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IIQE Paper 1 Risk and Insurance question: restaurant chain compares

IIQE Paper 1Risk and Insurance

A restaurant chain compares its stock records with its sales takings to estimate how much food goes missing. Which step of risk management is this?

A quantifying the risk
B identifying the risk
C dealing with the risk
D transferring the risk

Show the answer and explanation

Answer: A. quantifying the risk

Answer: quantifying the risk. Measuring the size of the loss, here by comparing stock with takings, is the quantifying step.Why not the others:• identifying the risk: Identifying finds the possible causes of loss; this step measures how big the loss is.• dealing with the risk: Dealing with the risk comes after it is measured, e.g. by CCTV or a self-insurance fund.• transferring the risk: Nothing is shifted to another party at this step.Watch out: Calling any investigation 'identifying' when the purpose is to measure the loss.Rule: Risk management steps: identify (possible causes), quantify (size of loss), deal with (choose tools).Source: IA P1 Study Notes, 2024 Edition (8th ed., Nov 2024; for exams from 17 Feb 2025), 1.1.3(c), p. 1/3

Common mistake

Calling any investigation 'identifying' when the purpose is to measure the loss.

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Original study material written to the public IIQE Paper 1 syllabus. Independent, not endorsed by the Insurance Authority or the VTC. Verify figures and rules against current guidance before relying on them.