Risk Assessment & Underwriting Flashcards
7 cards from real APP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Risk Assessment & Underwriting flashcards as text
In a risk heat map, which quadrant demands the most immediate management attention?
Answer: High probability / High impact
Risks that are both highly probable and highly impactful represent the greatest overall threat and require priority mitigation efforts.
What is 'subrogation' in insurance, and why does it matter to procurement professionals?
Answer: An insurer's right to pursue a third party responsible for a loss after paying a claim, potentially affecting supplier relationships
Subrogation allows an insurer who paid a claim to seek reimbursement from the party at fault, which could create legal action against a supplier.
A buyer requires suppliers to name the buyer as an 'Additional Insured' on the supplier's liability policy. This ensures:
Answer: The buyer receives protection under the supplier's insurance for claims arising from the supplier's work
Additional insured status extends the supplier's liability coverage to protect the buyer against third-party claims arising from the supplier's operations.
Which risk assessment framework is commonly used in US federal procurement to categorize information system risks by potential impact level?
Answer: NIST SP 800-30
NIST SP 800-30 provides guidelines for conducting risk assessments of federal information systems and is widely adopted in US government procurement.
When assessing supplier financial risk, which ratio best indicates a company's ability to meet short-term obligations?
Answer: Current ratio
The current ratio (current assets divided by current liabilities) measures a company's liquidity and ability to pay near-term debts.
A 'wrap-up' or 'owner-controlled' insurance program (OCIP) in large construction procurement means:
Answer: The project owner purchases a single consolidated insurance policy covering all contractors on the project
An OCIP centralizes insurance procurement under one policy, eliminating coverage gaps and often reducing overall premiums for large projects.
The 'Expected Monetary Value' (EMV) of a risk event is calculated as:
Answer: Probability of occurrence multiplied by the financial impact
EMV equals probability (expressed as a decimal) times monetary impact, providing a risk-weighted financial value for decision-making.