The Global Association of Risk Professional (GARP) Suggests Classifying the Major

question 50

Essay

The Global Association of Risk Professional (GARP) suggests classifying the major categories of operational risk into five categories according to the cause of the loss event. Name and describe two of these categories.

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Definitions:

Flood Insurance

A specific type of insurance policy that covers property damage due to flooding, often required for buildings in flood-prone areas.

Diversification

An approach that involves putting money into different types of assets to minimize the total risk.

Insurance Monies

Funds paid out by insurance companies to policyholders in the event of a claim for loss or damage covered by a policy.

Adverse Selection

A situation in markets where buyers or sellers have information that other participants do not have, leading to an inefficient transaction outcome.