Casualty Actuarial Society (CAS) Practice Exam

When defining risk criteria, what factors must be considered according to Mia's guidelines?

1. Market trends and competitor analysis

2. Causes of risk, effects of risk, and metrics

3. Price fluctuations and consumer behavior

4. Legal compliance and ethical standards

The correct answer is: Causes of risk, effects of risk, and metrics

When defining risk criteria, it is essential to consider the causes of risk, the effects of risk, and the metrics used to measure risk. This comprehensive approach ensures that risk assessments are grounded in a thorough understanding of the potential sources of risk and their possible impacts on an organization. By focusing on the causes, you can identify where risks originate, allowing for better management and mitigation strategies. Understanding the effects helps in prioritizing risks based on potential impacts, ensuring that the most critical risks are addressed first. Additionally, having metrics in place facilitates the ongoing monitoring and evaluation of risks, which is vital for informed decision-making and strategy development. The other factors mentioned in the options do not align as closely with the structured approach needed for defining risk criteria. While market trends and competitor analysis, price fluctuations and consumer behavior, and legal compliance and ethical standards are all important considerations in various contexts, they do not encompass the systematic evaluation required for effective risk criteria definitions according to Mia's guidelines. By emphasizing causes, effects, and metrics, the focus remains on creating a robust framework for managing and understanding risks effectively.