The statement 'There is a five percent chance that John will be injured in an automobile accident while driving to work tomorrow' is an example of

The statement 'There is a five percent chance that John will be injured in an automobile accident while driving to work tomorrow' is an example of

• A. Quantifying risk
• B. Verifying risk
• C. Quantifying loss exposures
• D. Identifying hazards

Answer: (A)

Estimating the likelihood of a loss event. In risk management, risk is often described by how probable a loss is and how severe it could be. Saying there is a five percent chance of being injured in an automobile accident tomorrow expresses the probability of a loss occurring. This focuses on the likelihood component rather than the financial consequence or the existence of a hazard. Verifying risk would be about confirming that risk exists, which this statement assumes rather than tests. Quantifying loss exposures would involve estimating the monetary value of potential losses, not just the probability. Identifying hazards is about recognizing conditions that could cause a loss, not assigning a probability. So, this statement is an example of quantifying risk because it assigns a numeric probability to a future loss event.

Estimating the likelihood of a loss event. In risk management, risk is often described by how probable a loss is and how severe it could be. Saying there is a five percent chance of being injured in an automobile accident tomorrow expresses the probability of a loss occurring. This focuses on the likelihood component rather than the financial consequence or the existence of a hazard. Verifying risk would be about confirming that risk exists, which this statement assumes rather than tests. Quantifying loss exposures would involve estimating the monetary value of potential losses, not just the probability. Identifying hazards is about recognizing conditions that could cause a loss, not assigning a probability. So, this statement is an example of quantifying risk because it assigns a numeric probability to a future loss event.