, organizational level, or societal level Generally we refer to incentive structures

question

Types of Incentives

answer

Financial - Most incentives Moral - "do the right thing" Natural - "curiosity, fear, anger, pain, joy, pursuit of happiness" Coercive - negative reinforcement Personal vs. socialPolitical Incentives short term vs. long term planning Discount rate

question

Which of the following actions describes a way organizations use expected value?

answer

Organizations estimate the future cash flows that are generated by an investment and then discount them back to present value.

question

Age biases occur when people in different age groups interpret information about risk differently.

answer

True, Age biases occur when people in different age groups interpret information about risk differently.

question

Which part of Secretary of State Donald Rumsfeld's quote poses the most threat to analyzing and creating decision-making models?

answer

"unknown unknowns"

question

A(n) _______ is an inclination of temperaments or outlook to present or hold a partial persepctive at the expense of (possibly equally valid) alternatives in reference to objects, people, or groups.

answer

bias

question

Individuals and organizations measure risk/return with expected utility.

answer

False, Expected utility is used for individuals, while expected value is used for organizations.

question

Sue is a very bright college student who stays up to date on all the news channels. In response to the number of child abductions she has seen on the news lately, she insists that her mother purchase a child harness for her younger brother. What type of bias is this?

answer

Media, Sue has a fear that is overestimated based on media attention.

question

Lots of ways (categories) of looking at risk at the individual level

answer

Property Liability Life Health Financial

question

Loss Exposures

answer

Loss Exposures Any condition or situation that presents a possibility of loss, regardless of whether that loss actually occurs. Three Elements to a loss exposure Asset exposed to loss Cause of loss Financial consequences of the loss

question

Property

answer

Asset exposed to loss Real property Land, buildings, crops, etc... Personal property Your stuff: furniture, jewelry, art, autos, watercraft, etc... Cause of Loss Fire, theft, windstorm, accidents, lost, pretty much anything you can think of Financial Consequences Reduction in property value Increased expenses Lost income

question

Liability

answer

Asset exposed to loss Money / other financial assets General, Special, Punitive damages Cause of Loss Claim / lawsuit Civil law vs. criminal law Tort, contract, statutory negligence Financial Consequences Defense costs Monetary damages

question

Specific Types of Liability

answer

Property owners Automobiles Employer-employee Parents and children Animals

question

Life - Premature Death

answer

Asset exposed to loss Your life Cause of Loss Premature death: illness, accident, stupidity Financial Consequences See next slide

question

Financial Impact of Premature Death

answer

Wage earning adult: Married Single with dependents Single with no dependents Non-wage earning adult: Married Single with dependents Single with no dependents Child

question

Life - Long Life

answer

Asset exposed to loss Your savings / retirement / wealth Cause of Loss Outliving assets, expenses > income for too long Financial Consequences What happens when retired? Income Expenses Which increase Which decrease

question

Health

answer

Asset exposed to loss Your health, livelihood Cause of Loss Poor care, poor genes, bad luck, injury, illness, etc... Financial Consequences Ability to earn income may decrease, or cease (as in premature death) Living expenses may continue (or increase) Evaluate same exposure categories as premature death

question

Health / Disability

answer

Asset exposed to loss Your health, livelihood Cause of Loss Poor care, poor genes, bad luck, injury, illness, etc... Financial Consequences Ability to earn income may decrease, or cease (as in premature death) Living expenses may continue (or increase) Evaluate same exposure categories as premature death

question

Financial

answer

Asset exposed to loss Your wealth Cause of Loss Health, disability, unemployment, poor planning, etc... Financial Consequences Inadequate savings Back to work Can't retire

question

Individual Risk Management

answer

Risk Management Process Determine Objectives Identify Risks Evaluate Risks Choose your alternatives Implement Review ; Evaluate

question

What are the risks?

answer

What are the risks? Change throughout life e.g. premature death 20's - not many people relying on you/your income 30's - family life changing - significant risk 40's - your grown up (and don't even know it) - highest this risk will ever be 50's - risk beginning to diminish 60's - not as big an issue 70's - not an issue ??? - not an issueHow do you evaluate Frequency / severity Death only happens once, but probability does vary Severity does vary based on Wealth Income

question

Smart Pill

answer

What is the risk? Insomnia, weight loss, decreased appetite, jitteriness Increased risk of cardiovascular problems Exacerbate depression, psychosis, anxiety 1-in-400 in doctor managed patients Potentially addictive 10% according to 2006 study Decreased performance over time (due to insomnia, addiction, malnutrition?) Paranoia, aggression, irritability

question

What is the reward?

answer

Improved performance on learning tasks such as memorization, especially for longer term memory (more than one day) & since education now seems to be a competitive sport... Need to be on drug while studying, not when taking exam Not clear you can remember more stuff at one time (working memory)

question

Who is using it ?

answer

You are... Prescription use doubled from 2007 to 2011 Studies estimate 25-35% of college students have used Ritalin, Adderall off-prescription 3-4% of population are ADHD, skewed toward younger children (many of you, if you had it, have outgrown it) Users are also more likely to: Smoke marijuana Skip class Lower GPAs

question

YES

answer

Yes, they are dangerous Alan Schwarz Case on Richard Fee Academic scholarship, college class president, baseball player, aspiring med school student Addiction to Adderall - committed suicide 2 years after collegePoints out problems in health care system: Quick diagnosis Ability to manipulate/feign symptoms Quick to medicate Doctor shoppingNot sure how all pharmaceuticals interact

question

No

answer

Joshua Gowin No different than other stimulants, e.g. caffeine Just more sophisticated They work, so use them

question

The financial consequences of property risks include: I. reduction in property value II. increases in expenses III. lost salary

answer

I and II only reduction in property value and increased expenses are financial consequences. Lost income from rental properties may also be a financial consequence, not lost salary.

question

In defense of "smart" pills, Joshua Gowin frequently compares them to what other cognitive enhancer?

answer

caffeine

question

According to Alan Schwarz in "Is the Use of 'Smart' Pills for Cognitive Enhancement Dangerous?", false prescriptions of ADHD medicine is on the rise. Which of the following is not listed as being one of the dangers of false prescription?

answer

Answers: a. strong addiction b. suicide/suicidal thoughts c. increased mental awareness d. loss of weightCorrect. Increased mental awareness.

question

Which of the following is NOT one of the five main catogories of risk faced by individuals?

answer

a. Property b. Liability c. Reputational d. HealthCorrect answer c. Reputational

question

Alan Schwarz's attack on "smart" pills centers around the story of _____________, a college class president and aspiring medical student who became addicted to the "smart" pill he was improperly prescribed.

answer

Richard Fee

question

Overview of Risk for Corporations

answer

Lots of ways (categories) of looking at risk at the organization level Business risk, operational risk, hazard risk, financial risk, strategic risk Why categorize? Expertise, risk management techniques, reports to stakeholders Categories may not be mutually exclusive (some risks may appear in multiple categories)

question

Business risk

answer

Investopedia does a better job than Wikipedia on this definition http://www.investopedia.com/terms/b/businessrisk.asp Deviations in profitability Can be caused by many things, prices, regulation, competition, etc... Very broad category, many will define as risk caused by operational, hazard, financial or strategic risks

question

Operational Risk

answer

Focus of BP case and Analytics readings Wikipedia is pretty good here http://en.wikipedia.org/wiki/Operational_risk Potential losses from internal sources Manufacturing processes Fraud Mismanagement Employee mistakes

question

Hazard Risk

answer

Very traditional risk management stuff Wikipedia not very good here (very personnel safety focused) Typically used in insurance industry to describe potential losses that only have a down side (pure risks), e.g. fire, auto accident, tornado, earthquake, etc...

question

Financial Risk

answer

Potential variation due to financial causes Wikipedia is better than investopedia here http://en.wikipedia.org/wiki/Financial_risk Losses due to exchange rate, investment losses, credit risks, liquidity risks, etc...

question

Strategic Risks

answer

Potential losses (variation) from poor business decisions Product mix Supplier choice Financing options Many decisions fall under "strategy", if any of them are wrong/faulty =; strategic risk I often lump reputational risk under strategic risk, but is often a separate classification

question

Plenty of other categories

answer

Legal risks Liability risks IT risks Etc... All have an impact on business some how some way

question

BP

answer

Case Study BP around 2 safety issues in 2005-2006 Overriding Themes of Case Corporate Strategy Public Relations Corporate Culture Workplace Safety Process Management

question

Two Specific Incidents

answer

March 25, 2005 Explosion at Texas City refinery 15 dead 170 injuredMarch 2006 Oil Spill at Prudhue Bay, Alaska (Alaskan North Slope)Jan. 2007 CEO Browne Resigns

question

Background

answer

BP formed in 1998 Merger of British Petroleum ; AMOCO Top 5 Global Oil Co. British Petroleum Over 100 years old Browne became CEO in 1995 Rebranding Environmentally friendly oil company Health, Safety, ; Environmental (HSE) performance Growth through M;A Green Company - Climate Change talk in 2002 Alternative Fuels Solar Public Relations Perspective Increase in brand value Many lauded BP's approach Some critics "greenwashing" How can an oil company be "green"?

question

cont.

answer

Corporate Strategy Perspective Growth through M&A "Do more with less"? Cost cutting? Cost conscious? What effect does Corporate Strategy have on Corporate Culture? Workplace Safety? Process Management?

question

1st event

answer

March 23, 2005 Explosion @ Texas City Refinery 15 dead 170 injured 1,700 lawsuits

question

Was safety first

answer

OSHA $21.3M fine by OSHA 300 willful violations of OSHA rules US Chemical Safety & Hazard Investigation Board (CSB) BP endangered workers to cut costs 23 accidents in 30 years 8 "severe" incidents in 10 years leading up to explosionCSB Report Con't: "Lack of safety leadership" "inadequate resources for safety" "independent panel to review safety" BP response "we may not have broken laws, but broke our values" Baker report - not finished until Jan. 2007

question

Second Event

answer

March 2006 Leak discovered in Prudhoe Bay, Alaska Largest US oilfield (Alaska North Slope) 267K gallons, largest spill in this oilfield Comparison Exxon Valdez approx. 30M gallons Comparison Deepwater Horizon 210M gallons Corroded pipe BP response - shut down oil fields 8% drop in US oil production 16 of 22 miles of pipe needed to be replaced

question

was safety firstt

answer

Pipeline and Hazardous Materials Safety Administration "ineffective leak detection system" Pipeline had several defects (internal corrosion) BP used a different inspection system (UT technology vs. pipeline inspection guages (PIG))

question

Browne Steps Down

answer

January 12, 2007 Browne will step down as CEO in July 2007 4 days before Baker report released Widely recognized as one of Great Britain's top businessmen Financial Legacy: M & A, rebranding, 5X increase in profits and market cap, 2.5X increase in share price

question

The Baker Report

answer

January 16, 2007 Critical of BP's approach to process safety Failed to give process safety the same emphasis as other initiatives including environmental and other safety initiatives Should have paid more attention to previous incidents (chemical releases ; fires) Refineries did not get the same importance as exploration Decentralized management and entrepreneurial culture delegated substantial discretion to plant managers without outlining expectations regarding process safety, responsibility, or accountabilityCommunication lacking Contract vs. union workforce problems "instances of lack of operating discipline, toleration of serious deviations from safe operating practices, and complacency" Not restricted to BP

question

10 recommendations

answer

10 recommendations 1.Process safety leadership (top down) 2.Process safety management system 3.Process safety knowledge and expertise 4.Process safety culture 5.Clearly define expectations and accountability for process safety 6.Support for line management 7.Leading and lagging performance measures for process safety 8.Process safety auditing 9.Board monitoring 10.Industry Leader

question

BP: The Follow-up

answer

Integrity was questioned One year "worst refinery accident" ; "worst oil spill" "bloated profits" "bad pipelines" Failed to communicate what was important Cost, safety or environment Did org structure allow it to do what is necessary?2010 Toxic gas release at Texas City refinery that lasts 40 days (sold in 2013) Deepwater Horizon Oil Spill Cause: cost-cutting?

question

Big Data Overview

answer

Big Data We create so much data today, how can organizations use it? Data mining Buying trends Targeted marketing Mitigate risky business practices, employee fraud (operational risk), ; black swans

question

Most risk management

answer

Use past data to predict future risks "risk landscape is changing so fast, that historic data is no longer a good predictor for tomorrow" Article is presented as a Q;A Business risk, operational risk, black swans, and behavioral analytics

question

What are the different types of risk organizations need to think about, from operational risk to the so-called black swans?

answer

Operational risk - the people, processes, and systems in place to produce the company's product/service Internal fraud, external fraud, products & business practices, damage to physical assets, business disruption, system failures, process management, employment practices, workplace safety

question

What is a black swan risk?

answer

An extreme outlier: high impact, hard-to-predict, rare events that generally people don't expect. E.g. Bernie Madoff, mortgage crisis

question

How has risk changed in recent years?

answer

Globalization, cascading network effect Operational risk - 30% of business loss

question

Where does data analytics fit in?

answer

Tools to predict areas of vulnerability in organizations to black swans and other kinds of risk Look for markers of situations where human behavior can impact operational risk Look for factors that influence human behavior Laziness, fatigue, moral or ethical "opportunities", stressors (debt, job concerns, family issues)

question

Could data analytics have helped BP?

answer

There were reports that on-site employees were worried about such an event, but no channel to communicate BP didn't monitor systems closely, costly to do so, cut corners

question

Future of behavioral analytics?

answer

Systems are pretty good at looking for potential risks ignoring the human element Behavioral analytics adds that examination of the human component, mixed with statistics and external analysis More complete or "intelligent" risk analytics.

question

The people, processes, and systems in place to produce the company's product/service describes which of the following risk categories?

answer

operational

question

Which of the following terms best describes a rare, unexpected event (e.g., the discovery of alien life on Mars)?

answer

black swan

question

Business risk can encompass which of the following?

answer

operational hazard strategicall of the above

question

The reading on behavioral analytics discussed the possibility of fraud can be within which of the following categories?

answer

operational

question

In the case discussed in class, we identified some overriding themes. Which of the following was NOT one of the overriding themes?

answer

Correct answer; managerial efficiency Answers: a. corporate strategy b. workplace safety c. corporate culture d. managerial efficiency

question

Which investigative body concluded that BP endangered workers to cut costs?

answer

US Chemical Safety ; Hazard Investigation Board (CSB)

question

Which of the following was NOT included in the 10 recommendations from the Baker Report?

answer

additional expertise within workforce process safety culture support for line management board monitoringCorrect additional expertise within workforce

question

Sally desperately wants to open her own nail salon. She decides to open on the north side of town, which she did not realize receives relatively little traffic. Which category would this error fit under?

answer

strategic

question

According to "From Superstorms to Factory Fires", the author was surprised to find what kind of correlation between how much a firm spends annually on procurement at a particular site and the site's impact on company performance? ch.9

answer

little correlation

question

In "From Superstorms to Factory Fires", what was Ford able to do using the model described in the article? ch.9

answer

Using the model, Ford was able to identify the supplier sites that required no special risk-management attention.

question

In "Strategy, Risk, and the Global Financial Crisis", Walter Keichel argues that a fair-minded observer would conclude which of the following statements in regards to the financial crisis?

answer

While strategy and its champions may not have been a main cause in bringing on the global financial crisis, they did not do much to avert it.

question

In "Strategy, Risk, and the Global Financial Crisis", what was a major difficulty encountered by Boston Consulting Group when the firm canvassed Indian, Japanese, European, and American firms?

answer

Firms were unwilling to implement a strategy, replying "We don't do strategy".

question

The following statement describes which of the following theories? "_________ is a theory of management that analyzes and synthesizes workflows. Its main objective is improving economic efficiency, especially labor productivity."

answer

Taylorism

question

Loss exposures

answer

any condition or situation that presents a possibility of loss, regardless of whether that loss actually occurs

question

Three elements of loss exposure:

answer

asset exposed to loss cause of loss financial consequences of loss

question

Five main categories or risk faced by individuals are:

answer

liability, health, property, life, and financial

question

Risk management process

answer

determine objectives, identify risks, evaluate risks, choose your alternatives, implement, review and evaluate

question

A flood is an example of:

answer

hazard risk

question

The primary causes of BP's march 2005 accident were absences of:

answer

safety leadership, independent panel to review safety, and inadequate resources for safety

question

Overriding themes of BP study were

answer

corporate strategy, workplace safety, corporate culture, public relations, and process management

question

Business risks encompass

answer

operational, hazard, financial, and strategic

question

Operational risk

answer

is potential losses from internal sources including manufacturing processes, fraud, mismanagement, and employee mistakes

question

Hazard risk

answer

is the traditional risk, management stuff, fire, tornado, flood, etc

question

Financial risk

answer

is potential variation due to financial causes (ex: losses due to exchange rate, investment losses, credit losses)

question

Business risk

answer

causes deviation in profitability and can be cause by many things, prices, regulation, competition, etc

question

Strategic risk

answer

are potential losses from poor business decisions

question

What percentage of business losses are attributed to operational risk?

answer

30%

question

Taylorism

answer

is the theory of management that analyzes and synthesizes workflows. its main objective is improving economic efficiency, especially labor productivity

question

The primary benefit of using the linear optimization model is

answer

it reveals supply chain dependencies and bottlenecks

question

High REI scores=

answer

big impact if disrupted

question

Time to Recovery (TTR) is

answer

the time it would take for a particular node to be restored to full functionality after a disruption

question

Supply chain risk

answer

is anything that can interrupt the ultimate product delivery anywhere along that supply chain

question

In liability cases what may be awarded

answer

general, special, and punitive

question

Big data can be used for

answer

targeting marketing, mitigating risky business practices, and predicting black swans

question

Risk/reward

answer

Employers want employees who can make critical decisions. Your education as a whole in the College of Business is about understanding the relationship between risk and reward.

question

Basis of insurance

answer

People are willing to pay to avoid risk

question

Individuals

answer

Measure risk and reward using expected utility. They are risk averse and prefer the sure thing over uncertainty.

question

Organizations

answer

Measure risk and reward by using expected value, CAPM, and the Efficient Frontier. There is no natural risk aversion, but they do look at risk and their decisions do reflect risk. When discussing risk and reward, we use the terms opportunity cost aka cost of capital.

question

Cost of capital

answer

aka Opportunity cost - can be utilized by organizations through discounting.

question

CAPM

answer

The Capital Asset Pricing Model - only reward systemic risk and not worried about diversifiable risk. These risks affect the entire portfolio.

question

Diversifiable Risk

answer

If you can diversify, there is no risk, and the net position won't change.

question

Efficient frontier

answer

a graph that shows the tradeoff between risk and reward.

question

Government and society

answer

Measuring the reward to society is difficult. Many times government is the only entity able to take on risk, regardless of the reward.

question

Bias problem

answer

One of the big problems we have with modeling how decisions are made is that they do not explicitly account for biases on the part of the decision maker.

question

The law of unintended consequences

answer

outcomes that are not the ones intended by a purposeful action.

question

What factors most influence decision-making?

answer

Experiences, Age, Gender, or Religion

question

What motivated your behavior?

answer

Money, Moral Code, Self Gratification, or Fear of Failure

question

The law of unintended consequences says that people who set up incentive systems are unable to predict all of the responses to that system.

answer

true

question

What is the safest country in the world in terms of investment?

answer

Japan (0.52 return rate)

question

What does The United States pay as a rate of return?

answer

2.42 rate of return; they are riskier than Japan because the number is higher.

question

What do political incentives do to an incentive system?

answer

They focus on the short term planning of a government

question

When organizations and politicians have higher risk, what do they do to the discount rate?

answer

The discount rates are increased

question

At which level are incentives found?

answer

Individual, Organizational, and Societal level

question

Which of the following is a way organizations utilize opportunity cost in their calculations?

answer

discounting

question

What motivates an individual to make or perform an action?

answer

incentive

question

Individuals and organizations measure risk/return with expected utility

answer

false

question

A bias can be described by what?

answer

subjective view

question

Age biases occur when people in different age groups interpret information about risk different.

answer

true

question

People who have experienced a low probability and high consequences event tend to overestimate its likelihood. What type of bias does this describe?

answer

experience bias

question

A _____ is an inclination of temperaments or outlook to present or hold a partial perspective at the expense of (possibly equally valid) alternatives in reference to objects, people, or groups.

answer

bias

question

Political incentives often do what to the discount rate?

answer

increase the discount rate

question

I am ultimately responsible for my own health care?

answer

true

question

I am ultimately responsible for my own retirement planning?

answer

true

question

A family can get by on $50,000 a year

answer

false

question

At what salary are people the happiest?

answer

Princeton University says <$50,000 based on a survey of 450,000 people because higher salary means more time working. A more recent survey of 10,000 people says $75,000.

question

Should you switch your choice from Door #1 to Door #2?

answer

Yes, it doubles your chances of winning. You start with a 1/3 chance of winning with door #1, your have 2/3 chance of door #2 or door #3. But we know that nothing is behind door #3, so it means there is actually a 2/3 chance of winning with door #2.

question

Being forced to "think faster" increases your willingness to take risk?

answer

true

question

Athletes get tested for performance enhancing drugs, we should also test students for performance enhancing drugs.

answer

yes

question

Taking a smart pill is just a way of helping you study, it is not cheating, it is perfectly ethical.

answer

false

question

Which category probably faces the largest financial impact from premature death?

answer

Married wage earning adults with dependents

question

According to Alan Schwarz, which involved party should first change how ADHD medicine is given?

answer

doctors

question

According to Joshua Gowin's article, some university surveys have shown that up to 35% of students have obtained which two drugs as a study aid?

answer

Adderall and Ritalin

question

In support of "smart" pills, Joshua Gowin introduces an anecdote of which historical event to illustrate the positive power of cognitive enhancers?

answer

the french revolution

question

Which of the following is NOT one of the five main categories of risk faced by individuals?

answer

reputational

question

The financial consequences of property risks include:

answer

reduction in property value, increases in expenses, lost income

question

In which age category do you face the highest risk of premature death?

answer

in your 40's

question

According to Joshua Gowin's article on "smart" pills, what is not a characteristic of students who used Ritalin and Adderall as study drugs?

answer

These students did steady work throughout the semester.

question

According to Joshua Gowin's article on "smart" pills, what are the characteristic of students who used Ritalin and Adderall as study drugs?

answer

These students tended to have lower GPAs in the 2.0-3.0 range, they smoked more pot than average students, they skipped more classes than average students

question

What best describes a rare, unexpected event?

answer

a black swan

question

According to the reading on behavioral analytics, what percentage of business loss can be attributed to operational risk?

answer

30%

question

What were the three primary causes of BP's March 2005 accident?

answer

absence of safety leadership, did not have an independent panel to review safety, and inadequate resources for safety.

question

What was not a primary cause of BP's March 2005 accident?

answer

overworking employees

question

In the case discussed in class, we identified some overriding themes. What are they?

answer

Corporate strategy, workplace safety, and corporate culture.

question

What is not an overriding theme?

answer

managerial efficiency

question

What type of risk does Dr. Nyce not consider it's own category of risk?

answer

reputational risk

question

What type of integration best describes the type of organization BP is?

answer

vertical

question

What was included in BP's corporate strategy?

answer

Growth through mergers and acquisitions, doing more with less, and cost cutting.

question

What was not included in BP's corporate strategy?

answer

Growth through hostile takeovers

question

The people, processes, and systems in place to produce the company's products/service describe what category of risk?

answer

operational risk

question

You purposely avoid getting gas at a BP station. - Brand management / reputation question

answer

false

question

It is necessary for corporations to put a value on human life.

answer

true

question

Corporations should invest in safety until its marginal costs equal its marginal benefits.

answer

Ideally less, but sometimes this is not enough.

question

It is your employer's responsibility to provide you with a safe work environment.

answer

true

question

It is okay for your employers to drug test you if your performance at work could endanger others?

answer

true

question

It is okay for your employer to gather personal information (tax returns, marital status, credit score, etc.) on you if your performance at work could endanger other?

answer

true

question

It is okay to use behavioral analytics in the hiring/firing/intervention of employees.

answer

true

question

In "From Superstorms to Factory Fires", what was Ford able to do using the model described in the article?

answer

Using the model, Ford was able to identify the supplier sites that required no special risk-management attention.

question

According to "From Superstorms to Factory Fires", the author was surprised to find what kind of correlation between how much a firm spends annually on procurement at a particular site and the site's impact on company performance?

answer

Little Correlation

question

The following statement describes which of the following theories? "_____" is a theory of management that analyzes and synthesizes workflows. Its main objective is improving economic efficiency, especially labor productivity."

answer

Taylorism

question

Which of the following is a primary benefit of using the linear optimization model?

answer

The model reveals supply chain dependencies and bottlenecks.

question

Which of the following is not an example of PI (performance impact)?

answer

unemployment rate

question

Which of the following is not described in "Strategy, Risk, and the Global Financial Crisis?" as being part of the "constellation" of forces responsible for the blurring of traditional industry lines?

answer

interest from investors

question

Which of the following is not true about REI scores?

answer

REI scores help determine macroeconomic effects of monetary policy.

question

Which of the following provides the clearest description of time to recovery (TTR)?

answer

The time it would take for a particular node to be restored to full functionality after a disruption.

question

What does Thomas Bass from "Derivatives: The Crystal Meth of Finance" mean when he says, "Derivatives do the work of Adam Smith's invisible hand?"

answer

Derivatives transmogrify individual greed into the collective good.

question

According to Yong Chen's article, how do derivatives derive value?

answer

From other assets

question

In "Are the risks of Derivatives Manageable?", Thomas A. Bass posits that market failures were due in part to mismanagement of derivative investments. What does he recommend?

answer

Bass recommends widespread regulation of derivatives or a complete ban.

question

Which Warren Buffet quote is echoed throughout "Derivatives: The Crystal Meth of Finance" as an attack on derivatives?

answer

"Derivatives are the financial weapons of mass destruction."

question

Chen believes derivatives do not lead to more overall risk-taking because:

answer

Hedge funds who use derivatives experienced less volatility and average market exposure during market downturns or extreme market events.

question

Which of the following do I not consider to be its own category of organizational risk?

answer

Reputational

question

Which of the following was not included in he corporate strategy perspective for BP?

answer

Growth through hostile takeovers

question

OSHA focuses on personnel safety while process safety focuses on the prevention of which of the following?

answer

Leaks in hazardous production processes and fires

question

Which of the following is an example of a hazard risk?

answer

Flood

question

What types of alternative fuels did BP pursue after Browne became CEO in 1995?

answer

Solar

question

Alan Schwarz's attack on "smart" pills centers around the story of _______, a college class president and aspiring medical student who became addicted to the "smart" pill he was improperly prescribed.

answer

Richard Fee

question

According to Joshua Gowin's article on "smart" pills, which of the following is not a characteristic of students who used Ritalin and Adderall as study drugs?

answer

These students did steady work throughout the semester.

question

Which of the following are elements of a loss exposure?

answer

Asset exposed to loss, Cause of loss, and financial consequences of loss

question

Which of the following is not a main bias we encounter when developing models?

answer

Location bias

question

Eric must keep a B average, or else lose his starting position on the basketball team. What type of incentive best describes this situation?

answer

Coercive

question

Eric must keep a B average, or else lose his starting position on the basketball team. What type of incentive best describes this situation?

answer

Coercive

RMI 2302 MID-TERM 2 FINAL – Flashcards

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