General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
In the risk management process, the first step is to:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The risk management process begins with identifying and analyzing loss exposures — determining what values are at risk, which perils threaten them, and how large the potential losses could be. Only after the exposures are understood can the manager evaluate techniques such as avoidance, retention, sharing, reduction, and transfer, and then implement and monitor the chosen program. Buying insurance before identifying exposures would risk over-insuring or under-insuring the wrong risks.
Why the other options are wrong
- B) Purchasing coverage for every possible risk is neither practical nor the first step; coverage should follow an analysis of the actual exposures.
- C) Selecting a technique without analyzing the risks inverts the process and can leave critical exposures unaddressed.
- D) Filing a claim presumes a loss has already occurred; risk management is forward-looking and begins before losses happen.
Memory hook
Identify first, insure second. You cannot manage a risk you have not found.