Question

Caroline but a fancy new car. Within six months, she had to take the car in for repairs four times, each repair cost more than $1000. What type of risk does this best represent

Answer 1

Answer:

Personal risk is the correct answer

Explanation:

Plato users:)

Answer 2

Answer:

The type of risk related to the scenario presented is called Operational Risk

Explanation:

Operational Risks are strongly related to human error and or external events. We know that the car is new. Hence the possibility of a breakdown from a manufacturer or factory defect (given the question) is highly unlikely.

If the car has been fixed 4 times in 6 months, it is very likely that Caroline is not doing something right. E.g.

• She probably doesn't drive too well and has been in one too many accidents or
• Perhaps she drives just well enough to get herself to her intended destinations but is not skilled enough with defensive driving.

Or it just may be that she has been very unlucky with other drivers.

In any case, the error is human-elated and maybe external hence operational risks.

Other examples of operational risks are:

• Accounting errors
• Data entry errors
• It system failure  
• Non-reporting errors
• Power failure etc
• Utility downtimes

Besides loss of money as evidenced in the question, other resultant effects of operational risks are:

• Increased Overhead and
• Loss of goodwill reputation

Cheers