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Risk Management

Purpose of Course  showclose

Course Information  showclose

Learning Outcomes  showclose

Course Requirements  showclose

• Unit 1
• Unit 2
• Unit 3
• Unit 4
• Unit 5
• Unit 6
• Final Exam
• All Units

Unit Outline show close

Unit 1: The Nature of Risk: Losses and Opportunities  

Risk management has become a focal point in business practices and societal decision-making in the twenty-first century.  The focus on risk management has become particularly important with the recent crisis of the global financial systems that arose with the failures in predicting, preventing, and containing risk.  As a focused field of study, risk management draws on core knowledge from law, engineering, finance, economics, medicine, psychology, accounting, mathematics, statistics, and other fields to create a holistic and sustainable decision-making framework.  This unit introduces the fundamentals of risk management, including the definition of risk and roles of risk in decision-making.  You will also learn to distinguish between different classifications of risks and attitudes toward risk.

Unit 1 Time Advisory   show close


Unit 1 Learning Outcomes   show close


1.1 The Notion and Definition of Risk  

• Reading: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 1: The Nature of Risk: Losses and Opportunities:” “Section 1.2: The Notion and Definition of Risk”

  Link: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals:“Chapter 1: The Nature of Risk: Losses and Opportunities:” “Section 1.2: The Notion and Definition of Risk” (HTML)
   
  Instructions: Please click on the link above, and read Section 1.2 of the textbook.  Also, complete the Discussion questions at the end of the reading.  This reading defines risk as a consequence of uncertainty.  Pay attention to the Venn diagram in Figure 1.3, which illustrates risk-reward outcomes.  Please note that this reading also covers the topics outlined in sub-subunits 1.1.1 through 1.1.3.
   
  Reading, note-taking, and answering the Discussion questions should take approximately 1 hour to complete.
  
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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1.1.1 Risk as a Consequence of Uncertainty  

Note: This topic is covered by the reading assigned below subunit 1.1.  In particular, focus on the text below the heading “Risk as a Consequence of Uncertainty.”

1.1.2 The Role of Risk in Decision Making  

Note: This topic is covered by the reading assigned below subunit 1.1.   In particular, focus on the text below the heading “The Role of Risk in Decision-Making” as well as review Figure 1.3.

1.1.3 Definitions of Risk  

Note: This topic is covered by the reading assigned beneath subunit 1.1.  Focus on the text below the heading “Definition of Risk.”

1.2 Attitudes Toward Risk  

• Reading: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 1: The Nature of Risk: Losses and Opportunities:” “Section 1.3: Attitudes toward Risks”

  Link: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 1: The Nature of Risk: Losses and Opportunities:” “Section 1.3: Attitudes toward Risks” (HTML)
   
  Instructions: Please click on the link above, and read Section 1.3 in its entirety for an introduction to 3 major types of risk attitudes: risk averse, risk seeker, and risk neutral.  Also, complete the Discussion questions at the end of the reading.  Remember to take notes as you read. 
   
  Reading, note-taking, and answering the Discussion questions should take approximately 1 hour to complete.
  
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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1.3 Types of Risks  

• Reading: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals:“Chapter 1: The Nature of Risk: Losses and Opportunities:” “Section 1.4: Types of Risks”

  Link: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 1: The Nature of Risk: Losses and Opportunities:” “Section 1.4: Types of Risks” (HTML)
   
  Instructions: Please click on the link above, and read Section 1.4 in its entirety for an introduction to pure risks, speculative risks, diversifiable and non-diversifiable risks, and enterprise risks.  Also, complete the Discussion questions at the end of the reading.  Note that this reading also covers the topics outlined in sub-subunits 1.3.1 through 1.3.3.
   
  Reading, note-taking, and answering the Discussion questions should take approximately 1 hour to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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1.3.1 Pure versus Speculative Risk Exposures  

Note: This subunit is covered by the reading assigned beneath subunit 1.3.  Focus on the section titled “Pure Versus Speculative Exposures.”  Also, pay attention to Table 1.2, which provides examples of pure risks and speculative risks.

1.3.2 Diversifiable and Nondiversifiable Risks  

Note: This subunit is covered by the reading assigned beneath subunit 1.3.  Focus on the section titled “Diversifiable and Non-Diversifiable Risks.”

1.3.3 Enterprise Risks  

Note: This subunit is covered by the reading assigned beneath subunit 1.3.  Focus on the section titled “Enterprise Risks.”  Study Figure 1.6, and make sure you understand the concepts addressed in this figure before moving on to the next subunit.

1.4 Where We Have Been – Key Takeaways  

• Reading: Flat World Knowledge: Baranoff et al.’s RiskManagement for Enterprises and Individuals: “Chapter 1: The Nature of Risk: Losses and Opportunities:” “Section 1.5: Perils and Hazards”

  Link: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals:“Chapter 1: The Nature of Risk: Losses and Opportunities:” “Section 1.5: Perils and Hazards” (HTML)
   
  Instructions: Please click on the link above, and read Section 1.5 in its entirety.  Also, complete the Discussion questions at the end of the reading.  Study the discussion on moral hazards carefully; in this reading, you will learn the difference between perils and hazards.
   
  Reading, note-taking, and answering the Discussion questions should take approximately 1 hour to complete.
  
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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Unit 1 Assessments  

• Assessment: Pearson Education: George E. Rejda's Principles of Risk Management and Insurance: “Chapter 1: Introduction:” “Self-Assessment Quiz”

  Link: Pearson Education: George E. Rejda's Principles of Risk Management and Insurance: “Chapter 1: Introduction:” “Self-Assessment Quiz” (HTML)
  
  Instructions: Please click on the link above, which will take you to the Student Resources webpage for George E. Rejda's Principles of Risk Management and Insurance.  Select the link for “Chapter 1: Introduction.”   Click on the “Self-Assessment Quiz” link, and answer all 10 multiple-choice questions.  Click on “Submit Answers for Grading” at the bottom of the webpage, and check your answers against the answer key.  Note that you do not need to e-mail your results.
  
  This assessment should take approximately 30 minutes to complete.
  
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above. 

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• Assessment: The Saylor Foundation’s “Assessment for Unit 1”

  Link: The Saylor Foundation’s “Assessment for Unit 1” (PDF) and “Unit 1 Answer Key” (PDF).
   
  Instructions: Complete this assessment after you finish the readings of Unit 1. Write down your answers before checking with the Answer Key.

  See a broken link? Please let us know!

Unit 2: Risk Measurement and Metrics  

The previous unit explained how risk arises as a consequence of uncertainty and proposed that risk and uncertainty are connected but distinct concepts.  This unit will discuss methods of measuring risk and uncertainty.  In order to understand and use the concepts of risk and uncertainty, you need to be able to measure outcomes.  All too often, assessments of risk are mere guesses, and the consequences can range from lost opportunities to death.

This unit will discuss measurable and quantifiable outcomes as well as how you can measure risk and uncertainty using numerical methods.

Unit 2 Time Advisory   show close


Unit 2 Learning Outcomes   show close


2.1 Quantification of Uncertainty via Probability Models  

• Reading: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 2: Risk Measurement and Metrics:” “Section 2.1: Quantification of Uncertainty via Probability Models”

  Link: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 2: Risk Measurement and Metrics:” “Section 2.1: Quantification of Uncertainty via Probability Models” (HTML)
   
  Instructions: Please click on the link above, and read Section 2.1 in its entirety to learn how to use probability models.  Remember to complete the Discussion questions at the end of the reading.  Make sure that you understand the example illustrated in Table 2.3 before continuing on to the next resource.  Please note that this reading also covers the information outlined in sub-subunits 2.1.1 through 2.1.4.
   
  Reading, note-taking, and answering the Discussion questions should take approximately 2 hours to complete.
  
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above. 

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• Assessment: Actuarial Science at Illinois State University: The Society of Actuaries and the Casualty Actuarial Society’s “Practice Exercises for Course P Examination”

  Link: Actuarial Science at Illinois State University: The Society of Actuaries and the Casualty Actuarial Society’s “Practice Exercises for Course P Examination” (PDF)
   
  Instructions: In this assessment, you will be asked to answer several questions on an actuarial exam.  An actuary uses mathematics to quantify and to predict the financial impact of risk and uncertainty.  In order to become an actuary, a person has to complete successfully a series of professional level exams.  The practice exam that you will work is the basic exam, dealing with probability.  To prepare for this assessment, you may want to refresh what you have learned from your Probability and Statistics courses.
   
  To access the practice exam, click on the link above.  Under the section titled Course P Examination: (Probability) click on the link “Practice Exercises for Course P Examination” to download the PDF file.  This is a sample exam for Exam P of Society of Actuaries.  The questions are on pages 1-82.  For this course, please answer questions 6, 14, 29, 32, 33, 36, 48, 53, 64, and 99.  After you complete this exam, check your answers against the solutions. You will notice that after the final question on page 82 the solutions are listed and the page numbers restart from 1-54.
   
  This assignment will take you approximately 2 hours to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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2.1.1 Quantifying Uncertain Events  

Note: This topic is covered by the reading assigned below subunit 2.1.  Focus on the text below the heading “Measurement Techniques for Frequency, Severity, and Probability Distribution Measures for Quantifying Uncertain Events.”

2.1.2 Measures of Outcome Value: Severity of Loss and Value of Gain  

Note: This topic is covered by the reading assigned below subunit 2.1.   Focus on the text below the heading “Measures of Outcome Value: Severity of Loss and Value of Gain.”

2.1.3 Probability and Outcome Value: Assessment of an Uncertain Endeavor  

Note: This topic is covered by the reading assigned below subunit 2.1.  Focus on the text below the heading “Combining Probability and Outcome Value Together to Get an Overall Assessment of the Impact of an Uncertain Endeavor.”  Make sure that you understand the concept of “expected value,” which is critical in assessing the impact of an uncertain endeavor.

2.2 Measures of Risk: Putting It Together  

• Reading: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 2: Risk Measurement and Metrics:” “Section 2.2: Measures of Risk: Putting It Together”

  Link: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 2: Risk Measurement and Metrics:” “Section 2.2: Measures of Risk: Putting It Together” (HTML)
   
  Instructions: Please click on the link above, and read Section 2.2 in its entirety. Also, complete the Discussion questions at the end of the reading.  This reading discusses basic statistical concepts that are used to measure risk, including Value at Risk (VaR), Maximum Probable Annual Loss (MPAL), and Beta Measures.   Note that this reading also covers the topics outlined in sub-subunits 2.2.1 through 2.2.3.
   
  Reading, note-taking, and answering the Discussion questions should take approximately 2 hours to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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• Assessment: McGraw-Hill: Bodie, Kane, and Marcus’s Investments, 9th edition: “Chapter 9 Multiple Choice Quiz”

  Link: McGraw-Hill: Bodie, Kane, and Marcus’s Investments, 9th edition: “Chapter 9 Multiple Choice Quiz” (HTML)
   
  Instructions: Please click on the link above, and answer all 10 questions of the multiple choice quiz on Capital Asset Pricing Model (CAPM).  After you have completed the quiz, click on the “Submit Answers” button to check your answers against the Result Reporter.  Note that you do not need to fill out the information to e-mail your results.
   
  This assignment will take approximately 1 hour to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above. 

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2.2.1 Some Common Measures of Risk: Range and Deviation  

Note: This topic is covered by the reading assigned below subunit 2.2.  Focus on the text below the heading “Some Common Measures of Risk: Range and Deviation.”

2.2.2 Financial Measures: Value at Risk (VaR) and Maximum Probable Annual Loss (MPAL)  

Note: This topic is covered by the reading assigned below subunit 2.2.   Focus on the text below the heading “Financial Measures: Value at Risk (VaR) and Maximum Probable Annual Loss (MPAL).”

• Reading: McKinsey & Company’s Working Papers on Risk, Number 32: Mehta et al.’s “Managing Market Risk: Today and Tomorrow”

  Link: McKinsey & Company’s Working Papers on Risk, Number 32: Mehta et al.’s “Managing Market Risk: Today and Tomorrow”(PDF)

  Instructions: Please click on the link above to view a collection of McKinsey’s latest topics on risk management.  Then, select the article’s title, “Managing Market Risk: Today and Tomorrow,” to download the PDF file.  Read the entire article.  Value at Risk (VaR) has been the cornerstone of risk management at financial intuitions for decades.  This reading provides an in-depth discussion of the limitations of VaR and how these limitations are addressed in real time.

  Studying this reading should take approximately 2 hours to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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2.2.3 CAPM’s Beta Measure of Nondiversifiable Portfolio Risk  

Note: This topic is covered by the reading assigned below subunit 2.2.  Focus on the text below the heading “Capital Asset Pricing Model.”

Subunit 2.2 Assessment  

• Assessment: The Saylor Foundation’s “Assessment for Subunit 2.2”

  Link: The Saylor Foundation’s “Assessment for Subunit 2.2” (PDF) and “Subunit 2.2 Answer Key” (PDF).
   
  Instructions: Complete this assessment after you finish the readings of Subunit 2.2. Write down your answers before checking with the Answer Key.

  See a broken link? Please let us know!

Unit 3: Risk Attitudes and Expected Utility Theory  

The previous unit introduced the most commonly used ways in which we measure risk and uncertainty.  It is important to understand that these measures are usually misunderstood, misused and misapplied.  Whenever we look into risks, risk measures, and risk management, we must always view these in a greater context. In this unit, we focus on the risk within the “satisfaction” value maximization for individual and firms. The value here is measured by economists by comparing levels of satisfaction an individual achieves when confronted with two or more choices.

Unit 3 Time Advisory   show close


Unit 3 Learning Outcomes   show close


3.1 Utility Theory  

• Reading: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 3: Risk Attitudes: Expected Utility Theory and Demand for Hedging:” “Section 3.1: Utility Theory”

   Link: Flat World Knowledge: Baranoff et al.’sRisk Management for Enterprises and Individuals:“Chapter 3: Risk Attitudes: Expected Utility Theory and Demand for Hedging:” “Section 3.1: Utility Theory” (HTML)
   
  Instructions: Please click on the link above, and read Section 3.1 in its entirety.  Also, complete the Discussion questions at the end of the reading.  This reading introduces Utility Theory, which is a preference-based approach to ranking choices.
   
  Reading, note-taking, and answering the Discussion questions should take approximately 2 hours to complete.
  
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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3.2 Uncertainty, Expected Value, and Fair Games  

• Reading: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 3: Risk Attitudes: Expected Utility Theory and Demand for Hedging:” “Section 3.2: Uncertainty, Expected Value, and Fair Games”

  Link: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 3: Risk Attitudes: Expected Utility Theory and Demand for Hedging:” “Section 3.2: Uncertainty, Expected Value, and Fair Games” (HTML)
   
  Instructions: Please click on the link above, and read Section 3.2 in its entirety.  Also, complete the Discussion questions at the end of the reading.  This reading explains how to calculate expected values, which are critical in risk management evaluations. 
   
  Reading, note-taking, and answering the Discussion questions should take approximately 2 hours to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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3.3 Choice under Uncertainty: Expected Utility Theory  

• Reading: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 3: Risk Attitudes: Expected Utility Theory and Demand for Hedging:” “Section 3.3: Choice under Uncertainty: Expected Utility Theory”

  Link: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 3: Risk Attitudes: Expected Utility Theory and Demand for Hedging:” “Section 3.3: Choice under Uncertainty: Expected Utility Theory” (HTML)
   
  Instructions: Please click on the link above, and read Section 3.3 in its entirety to learn how to use the Expected Utility Theory to evaluate the outcomes of decisions.  Also, complete the Discussion questions at the end of the reading. 
   
  Reading, note-taking, and answering the Discussion questions should take approximately 2 hours to complete.
  
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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3.4 Biases Affecting Choice under Uncertainty  

• Reading: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals:“Chapter 3: Risk Attitudes: Expected Utility Theory and Demand for Hedging:” “Section 3.4: Biases Affecting Choice under Uncertainty”

  Link: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals:“Chapter 3: Risk Attitudes: Expected Utility Theory and Demand for Hedging:” “Section 3.4: Biases Affecting Choice under Uncertainty”(HTML)
   
  Instructions: Please click on the link above, and read Section 3.4 in its entirety for an introduction to behavioral economics and potential biases that affect decision-making.  The biases discussed in this section include availability bias, anchoring bias, framing effect, and sunk cost.  Also, complete the Discussion questions at the end of the reading.  Please note that this reading also covers the topics outlined in sub-subunits 3.4.1 and 3.4.2.
   
  Reading, note-taking, and answering the Discussion questions should take approximately 2 hours to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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3.4.1 Framing Effect  

Note: This topic is covered by the reading assigned below subunit 3.4.  Focus on the text below the heading “Framing Effect.”

3.4.2 Availability, Experience, and Anchoring bias  

Note: This topic is covered by the reading assigned below subunit 3.4.  Focus on the text below the heading “Availability, Experience, and Anchoring Bias.”

3.5 Risk Aversion and Price of Hedging  

• Reading: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 3: Risk Attitudes: Expected Utility Theory and Demand for Hedging:” “Section 3.5: Risk Aversion and Price of Hedging”

  Link: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 3: Risk Attitudes: Expected Utility Theory and Demand for Hedging:” “Section 3.5: Risk Aversion and Price of Hedging” (HTML)
   
  Instructions: Please click on the link above, and read Section 3.5 in its entirety to learn about the connection between risk aversion and insurance premiums.  Also, complete the Discussion questions at the end of the reading. 
   
  Reading, note-taking, and answering the Discussion questions should take approximately 2 hours to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above

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Unit 3 Assessments  

• Assessment: Oxford University Press: Dominick Salvatore's Managerial Economics in a Global Economy: “Chapter 14:” “Multiple Choice Quiz”

  Link: Oxford University Press: Dominick Salvatore's Managerial Economics in a Global Economy: “Chapter 14:” “Multiple Choice Quiz” (HTML)
  
  Instructions: This assessment will test what you have learned so far for Units 1-3. Please click on the link above, and answer all of the questions in the Multiple Choice Quiz, except for the last three questions about auctions.  Click on the “Evaluate Quiz” button at the bottom of the page, and check your answers against the answer key.
  
  This assessment should take approximately 1 hour to complete.
  
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above. 

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• Assessment: The Saylor Foundation’s “Assessment for Unit 3”

  Link: The Saylor Foundation’s “Assessment for Unit 3” (PDF) and “Unit 3 Answer Key” (PDF).
   
  Instructions: Complete this assessment after you finish the readings of Unit 3. Write down your answers before checking with the Answer Key.

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Unit 4: Risk Management: Fundamental Tools  

In the prior units, we discussed risks at length from a variety of angles. With this unit, we finally begin the discussion of risk management methods.  The first step to understanding risk management is to learn the basics of the fundamental risk management processes.  In a broad sense, these include the processes of identifying, assessing, measuring, and evaluating alternative ways to mitigate risks.

Fortunately, the importance of this topic (considered by some as THE most important) has resulted in the development of several risk management standards from highly respected organizations such as the Project Management Institute, the National Institute of Science and Technology, actuarial societies, and ISO.

Unit 4 Time Advisory   show close


Unit 4 Learning Outcomes   show close


4.1 The Risk Management Function and Process  

• Reading: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 4: Evolving Risk Management: Fundamental Tools:” “Section 4.1: The Risk Management Function”

  Link: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 4: Evolving Risk Management: Fundamental Tools:” “Section 4.1: The Risk Management Function” (HTML)
   
  Instructions: Please click on the link above, and read Section 4.1 in its entirety. Also, complete the Discussion questions at the end of the reading.  This reading discusses the role of chief risk officers (CROs) and the risk management process.
   
  Reading, note-taking, and answering the discussion questions should take approximately 2 hours to complete.
   
  Terms of Use: Please respect the copyright and terms of use on the webpage displayed above.

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4.2 Beginning Steps: Communication and Identification  

• Reading: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 4: Evolving Risk Management: Fundamental Tools:” “Section 4.2: Beginning Steps: Communication and Identification”

  Link: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 4: Evolving Risk Management: Fundamental Tools:” "Section 4.2: Beginning Steps: Communication and Identification" (HTML)
   
  Instructions: Please click on the link above, and read Section 4.2 in its entirety.  Also, complete the discussion questions at the end of the reading.  This reading discusses how to identify risks using risk profiling or risk mapping techniques.  Carefully study Figure 4.2 in this section.  Note that this reading also covers the information outlined in sub-subunits 4.2.1 through 4.2.4.
   
  Reading, note-taking, and answering the discussion questions should take approximately 2 hours to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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4.2.1 Identifying Risks  

Note: This topic is covered by the reading assigned below subunit 4.2.  Focus on the text below the heading “Identifying Risks.”

4.2.2 Risk Profiling  

Note: This topic is covered by the reading assigned below subunit 4.2.  Focus on the text below the heading “Risk Profiling.”

4.2.3 Risk Mapping: Creating the Model  

Note: This topic is covered by the reading assigned below subunit 4.2.  Focus on the text below the heading “Risk Mapping: Creating the Model.”

4.2.4 Risk Identification and Estimates of Frequency and Severity  

Note: This topic is covered by the reading assigned below subunit 4.2.  Focus on the text below the heading “Risk Identification and Estimates of Frequency and Severity.”

4.2.5 Plotting the Risk Map  

Note: This topic is covered by the reading assigned below subunit 4.2.  Focus on the text below the heading “Plotting the Risk Map.”

4.3 Projected Frequency and Severity and Cost-Benefit Analysis—Capital Budgeting  

• Reading: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 4: Evolving Risk Management: Fundamental Tools:” “Section 4.3: Projected Frequency and Severity and Cost-Benefit Analysis—Capital Budgeting”

  Link: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 4: Evolving Risk Management: Fundamental Tools:” “Section 4.3: Projected Frequency and Severity and Cost-Benefit Analysis—Capital Budgeting” (HTML)
   
  Instructions: Please click on the link above, and read Section 4.3 in its entirety for an introduction to the basic tools for risk-based capital budgeting, including cost-benefit analysis as well as projected frequency and severity.  You will also learn about the Risk Management Information System (RMIS), used to quantify the loss history of an organization and assist risk managers in conducting trend analyses.  Remember to complete the discussion questions at the end of the reading. 
   
  Reading, note-taking, and answering the discussion questions should take approximately 2 hours to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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• Assignment: Murray State University: Dr. Larry Guin’s “Capital Budgeting Techniques,” “Managing Risk of the Cash Flow Estimates,” and “The Hurdle Rate”

  Link: Murray State University: Dr. Larry Guin’s “Capital Budgeting Techniques” (HTML), “Managing Risk of the Cash Flow Estimates” (HTML), and “The Hurdle Rate” (HTML)
   
  Instructions: For this activity, you will be asked to perform several capital budgeting analyses.  To prepare for the assignment, click on the first link above, and read the entire webpage for an overview of capital budgeting techniques.  Then, click on the second link above, and read the entire webpage on “Managing Risk of the Cash Flow Estimates.”  Optionally, you may also decide to read the webpage about “hurdle rate.”
   
  After reviewing all of the resources linked above, revisit the first resource, the “Capital Budgeting Techniques” webpage.  Under the section “A Capital Budgeting Spreadsheet,” make sure to click on the link to download the Excel file, “Capital Budgeting.xls.”  Scroll down to the section titled “Some Sample Capital Budgeting Problems,” and click on the “Shenandoah” link to download the PDF file.  Read the problem statement on the first page of the PDF file.  Answer the questions using the “Capital Budgeting.xls” spreadsheet that you also downloaded.  After you finish, check your answers against the solutions on pages 2-5 of the PDF file.
   
  Return to the “Capital Budgeting Techniques” webpage.  Scroll down to the section titled “Some Sample Capital Budgeting Problems,” and click on “Seal-A-Deal” to download the PDF file.  Read the problem statement on the first page of the PDF file.  Answer the questions using the “Capital Budgeting.xls” that you previously downloaded.  After you finish, check your answers against the solutions on pages 2-5 of the PDF file.
   
  Return to the “Capital Budgeting Techniques” webpage.  Scroll down to the section titled “Some Sample Capital Budgeting Problems,” and click on the “Princess Cruise Lines” link to download the PDF file.  Read the problem statement on the first page of the PDF file.  Answer the questions using the “Capital Budgeting.xls” that you previously downloaded.  After you finish, check your answers against the solutions on pages 2-6 of the PDF file.
   
  This assignment will take you approximately 4 hours to complete.
   
  Terms of Use: Please respect the copyright and terms of use on the webpages displayed above.

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4.4 Risk Management Alternatives: The Risk Management Matrix  

• Reading: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 4: Evolving Risk Management: Fundamental Tools:” “Section 4.4: Risk Management Alternatives: The Risk Management Matrix”

  Link: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals:“Chapter 4: Evolving Risk Management: Fundamental Tools:” “Section 4.4: Risk Management Alternatives: The Risk Management Matrix” (HTML)
   
  Instructions: Please click on the link above, and read Section 4.4 in its entirety to learn about the risk management matrix, which classifies risks based on high and low levels of frequency and severity.  The risk management matrix is a tool frequently used by risk managers in order to identify appropriate management strategies for certain types of risks.  Note that managers should try to avoid high-frequency, high-severity situations.  Remember to complete the Discussion questions at the end of the reading. 
   
  Reading, note-taking, and answering the Discussion questions should take approximately 2 hours to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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• Assignment: Mitre’s “Risk Management Toolkit”

  Link: Mitre’s “Risk Management Toolkit” (HTML)
  
  Instructions: Please click on the link above, scroll down to the bottom of the webpage, and select the link to download "Risk Matrix 2.20 Software"to your computer.  This is an Excel add-in that allows you to identify, prioritize, and manage risks.  You will need to have Excel installed on your computer and enable macros.  Also, click on the link on the webpage to download the PDF file titled "Risk Matrix 2.20 User's Guide" to learn how to use the software.  After you complete going through the user's guide, use the tool to construct a risk matrix for an activity that you are engaging in currently or in the near future.  Examples include applying to graduate school, organizing a party, and working on a class project.
  
  This activity should take approximately 4 hours to complete.
  
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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4.5 Comparisons to Current Risk-Handling Methods  

• Reading: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 4: Evolving Risk Management: Fundamental Tools:” “Section 4.5: Comparisons to Current Risk-Handling Methods”

  Link: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 4: Evolving Risk Management: Fundamental Tools:” “Section 4.5: Comparisons to Current Risk-Handling Methods” (HTML)
   
  Instructions: Please click on the link above, and read Section 4.5 in its entirety for an overview of current risk-handling methods.  Also, complete the Discussion questions at the end of the reading. 
   
  Reading, note-taking, and answering the Discussion questions should take approximately 2 hours to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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Unit 4 Assessments  

• Assessment: Pearson Education: George E. Rejda's Principles of Risk Management and Insurance: “Chapter 3: Introduction to Risk Management:” “Self-Assessment Quiz”

  Link: Pearson Education: George E. Rejda's Principles of Risk Management and Insurance: “Chapter 3: Introduction to Risk Management:” “Self-Assessment Quiz” (HTML)
  
  Instructions: Please click on the link above, which will take you to the Student Resources webpage for George E. Rejda's Principles of Risk Management and Insurance.  Select the link for “Chapter 3: Introduction to Risk Management.”  Next, click on the "Self-Assessment Quiz" link, and answer all 10 multiple-choice questions.  Click on “Submit Answers for Grading” button at the bottom of the webpage, and check your answers against the answer key.  Note that you do not need to e-mail your results.
  
  Completing this assessment should take approximately 30 minutes to complete.
  
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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• Assessment: The Saylor Foundation’s “Assessment for Unit 4”

  Link: The Saylor Foundation’s “Assessment for Unit 4” (PDF) and “Unit 4 Answer Key” (PDF).
   
  Instructions: Complete this assessment after you finish the readings of Unit 4. Write down your answers before checking with the Answer Key.

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Unit 5: The Evolution of Risk Management: Enterprise Risk Management  

The first three units of this course provided information to help you understand and measure risks, as well as to evaluate risk attitudes and risk behavior. Unit 4 concentrated on risk management and methods for identifying, measuring, and managing risks. This final unit introduces an idea that is critical to the management of risk--the realization that all risks should be treated in a holistic, global, and integrated manner, as opposed to having individual divisions within a firm treating the risk separately. Information technology, globalization, and innovation in financial technologies have all led to a term called “enterprise risk management” (ERM) that includes managing pure opportunity and speculative risks. This concept of Enterprise-wide Risk Management (ERM) was named one of the top ten breakthrough ideas in business by the Harvard Business Review in 2004.

Unit 5 Time Advisory   show close


Unit 5 Learning Outcomes   show close


5.1 Enterprise Risk Management within Firm Goals  

• Reading: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 5: The Evolution of Risk Management: Enterprise Risk Management:”“Section 5.1: Enterprise Risk Management within Firm Goals”

  Link: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 5: The Evolution of Risk Management: Enterprise Risk Management:”“Section 5.1: Enterprise Risk Management within Firm Goals” (HTML)
   
  Instructions: Please click on the link above, and read Section 5.1 in its entirety.  Also, complete the discussion questions at the end of the reading.  This reading discusses the values of risk management with respect to the goals of a company. 
   
  Reading, note-taking, and answering the discussion questions should take approximately 1 hour to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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• Lecture: YouTube: Stanford University: Strategic Decisions Group’s “How to Specify and Apply Corporate Risk Management”

  Link: YouTube: Stanford University: Strategic Decisions Group’s “How to Specify and Apply Corporate Risk Management”(YouTube)
   
  Instructions: Please click on the link above, and watch the video in its entirety.  In this video, leading risk managers describe best practices for managing a given risk appetite, which can be categorized as risk averse, risk neutral, or risk seeking.
   
  Watching this video lecture should take approximately 1 hour to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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5.2 Risk Management and the Firm’s Financial Statement—Opportunities within the ERM  

• Reading: MIT OpenCourseWare: John E. Parsons and Antonio S. Mello’s Course Notes on Advanced Corporate Financial Risk Management: “Chapter 2: How Companies Manage Risk”

  Link: MIT OpenCourseWare: John E. Parsons and Antonio S. Mello’s Course Notes on Advanced Corporate Financial Risk Management: “Chapter 2: How Companies Manage Risk” (PDF)
   
  Instructions: Please click on the link above, find “Chapter 2” in the “Course Notes” column, and click on the PDF link to download “Chapter 2: How Companies Manage Risk.”  Read the document in its entirety (23 pages) for an overview of corporate risk management strategies. 
   
  Studying this reading should take approximately 1 hour to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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• Reading: MIT OpenCourseWare: John E. Parsons and Antonio S. Mello’s Course Notes on Advanced Corporate Financial Risk Management: “Chapter 3: Why Companies Manage Risk”

  Link: MIT OpenCourseWare: John E. Parsons and Antonio S. Mello’s Course Notes on Advanced Corporate Financial Risk Management: “Chapter 3: Why Companies Manage Risk” (PDF)
   
  Instructions: Please click on the link above, find “Chapter 3” in the “Course Notes” column, and click on the PDF link to download the file titled “Chapter 3: Why Companies Manage Risk.”  Read the entire file (14 pages).  This reading illustrates the benefits of Enterprise Risk Management and introduces the Modigliani-Miller Theorem.
   
  Studying this reading should take approximately 1 hour to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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5.3 Risk Management Using the Capital Markets  

• Reading: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 5: The Evolution of Risk Management: Enterprise Risk Management:”“Section 5.2: Risk Management and the Firm’s Financial Statement”

  Link: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 5: The Evolution of Risk Management: Enterprise Risk Management:”“Section 5.2: Risk Management and the Firm’s Financial Statement” (HTML)
   
  Instructions: Please click on the link above, and read Section 5.2 in its entirety for a discussion on the causes of the 2008-2009 financial crisis.  This reading discusses how ERM relates to a company’s balance sheet.  Pay attention to Tables 5.3 and 5.5.  Remember to complete the discussion questions at the end of the reading. 
   
  Reading, note-taking, and answering the discussion questions should take approximately 2 hours to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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5.4 Risk Management Using the Capital Markets  

• Reading: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 5: The Evolution of Risk Management: Enterprise Risk Management:”“Section 5.3: Risk Management Using the Capital Markets”

  Link: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 5: The Evolution of Risk Management: Enterprise Risk Management:”“Section 5.3: Risk Management Using the Capital Markets” (HTML)
   
  Instructions: Please click on the link above, and read Section 5.3 in its entirety for an introduction to the basic risk management concepts for dealings in financial markets.  This reading describes the evolution of financial markets and provides a case study of financial risk management at a bank.  Topics include derivatives, forwards, futures, swaps and options, and insurance-linked securities.   Remember to complete the Discussion questions at the end of the reading.  Note that this reading also covers the topics outlined in sub-subunits 5.4.1 and 5.4.2.
   
  Reading, note-taking, and answering the Discussion questions should take approximately 2 hours to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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5.4.1 Evolution of Financial Markets  

Note: This topic is covered by the reading assigned below subunit 5.4.  Focus on the text below the heading “Evolution of Financial Markets.”  

5.4.2 Case Study: Financial Risk Management for a Hometown Bank  

Note: This topic is covered by the reading assigned below subunit 5.4.  Focus on the text below the heading “Example: The Case of Financial Risk Management for the Hypothetical Hometown Bank.”  This case study illustrates the process banks used to manage risk prior to the 2008-2009 credit crisis.  While completing this reading, keep the following question in mind: what are the primary elements of Hometown’s financial risks?  Also, be sure that you understand the information conveyed in Table 5.11 before proceeding to the next resource. 

5.5 Value-Protection Risk Management  

• Lecture: YouTube: Stanford University: Strategic Decisions Group’s “How Can Enterprise Risk Management Create and Protect Enterprise Value?”

  Link: YouTube: Stanford University: Strategic Decisions Group’s “How Can Enterprise Risk Management Create and Protect Enterprise Value?” (YouTube)
   
  Instructions: Please click on the link above, and view the lecturein its entirety to learn how to leverage value-driven ERM to align risk management with business strategies.  In this lecture, leading risk managers describe strategies to balance value creation and value protection in ERM. 
   
  Viewing this lecture should take approximately 1 hour to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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• Lecture: YouTube: Stanford University: Strategic Decisions Group’s “ImprovePortfolio Results with Value-Based Management”

  Link: YouTube: Stanford University: Strategic Decision Group’s “Improve Portfolio Results with Value-Based Management”(YouTube)
   
  Instructions: Please click on the link above, and watch the video in its entirety.  In this video, leading risk managers share their ideas on value-based management.  This video will help you improve your decision-making abilities when presented with an individual project for a larger portfolio.  You will also learn to minimize ad hoc decision-making. 
   
  Watching this lecture should take approximately 1 hour to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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5.6 Case Study: Risk Management in Health Care  

• Lecture: YouTube: Stanford University: Strategic Decision Group’s “Taking Healthcare ERM to the Next Level—Strategic Decisions and Risk Management Program”

  Link: YouTube: Stanford University: Strategic Decision Group’s“Taking Healthcare ERM to the Next Level—Strategic Decisions and Risk Management Program”(YouTube)
   
  Instructions: Please click on the link above, and watch this video lecture in its entirety to learn about a variety of potential risks in health care.  In this lecture, risk managers describe ERM for healthcare organizations. 
   
  Watching this lecture should take approximately 1 hour to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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Unit 5 Assessments  

• Activity: Pearson Education: George E. Rejda's Principles of Risk Management and Insurance: "Chapter 4: Advanced Topics in Risk Management:” “Web Exercise”

  Link: Pearson Education: George E. Rejda's Principles of Risk Management and Insurance: "Chapter 4: Advanced Topics in Risk Management:” “Web Exercise” (HTML)
  
  Instructions: Please click on the link above, which will take you to the Student Resources webpage for George E. Rejda's Principles of Risk Management and Insurance.  Select the link to “Chapter 4: Advanced Topics in Risk Management.”  Then, click on the “Web Exercise” link, and follow the instructions on the webpage to complete the exercise, which will introduce you to enterprise risk consulting.
  
  This activity should take approximately 1 hour to complete.
  
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above. 

  See a broken link? Please let us know!

• Assessment: Pearson Education: George E. Rejda's Principles of Risk Management and Insurance: “Chapter 4: Advanced Topics in Risk Management:” “Self-Assessment Quiz”

  Link: Pearson Education: George E. Rejda's Principles of Risk Management and Insurance: “Chapter 4: Advanced Topics in Risk Management:” “Self-Assessment Quiz” (HTML)
  
  Instructions: Please click on the link above, which will take you to Student Resources for George E. Rejda's Principles of Risk Management and Insurance.  Select the link to "Chapter 4: Advanced Topics in Risk Management.”  Then, click on the "Self-Assessment Quiz," and answer all 10 multiple-choice questions.  Click on “Submit Answers for Grading” button at the bottom of the webpage, andcheck your answers against the answer key.  Note that you do not need to e-mail your results.
  
  This assessment should take approximately 30 minutes to complete.
  
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above. 

  See a broken link? Please let us know!

• Assessment: The Saylor Foundation's "Unit 5 Assessment"

  Link: The Saylor Foundation's "Unit 5 Assessment" (PDF) and "Unit 5 Assessment Answer Key" (PDF).
  
  Instructions: Complete this assessment after you finish the readings of Unit 5. Write down your answers before checking with the Answer Key.

  See a broken link? Please let us know!

Unit 6: Risk Management: Advanced Tools  

This final unit will introduce you to advanced risk management tools.  You will learn how to use data analytics, modeling, and simulation to inform risk management decisions.  You will also learn how to communicate risk to stakeholders.  Last but not least, you will learn the specific roles of risk managers and chief risk officers (CROs) in various organizations.

Unit 6 Time Advisory   show close


Unit 6 Learning Outcomes   show close


6.1 Risk Modeling  

• Reading: McKinsey & Company’s Working Papers on Risk, Number 13: Angius et al.’s “Risk Modeling in a New Paradigm: Developing New Insight and Foresight on Structural Risk”

  Link: McKinsey & Company’s Working Papers on Risk, Number 13: Angius et al.’s “Risk Modeling in a New Paradigm: Developing New Insight and Foresight on Structural Risk”(PDF) 

  Instructions: Please click on the link above, scroll down the webpage to the article titled “Risk Modeling in a New Paradigm: Developing New Insight and Foresight on Structural Risk,” and click on the title to download the PDF file.  Read the PDF in its entirety.  Make sure to take notes on this resource.  This reading discusses the failures in risk-modeling predictions of the 2008 financial crisis as well as suggests various safeguards for financial institutions.  You will learn about the inadequate predictive models that deemphasize the importance of sound judgment.  You will learn how to assign disproportionate significance to mathematical models and the accumulation of recent information.
   
  Studying this reading should take approximately 3 hours to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above

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6.2 Intersection between Talent and Risk  

• Reading: NC State University: Poole College of Management: Enterprise Risk Management Initiative Faculty and Amy Claus’s “The People Side of Risk Intelligence”

  Link: NC State University: Poole College of Management: Enterprise Risk Management Initiative Faculty and Amy Claus’s “The People Side of Risk Intelligence” (PDF)
   
  Instructions: Please click on the link above, read the introduction to this white paper, and select the link at the end of the page to “The People Side of Risk Intelligence Related Materials” to download the PDF file.  Read Part I of the article (pages 2-6) for insight into the risks of talent management.  This reading addresses perspectives of both talent managers and risk managers as well as how to combine these approaches to increase enterprise value.  
   
  Studying this reading should take approximately 3 hours to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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6.3 Oversight of Enterprise Risk Management  

• Reading: McKinsey & Company’s Working Papers on Risk, Number 18: Brodeur et al.’s “A Board Perspective on Enterprise Risk Management”

  Link: McKinsey & Company’s Working Papers on Risk, Number 18: Brodeur et al.’s “A Board Perspective on Enterprise Risk Management” (PDF)
   
  Instructions: Please click on the link above to view a collection of McKinsey’s latest white papers on risk management.  Scroll down to the title of the article, “A Board Perspective on Enterprise Risk Management,” and click on the title to download the PDF file.  Read this entire document (15 pages) fora comprehensive perspective on the role of the company board in risk oversight.  This reading emphasizes the use of an integrated system of risk reports to prioritize and manage risks. 
   
  Studying this reading should take approximately 3 hours to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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6.4 Insurance Solutions  

6.4.1 Nature of Insurance  

• Reading: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 6: The Insurance Institution and Solutions:” “Section 6.2: Nature of Insurance”

  Link: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 6: The Insurance Institution and Solutions:” “Section 6.2: Nature of Insurance” (HTML)
   
  Instructions: Please click on the link above, and read Section 6.2 in its entirety.  Also, complete the discussion questions at the end of the reading.  This reading explains the basic principles of insurance.  Pay particular attention to studying the section on the “law of large numbers.” 
   
  Reading, note-taking, and answering the discussion questions should take approximately 2 hours to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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6.4.2 Ideal Requisites on Insurability  

• Reading: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 6: The Insurance Institution and Solutions:” “Section 6.3: Ideal Requisites on Insurability”

  Link: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 6: The Insurance Institution and Solutions:” “Section 6.3: Ideal Requisites on Insurability” (HTML)
   
  Instructions: Please click on the link above, and read Section 6.3 in its entirety for an overview of the requirements for insurability.  Also, complete the Discussion questions at the end of the reading. 
   
  Reading, note-taking, and answering the Discussion questions should take approximately 2 hours to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

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6.4.3 Ideal Requisites on Insurability  

• Reading: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 6: The Insurance Institution and Solutions:” “Section 6.4: Types of Insurance and Insurers”

  Link: Flat World Knowledge: Baranoff et al.’s Risk Management for Enterprises and Individuals: “Chapter 6: The Insurance Institution and Solutions:” “Section 6.4: Types of Insurance and Insurers” (HTML)
   
  Instructions: Please click on the link above, and read Section 6.4 in its entirety for an overview of types of insurance and insurers.  Also, complete the Discussion questions at the end of the section. 
   
  Reading, note-taking, and answering the Discussion questions should take approximately 2 hours to complete.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above. 

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• Activity: Palisade’s “@Risk;” Dr. Chris Albright’s “Financial Portfolio Model” and “Oil Drilling;” “@Risk 5.x Tutorials;” and “Industry Models”

  Links: Palisade’s “@Risk” (HTML); Dr. Chris Albright’s “Financial Portfolio Model” (Flash) and “Oil Drilling” (Flash); “@Risk 5.x Tutorials” (HTML); and “Industry Models” (HTML)
  
  Instructions: In this assignment, you will be asked to perform risk analysis using the @Risk software, one of the most popular risk analysis software in the world.  @Risk was developed and marketed by Palisade.  The software will be free for the first 15 days.
  
  For this assignment, you will be asked to do the following:
  1. Please click on the first link above, which will take you to a free trial version of @Risk.  Click on the button “Free Trial Download” under “@Risk: Now for Microsoft Excel and Microsoft Project.”  This will take you to a page, where you can fill in your personal information.  After you complete the form, click on the “Send my software!” link, and @Risk will be sent to the email address that you provided.  Follow the installation instructions to install @Risk.  You will need Excel already installed on your computer before installing @Risk. 
  
  2. To learn how to use @Risk, click on the second and third links above.  On the webpage, select the link for “Financial Portfolio Models,” and watch the entire presentation.  Then, on the webpage, select the link for “Oil Drilling,” and watch the entire presentation.  For further information on how to use @Risk, you can click on the fourth link above for “@Risk 5.x Tutorials,” which will provide a detailed tutorial for @Risk.  Make sure that you read the tutorial in its entirety as well as follow the instructions in the tutorial closely.
  
  3. Once you have completed studying and practicing @Risk, click on the last link above for “Industry Models.”  Scroll down to the section titled "Event and Operational Risks," and download the Excel file: “Example model: EventandOperationalRisks.xls.”  Open the Excel file, and explore the effects of different parameters on the outcomes.
  
  You should dedicate approximately 4 hours to complete this activity.
   
  Terms of Use: Please respect the copyright and terms of use displayed on the webpages above.

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• Activity: Pearson Education: George E. Rejda's Principles of Risk Management and Insurance: “Chapter 3: Introduction to Risk Management:” “Web Exercise”

  Link: Pearson Education: George E. Rejda's Principles of Risk Management and Insurance: “Chapter 3: Introduction to Risk Management:” “Web Exercise” (HTML)
  
  Instructions: Please click on the link above, which will take you to the Student Resources webpage for George E. Rejda's Principles of Risk Management and Insurance.  Select the link to “Chapter 3: Introduction to Risk Management.”  Then, click on the “Web Exercise” link, and follow the instructions on the webpage to complete the exercise, which will introduce you to captive insurance.
   
  This activity should take approximately 1 hour to complete.
  
  Terms of Use: Please respect the copyright and terms of use displayed on the webpage above. 

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Subunit 6.4 Assessment  

• Assessment: The Saylor Foundation's "Subunit 6.4 Assessment"

  Link: The Saylor Foundation's "Subunit 6.4 Assessment" (PDF) and "Subunit 6.4 Assessment Answer Key" (PDF).
  
  Instructions: Complete this assessment after you finish the readings of Subunit 6.4. Write down your answers before checking with the Answer Key.

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Final Exam  

• Final Exam: The Saylor Foundation's BUS404 Final Exam

  Link: The Saylor Foundation's BUS404 Final Exam (HTML)
  
  Instructions: You must be logged into your Saylor Foundation School account in order to access this exam.  If you do not yet have an account, you will be able to create one, free of charge, after clicking the link. 

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