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Module 9

1. Maximizing shareholder value is an optimal strategy?


False. It is a result, not a strategy.
2. Firms just need a really good single strategy to be successful for a long period of time.
False, they need to adapt to innovations. Markets are always changing.
3. Which of the following caused the global financial crisis?
Poor risk management by financial firms, lack of regulation, and the real estate market collapse
4. What is the definition of strategic risk?
Mistakes in strategy
5. What should the strategy of a company do?
It should make you more competitive, give you an advantage over your competition, should
make you more alert to circumstances, and make you more resilient.
6. What was the global financial crisis described as?
A failure of risk management
7. Why is capitalism fiercening?
Companies are evaluated on a 3-6 month cycle and think along the lines of I need to make
money today and forget about future profits
8. What played a large role in the global financial crisis but was not the only cause?
Strategy and the lack thereof
9. What was a common theme in the financial crisis?
Fiercening of capitalism versus corporate strategy
10. What is corporate strategy focused on?
The ultimate goal, purpose, and strategy both short term and long term
11. What 5 things played roles in the financial crisis besides strategic risk?
How the mortgage system works, Fannie Mae / Freddie Mac, Conforming Mortgage, Credit
Default Swaps, and Mortgage Securitization
12. What is a mortgage?
A loan from a bank to buy real estate. Most real estate transactions involve mortgages (80% of
transactions). You will eventually have to pay it back.
13. How much will a conforming mortgage cover of the property value?
80%

14. Why dont banks want to lend too much?


It depletes their cash quickly.
15. What are loans in the eyes of the bank?
Long Term Assets (accounts receivable)
16. What are deposits in the eyes of the bank?
Short term liabilities
17. Why did banks make revenue on loans and mortgages?
Prices were rising so much and therefore qualifications did not matter and so they had no risk
18. What is an on demand deposit?
I can walk into the bank anytime and demand my money back. This is shown as a liability in the
eyes of the bank. They take your money and invest it.
19. What is Fannie Mae / Freddie Mac?
Government sponsored, secondary mortgage markets. They give the cash back to the banks to
encourage the banks to lend again. They dealt with MBSs.
20. What do Mortgage Backed Securities (MBS) do?
They take the thousands of mortgages and create a bond, where the payment on the bond is
linked to the person who bought the mortgage. The MBS is put onto the market. These were
actually risky.
21. Why did MBSs work until 2006?
Because the real estate values kept going up. As long as property values dont go down by more
than 20%, everything was fine.
22. Why did rates start going down in 2007?
No one can pinpoint why, but they continued to decrease.
23. In response to the declining rates, what were the two options?
Short sale = convincing banks to let you pay back less money than your
borrowed.
Walk away = stop paying the mortgage and let the banks foreclose on you and
make you file for bankruptcy. A lot of people did this.
24. Were there people that saw this coming?
Yes
25. What is a conforming mortgage?
The most that banks will lend you up to 80% of property value
26. What are Credit Default Swaps?

Due to the riskiness of MBSs, Freddie Mae and Freddie Mac found a financial institution
(Lehman Brothers) to do a credit default swap (CDS) to guarantee that people will pay their
mortgages, and if people do not, then Lehman Brothers will pay. This is a 3rd party guaranteeing
payment.
27. Why did Lehman Brothers go out of business?
Due to Credit default swaps. They did not have long term strategy.
28. What did the Federal Government do?
They stepped in due to systemic risk and started bailing financial institutions out.
29. What is mortgage securitization?
Financial institutions such as Lehman Brothers who guaranteed payment of mortgages.
30. Did strategy cause the crisis?
No, but it did nothing to avert it either. No one checked the qualifications of the people who were
applying for mortgages.
31. What is the sphere of competence?
What is your strategy and what are you going to do in areas that you know?
32. In the 90s, what were internet stocks evaluated on?
Stock values. High = good.
33. What did strategy point to as the only measure of success?
Stock price
34. What did Michael Porter lament about in the 90s?
That companies were sacrificing long-term strategy for more faddish concerns / short term
profits
35. What is the problem with strategy?
Competitive advantage time is shortened, positional volatility of leaders, and need for adaptive
strategy
36. What is an example of the positional volatility of leaders?
o Best Buy is going to be gone due to the internet unless they adapt because they
are selling a commodity that can be price checked.
o GE does a good job at adapting and staying current in order to survive
37. Why do we need an adaptive strategy?
Instead of developing one strategy based on analysis, prediction and deduction, create a set of
optimal conditions for the continuous emergence of superior strategies.
We need a bunch of good strategies that will keep us at the forefront.
38. What four things do we need to incorporate in strategy?

Risk, boundaries, corporate purpose, and environment


39. Why is one strategy not good enough?
Things are changing rapidly today
40. According to strategic risk, what can strategy not ignore?
Risk
41. Is systemic risk real?
Yes, in the mortgage crisis, when one financial institution falls, it has a domino effect and many
others will fall as well. If the Federal government didnt step in, it would have been worse.
42. What causes systemic risk?
Interrelation
43. When was systemic risk the highest?
It is the highest today than it has ever been
44. How do companies build contingencies into strategy in order to deal with risk? (aka how can
they be more resilient?)
By creating back up plans (excess capacity). However this is not an optimal use of resources
45. What is the trade off in relation to resilience?
Between efficiency and redundancy/excess capacity
46. What are strategic boundaries defined by?
Strategy
47. What questions are asked in relation to strategic boundaries?
Market definitions/segments?
What activities should we pursue?
How broad should our scope be?
What are your core competencies? How are you going to stay relevant?
48. What determines whether or not you are maximizing shareholder value?
How you answer the strategic boundary questions
49. What is corporate purpose defined by?
Strategy
50. What three things are incorporated in corporate purpose?
Stability, growth and employees
51. Is shareholder value a result or a strategy?
A result

52. What is strategic environment reflected by?


Strategy
53. What three things does strategic environment encompass?
What type of growth is sustainable, Demographic trends, and Consumption trends
54. What 4 things does strategy incorporate?
Strategic risk, strategic boundaries, corporate purpose, and strategic environment
55. What was cast aside in the global financial crisis?
Strategy because of the spectacular growth of the mortgage markets and the financial derivatives
56. What was the height of financial success?
2007, when banks and other financial institutions amounted to 41% of the share of US corporate
profits
57. What led to the consolidation of the industry?
Deregulation, competition, and new technologies
58. What are quants?
The new breed of financial engineers behind the new instruments, such as credit default swaps.
These people led the innovation front.
59. What was greater taylorism?
Efforts of cost cutting and sourcing
60. Executives were in charge of making strategy and were at a disadvantage for what?
Judging the risk that all the new innovations might carry.
61. What are the 3 Cs of strategy revolution?
Customers, costs, and competitors
62. Who said that paranoia is just having all of the facts?
William Burrough
63. When the Boston Consulting Group canvassed 20 global companies about their ideas on
strategy when financial institutions freeze up, what did these companies say?
We do not do strategy and With the world changing so quickly, how can we make predictions
about the future?
64. Did being the biggest company make you the most profitable?
No
65. Just as many companies were realizing that people were the key to their future strategic
success, what were they also discovering?

That shareholder-value pressured people to work longer hours and that heightened job insecurity
were making employees more likely to feel unmotivated and disenfranchised.
66. Who were the people who became responsible for strategy?
The people who were in daily contact with customers, competition, and changing market
conditions.
67. Who said that shareholder value is a result, not a strategy?
Jack Welch
68. Few Companies today are concerned about supply chain management
False
69. A major concern of supply chains today is the real tradeoff between efficiency and potential
disruption
True
70. Supply chain disruption cost Toyota the #1 spot for automakers in 2011
True, an earthquake caused a tsunami and knocked them from #1 to #3 because they could not
transport the parts. They lost 50% of production.
71. In supply chain management, what have may companies moved towards?
Just in time delivery, reducing the need to store excessive amounts of stock which can be
costly
72. What is supply chain risk?
Anything that can interrupt the ultimate product delivery (anywhere along that supply chain).
Think about how an organization goes from raw materials to finished products on the market (a
chain of events).
73. In supply chain, what is there a real tradeoff between?
Efficiency and potential disruption
74. Why do we generally win wars?
Based on supply chain
75. In supply chain, who is risk put on?
Risk is put on the supplier, not the manufacturer.
76. What is supply chain?
A system of organizations, people, activities, information, and resources involved in moving a
product or service from supplier to customer.
77. What is the problem with supply chain risk?
How can we predict what is going to happen?

78. What does risk management often rely on?


Looking at historical data to estimate frequency and severity of future losses
79. What does risk management work well for?
Common supply chain problems
80. What are three examples of common supply chain problems?
Poor supplier performance (poor quality, late), Forecast errors (not ordering enough, too much),
and Transportation breakdowns
81. What doesnt risk management work well for?
Low probability/high impact events that are hard to predict
82. What are 4 examples of these hard to predict events?
o Hurricane Katrina
o Superstorm Sandy
o SARS outbreak
o Ebola outbreak
83. What is supply chain risk similar to?
The discussion of big data that uses analytics and models. Lets not worry about the cause, lets
worry about the effects.
84. In the article about supply chain risk, what is the authors purpose?
To ignore the cause of the disruption to the supplier and to develop a model that focuses on time
to recovery of the supplier, our exposure to that supplier, and risk exposure index.
85. If we ignore the cause of the disruption to the supplier, what do we actually care about?
I dont care why they cant deliver, just that they cant deliver and how long it will be before they
can deliver
86. What should be done for every supplier that a company has?
Develop a model that focuses on time to recovery (TTR) of the supplier (estimated); and our
exposure to that supplier, risk exposure index (estimated).
87. What is TTR?
Time to recovery how long until the supplier can deliver the time it takes for a particular
node to be restored to full functionality after a disruption.
88. What is exposure?
How we are effected
89. How does the risk management strategy for supply chain work?
Take out one supplier at a time, and using their estimated TTR, make the adjustments we would
make to the rest of our supply chain to keep getting our product to market for that duration. Next,

determine how much it would cost us (lost profitability). Finally, plot the results to see our risk
exposure to each supplier.
90. What type of approach is this?
A methodical approach that does not forget about small, low-cost commodity (things that you
can buy from anyone) suppliers which can have a large impact
91. What are the 7 benefits of this strategy?
1. Identifies hidden exposures (you do not skip over anything, you are looking at
every single supplier)
2. Avoids the need for predictions about rare events (dont worry about the why)
3. Reveals supply chain dependencies and bottlenecks (dominos effects)
4. Promotes discussion and learning among senior management
5. Allows for more focused risk management
6. Many key suppliers are properly managed
7. Many small suppliers often overlooked prior to this type analysis
92. What is just in time delivery?
What businesses are primarily focused on in order to be the most efficient. Products are delivered
only when they need it so as not to have too much excess inventory. The problem is the tradeoff
when something goes wrong. There is a longer time to recover.
93. When does supply chain risk become a more of a problem?
When businesses outsource
94. According to "From Superstorms to Factory Fires", the author was surprised to find what
kind of correlation between how much a firm spends annually on procurement at a particular site
and the site's impact on company performance?
Little correlation
95. In "From Superstorms to Factory Fires", what was Ford able to do using the model described
in the article?
A: Using the model, Ford was able to identify the supplier sites that required no special riskmanagement attention
96. In "Strategy, Risk, and the Global Financial Crisis", Walter Keichel argues that a fair-minded
observer would conclude which of the following statements in regards to the financial crisis?
While strategy and its champions may not have been a main cause in bringing on the global
financial crisis, they did not do much to avert it.
97. In "Strategy, Risk, and the Global Financial Crisis", what was a major difficulty encountered
by Boston Consulting Group when the firm canvassed Indian, Japanese, European, and American
firms?
Firms were unwilling to implement a strategy, replying "We don't do strategy".

98. The following statement describes which of the following theories? "_________ is a theory
of management that analyzes and synthesizes workflows. Its main objective is improving
economic efficiency, especially labor productivity."
Taylorism
99. Which of the following is a primary benefit of using the linear optimization model?
The model reveals supply chain dependencies and bottlenecks.
100. Which of the following is NOT an example of PI (performance impact)?
Unemployment rate
101. What are examples of PI (performance impact)?
Lost units of production, profit margin, and revenue
102. Which of the following is not described in "Strategy, Risk, and the Global Financial
Crisis?" as being part of the "constellation" of forces responsible for the blurring of traditional
industry lines?
Interest from investors
103. What are described in "Strategy, Risk, and the Global Financial Crisis?" as being part of the
"constellation" of forces responsible for the blurring of traditional industry lines?
Deregulation, competition from new quarters, and new technologies
104. What is an REI score?
Risk Exposure index that is assigned to nodes in a supply chain
105. What are examples of supply chain responses that will minimize the performance impact of
the disruption at a specific node?
Drawing down inventory, shifting production, expediting transportation, or reallocating resources
106. What are operational performance impact (PI) generated based on?
Optimal response for the node
107. What can PI be measured in?
lost units in production, lost sales, revenue, or profit margin
108. What will be assigned to the node with the largest PI?
An REI of 1.0
109. What will all other nodes be assigned?
An REI score that has been indexed relative to the node with the largest PI.
110. What would a node whose disruption would cause the least impact be assigned?
An REI close to zero
111. What mathematical technique does this model use?

Linear optimization to determine the best response to a nodes being disrupted for the duration of
its TTR
112. What is true about REI scores?
The node with the largest performance impact is assigned an REI of 1.0, REI allows a firm to
identify at a glance the nodes that should get the most attention from risk managers, and a node
whose disruption would cause the least impact receives an REI value close to zero.
1013. What is NOT true about REI scores?
REI scores help determine macroeconomic effects of monetary policy
114. Which of the following provides the clearest description of time to recovery (TTR)?
The time it would take for a particular node to be restored to full functionality after a disruption
115. What is the most important thing that you can do today?
Vote
116. Financial derivatives are extremely risky and should be heavily regulated?
True
117. What are the traditional methods for managing supply chain risk?
Ones that rely on knowing the likelihood of occurrence and the magnitude of impact for every
potential event that could disrupt a firms operations. These methods work well for common
supply chain disruptions such as poor performance, forecast errors, and transportation
breakdowns. These methods use historical data to quantify the level of risk.
118. Why is uncommon supply chain risk hard to quantify using the traditional model?
Historical data is limited and nonexistent for low probability, high impact events.
119. What is a new model created to focus o?
The impact of potential failures at points along the supply chain rather than the cause of the
disruption. The model can be updated quickly and easily. It determines the probability that any
specific risk will occur.
120.
Producers overlook the risks associated with ______?
Low cost, commodity suppliers. This leaves the organization exposed to hidden risk.
121. The model accounts for _____?
Existing and alternative sources of supply, transportation, inventory, work in progress, and
production dependencies.
122.

Benefits of the supply chain model:


a. It identifies hidden exposures
b. It avoids the need for predictions about rare events
c. It reveals supply chain dependencies and bottlenecks It promotes discussion and
learning

123.

The model allows us to categorize suppliers into 2 dimensions:


a. The total amount of money that the company spends at each supplier site in a given
year
b. The performance impact on the firm associated with a disruption of each supplier
node.

124. What is characteristic of high risk?


When the total amount spent and the performance impact are BOTH high.
125. What is characteristic of low risk?
Low total spent and low performance impact
126. What is characteristic of hidden risk
Total spent is low but performance impact is high

Module 10A
127. What is a derivative?
A contract between two or more parties whose value is based on an agreed-upon underlying
financial asset, index or security
128. What are common underlying instruments to derivatives?
Bonds, commodities, currencies, interest rates, market indexes, and stocks.
129. What type of risk is a derivative an example of?
Organizational level risk
130. What are the 5 common types of derivatives?
Futures contracts, forward contracts, stock options, swaps, and warrants
131. Why is a futures contract considered a derivative?
Its value is affected by the performance of the underlying contract
132. Why is a stock option considered a derivative?
Its value is derived from that of the underlying stock
133. Describe derivatives used as a hedge.
Derivatives are great for hedging and it allows you to get rid of price risk by setting a price to
sell product in the future. The value of the contract is unknown. This does not create risk.
133.

In the following example, what have I done? I am an airline and I will use 10 million
barrels of aviation fuel this year. I dont know what the price of aviation fuel will be when I
need to buy it. I can enter into a futures contract to purchase the fuel at a specified price at a
specified time.

I have hedged my exposure to fuel price risk. If prices go up, I make money. If prices go down, I
lose money.
134.
Describe derivatives used to speculate.
Derivatives can also be used to speculate about future prices. Sell it now, high, and buy it again
later, low. If prices are predicted to go down, I make money. If prices go up, I lose money. This
creates risk by taking on exposure that I have never had.
135.

What is the problem of the following example? I think that the S&P index is going to go
down, how can I make money on that? I can enter a derivative transaction where I sell the
index at todays prices.
I do not actually own shares of the index to be able to sell
136. What options do I have in the example above?
Well, when the index goes down, I can enter into a different derivative transaction to buy at the
lower price.
If I sell high and I buy low, I make money without ever actually owning any shares of the
index. (or, if the index goes up and I sell low and buy high, then I lose money)
137. What is the risk in the use of derivatives?
Since many trades are unregulated, there is little oversight to see how risky some of the
positions that are being taken by individuals or organizations are. Domino effect and systemic
risk are an issue.
138.

What was the problem with Robert Citron in the Orange County case when they lost
over 1 billion dollars and went bankrupt?
They could no longer pay municipal bonds
139. Why did Barings Bank go bankrupt?
Nick Leeson hid his losings of billions of dollars from speculative transactions in Singapore.
140. Why did Lehman Brothers go bankrupt?
They were exposed to credit default swaps and subprime mortgages and were guaranteeing other
financial institutions money. A 3-4% move in property values and they went bankrupt. Everyone
saw this coming and a domino effect was created. The federal government did not bailout
Lehman Brothers but it did help Bank of America.
141. What is ironic about Warren Buffet from Berkshire Hathaway?
In 2002, The Oracle o Omaha (aka Warren Buffet) said, derivatives are financial weapons of
mass destruction. 6 years later (2009) he lost 67 billion dollars in derivatives transactions and
stripped Berkshire Hathaway of its triple A debt rating thus causing them to go bankrupt. He then
said, auditors cant audit these contracts, and regulators cant regulate them.
142.

Why even use derivatives if there is so much risk?


a. Legitimate hedging function they are a risk management tool
b. Amplify (leverage) returns (both good and bad)

c. All about risk/reward


d. Help make money move faster
e. Help make money work harder
143.

What dont we know about derivatives?


a. What is the risk exposure in derivatives?
b. No one knows exactly how big the derivatives market is because there are over the
counter trades

144. True or False: speculators often help make markets work


True. So in terms of regulation of derivatives, if you want to speculate, you should be allowed to.
145.
Can derivatives be regulated effectively?
Probably not, they are very complex and looking back at failures, if internal supervisors could
not see the risk, how could an external regulator?
146. Are derivatives a global product?
Yes, which is another reason why it is hard to regulate.
147.
In 2009, what were derivatives estimated to be?
One of the largest potential disasters of business transactions
148. What are derivatives used for?
To determine what someone is willing to pay for a contract
149.

True or false: derivatives are financial instruments based on other products, both physical
and financial.
True
150. Are derivatives powerful investment devices?
Yes, especially in hedge funds. 70% of hedge funds trade derivatives
151. According to Yong Chen, are derivatives associated with heavy risk taking?
No. Little is known about their effects on fund risk and performance.
152. What does hedge mean?
To insure against
153. According to Yong Chen, what did the high risk reputation of derivatives spur from?
Financial failures which used derivative trading
154.
How do derivatives derive their value?
From other assets and are derivatives are financial instruments that allow investors to speculate
on the future price of an asset.
155.

What does Thomas A. Bass think caused recent market failures?

Mismanagement of the derivative investments.


156. What does Thomas Bass describe derivatives as?
The worlds largest betting parlor and having gambling risks similar to crystal meth
157. Who believes that widespread regulation of derivatives should be instated?
Thomas Bass

Module 10B
158. What are examples of our needs?
We need food, water, shelter, and clothing.
159. What are examples of our insatiable wants?
We want entertainment, communication, variety, and brownies.
160. What do our wants and desires spur?
Economic activity
161. True or False: Our wants are unlimited
True
162. Why are our means limited?
Resources, labor, capital and technology are scarce
163. True or False: It is difficult to determine the right mix of production, i.e. how much of each
product
True
164. True or False: The resources available to produce to fulfill our wants and needs are limited
and usually cannot be increased greatly at any given time.
True
165. What is technology usually subject to?
Limited degrees of improvement.
166. What does technology refer to?
The known means and methods available for combining resources to produce goods and
services.
167. What is labor?
The efforts of mind and muscle that can be used in production process
168. What is capital?
All of the nonhuman ingredients that go into production

169. What is the primary measure of production?


GDP
170. What is GDP?
It is the total value of production using market prices. (production x market value)
171. What doesnt GDP take into account?
Ownership. Where it is manufactured is the place where its GDP is contributed. It is not taking
into account where the product is sold.
172. What doesnt GDP as the economic pie tell us?
It doesnt tell us what is produced, all we know is the size of the pie. GDP is the economic pie
doesnt tell us anything about how that pie is split up.
173. What can cause GDP to Increase?
GDP can increase due to production increases or price increases.
174. What does Toyotas Camry which is produced in Kentucky count as?
US GDP, not Japan
175. This module deals with what type of risk?
Societal risk
176. What does every economy have a stock of?
Resources (labor & capital) and technology to produce
177. What is virtually limitless?
How resources and technology are combined to produce products/services
178.
If an economy can only produce two products, how can this be represented?
It can be represented by the production possibilities curve
179.
True

True or False: Opportunity cost is not linear

180.
True

True or False: Marginal cost is increasing and therefore the curve is convex.

181.

Is it possible to answer the following questions: What is optimal? What is the right level
of production?
No, it is impossible too tell.
182.
True

True or False: When you are near capacity, the cost moves a lot.

183.

What are the 2 types of Economic Growth:

Generic and specific growth


184. What is Generic growth?
When the GDP pie gets bigger: new resources, new technology, etc.
185. What are examples of Specific growth?
Education technology and food technology
186. When does the economic pie get bigger?
As GDP grows, the pie gets bigger.
187.
Yes

Can Governments use GDP to measure well being?

188. What do governments look at to answer the following question: Are we producing more?
Real GDP make adjustments for inflation/price changes
189.

What do governments look at to answer the following question: Are we using more
(labor) resources?
Per capita real GDP how much we can produce per person in our economy
190.
No

Is income evenly distributed?

191. What is the income chart divided into?


Quintiles - First 20% - Poorest, Second 20 % - Second Poorest, Third 20% - Middle Class,
Fourth 20% - Second Richest, Fifth 20% - Richest
192. What causes poverty?
Income disparity the fact that it is not distributed evenly
193. How do you fix income disparity and should it be fixed?
Quality of the labor force - Quality of the labor force education be careful type of
education skills
Capital = natural resources
Stock of Capital / Capital Accumulation
Technology
Efficiency
Population highly effects growth of an economy
193. What does the development chart of countries look at?
The development chart looks at population, rate of population increase, life expectancy, per
capital real GDP, and GDP growth rate.
194. What are examples of Less Developed Countries?

Chile, China, Columbia, Egypt, El Salvador, Ethiopia, India, Indonesia, Kenya, Mexico, Nigeria,
Peru, Philippines, South Africa, Thailand, Venezuela, and Zambia
195. What is characteristic of Less Developed Countries?
These usually have higher population, higher rate of population increase, lower life expectancy,
lower per capita real GDP, and higher GDP growth rate
196.

What can governments in less developed countries do to combat income disparity?


Communism vs. Capitalism
Planned vs. unplanned economy
Involvement in education
Infrastructure
Attract FDI (Foreign Direct Investment) developed countries invest, help train our
workers, and update less developed countries infrastructure.

197. What is the issue with FDI?


Nationalization when the host country (less developed country) takes over once it has been
developed and kicks foreigners (developed country) out.
198. When was most of the U.S infrastructure built?
Under the Eisenhower reign and then was not updated for 50 years which led to bridges
collapsing.
199. What are examples of Developed Countries?
Canada, France, Germany, Italy, Japan, Singapore, Sweden, Switzerland, United Kingdom, and
United States
200. What is characteristic of Developed Countries?
These usually have lower population, lower rate of population increase, higher life expectancy,
higher per capita real GDP, and lower GDP growth rate more efficient in production
201. What can governments of developed nations do to combat income disparity?
Humanitarian aid
World Bank / loans to developing countries
Partnerships / Cooperation
Outsourcing
201.
2/3

What fraction of the worlds population goes to sleep hungry at night?

202.
1/5

What fraction of the world survives on no more than $1 per day?

203. What do human beings want?


The things that are necessary to keep them alive (food and protection).

204.
True

True or False: Wants are unlimited and insatiable due to variety.

205.
True

True or False: Resources are always scarce relative to the sum of total of human wants.

206. What is technology?


The known means and methods available for combining resources.
207. What does GDP measure?
The total market value of all final goods and services produced within an economy during a
specific time period.
208. What is the Production possibilities curve a graphical representation of?
The maximum quantities of the two goods that an economy can produce when its resources are
used in the most efficient way possible.
209. What is the opportunity Cost Principle?
The true cost of producing an additional unit of a good or service is the value of the other goods
and services that must be given up to obtain it.
210. What is increasing opportunity cost?
As more of a particular good or service is produced, the cost in terms of other goods or services
given up grows. This gives the productions possibilities curve its bow shape.
211.What is Marginal social cost?
The true cost born by society when the production of a good or service is increased by one unit.
212. What is Marginal social benefit?
The true benefit to society of a one unit increase in the production of a good or service.
213. What is Cost benefit analysis?
A technique for determining the optimal level of an economic activity. In general, an activity
should be expanded so long as the expansion leads to greater benefits than costs.
214. What is Real GDP?
GDP in current dollars corrected for inflation. The correction required dividing each years GDP
in current dollars by that years price index in decimal form
215. What is Per capita real GDP?
Real GDP divided by population
216. What is Per capita GDP?
GDP in current dollars divided by population
217. What are the 5 causes of poverty and requisites of economic growth:

1.
2.
3.
4.
5.

Quality of labor force


Stock of capital and capital accumulation
Technology
Efficiency
Population

218. What is not a cause of poverty?


Health Care
219. GDP measures which of the following?
Production
220. What depicts the combination of resources and technology to produce products and
services?
Production Possibilities Curve
221. What does Thomas Bass from "Derivatives: The Crystal Meth of Finance" mean when he
says, "Derivatives do the work of Adam Smith's invisible hand principle?
Derivatives transmogrify individual greed in the collective good
222. Which of the following best describes an accurate implication of the resources and
technology available to a producing country?
The production combinations between resources and technology is virtually limitless
223. Which of the following is something less developed governments can do to alleviate
poverty?
Attract foreign direct investment
224. Which of the following best describes something developed governments can do to alleviate
poverty in lesser developed countries?
Humanitarian Aid
225. To what does Chen attribute the high-risk image of derivatives?
A number of spectacular financial failures from 1994 to 2008
226. GDP was referred to as the economic pie. One of the limitations, in this sense, is that we
dont know how the pie is split up.
True
227. Each economy possesses resources and technology to use in production
True
228.Which is greater, our wants or our means?
Our wants
229. Wealthier nations have an obligation to help poorer nations

False
230. Corporations have an obligation to help poorer nations.
False
231. Countries can increase their GDP by:
Increase in capital, increase in labor, and improvement in technology
232. The US is the only country with an income inequity problem
False

My Extra Credit Assignment:


233. According to the reading, which of the following are things that human beings want?
I.
Food
II.
Protection from Natural Elements
III.
Clothing
(a)
(b)
(c)
(d)
(e)
(f)
(g)
234.
(a)
(b)
(c)
(d)

I
II
III
I and II
I and III
II and III
I, II, and III
According to the reading, wants are _________ and ________ due to variety.
Unlimited, insatiable
Limited, insatiable
Unlimited, satiable
Limited, satiable

235.

Which word best describes the following definition: all of the efforts of mind and
muscle that can be used in production processes?
(a) Capital resources
(b) Labor resources
(c) Technology
(d) All Resources

236.
(a)
(b)
(c)
(d)

According to the reading, resources are always scarce relative to _______?


Sum of human needs
Sum of human dreams
Sum of human wants
Sum of human cravings

237.

What does GDP measure?

(a)
(b)
(c)
(d)

The total market value of all final goods and services produced
The total market value of all finished and unfinished goods produced
The total market value of all services offered
The total market value of all resources

238. Which of the following can cause increases in GDP?


I.
Human desires
II.
Production
III.
Average Prices
(a)
(b)
(c)
(d)
(e)
(f)
(g)

I
II
III
I and II
I and III
II and III
I, II, and III

239.

What word best describes the following definition: a graphical representation of the
maximum quantities of the two goods that an economy can produce when its resources are
used in the most efficient way possible?
(a) Economic frontier
(b) Production possibilities curve
(c) Opportunity cost curve
(d) Average GDP curve

240.
(a)
(b)
(c)
(d)

Which of the following is a characteristic of the production possibilities frontier?


Increasing opportunity cost
Decreasing opportunity cost
Increasing marginal social cost
Decreasing marginal social cost

241.

What term best describes the following definition: GDP in current dollars corrected for
inflation
(a) Per capita real GDP
(b) Per capita GDP
(c) Real GDP
(d) GDP

242. Which of the following is NOT a cause of poverty and requisites of economic growth?
I.
Quality of labor force
II.
Stock of capital and capital accumulation
III.
Technology
IV.
Efficiency
V.
Population

(a)
(b)
(c)
(d)
(e)
(f)
(g)

I
II
III
IV
V
All of the above ARE causes
None of the above ARE causes

Module 11
243.
True

True or False: Many global risks do not respect national borders.

244. How many experts does the annual Global Risk Survey?
More than 700 experts
245. What is the objective of the survey (Global Risks 2014 report)?
To explore nature of systemic risks, map out 31 global risks, and focus on how the 3
constellations have systemic impact
246. What are the 3 constellations?
Youth, cyberspace, and geopolitics
247. What can global risks only be addressed by?
Long term thinking and collaboration among businesses, governments and civil society.
248.
How are the 31 risks mapped out?
According to the level of concern they arouse, their likelihood and potential impact, as well as
the strength of the interconnections between them
249. What are the 4 Underlying Themes in the Report?
1. Trust (in other countries to do what they say)
2. Long-Term Thinking (problem: most risks are not immediate, but rather future risks)
3. Collaborative Multi-stakeholder Action (these problems cannot be solved solo)
4. Global Governance
250. What is Global Risk?
The occurrence that causes significant negative impact for several countries and industries over a
time frame of up to 10 years.
251. What is Systemic Risk?
The breakdowns in an entire system, as opposed to breakdowns in individual parts or
components
252. What are Systemic Risks characterized by?
Large failure:

Modest tipping points combining indirectly to produce large failures


Risk-sharing or contagion, as one loss triggers a chain of others
Hysteresis, or systems being unable to recover equilibrium after a shock

253. What 5 categories are the 31 global risks are divided into?
1. Economic
2. Environmental
3. Geopolitical
4. Societal
5. Technological
254. What is included in the economic category?
Risks in the economic category include fiscal and liquidity crises, failure of a major
financial mechanism or institution, oil-price shocks, chronic unemployment and failure of
physical infrastructure on which economic activity depends.
255.

What is included in the environmental category?


Risks in the environmental category include both natural disasters, such as earthquakes
and geomagnetic storms, and man-made risks such as collapsing ecosystems, freshwater
shortages, nuclear accidents and failure to mitigate or adapt to climate change.

256.

What is included in the geopolitical category?


The geopolitical category covers the areas of politics, diplomacy, conflict, crime and
global governance. These risks range from terrorism, disputes over resources and war to
governance being undermined by corruption, organized crime and illicit trade.

257.

What is included in the societal category?


The societal category captures risks related to social stability such as severe income
disparities, food crises and dysfunctional cities and public health, such as pandemics,
antibiotic-resistant bacteria and the rising burden of chronic disease.

258.

What is included in the technological category?


The technological category covers major risks related to the growing centrality of
information and communication technologies to individuals, businesses and governments.
These include cyber attacks, infrastructure disruptions and data loss.

259. What are the 3 parameters that the global risks are analyzed along?
1. Highest Concern (qualitative)
2. Likelihood and impact (quantitative)
3. Interdependencies (systemic)
260. What are the Top 10 highest concern systemic risks?
1. Fiscal Crisis in Key Economies
2. Structurally High Unemployment/Underemployment
3. Water Crises
4. Severe Income Disparity

5. Failure of Climate Change Mitigation & Adaptation


6. Greater Incidence of Extreme Weather Events
7. Global Governance Failure
8. Food Crises
9. Failure of a Major Financial Mechanism/Institution
10. Profound Political and Social Instability
261. What are the 31 risks mapped based on for the Global Risks Landscape?
Likelihood and impact, where the highest concern = biggest squares (FIGURE 1.1 in online PDF
reading)
262. What are the 31 risks mapped based on for the Global Risks 2014 Interconnections Map?
Based on how interconnected each risk is with the other risks (FIGURE 1.4 on online PDF
reading)
263. According to the interconnections map, which has the biggest risk?
Fiscal Crisis
264. What is the #1 high concern for systemic risk?
Fiscal Crises
265. What were the causes of the Fiscal Crisis?
Lack of confidence
High level of government debt (paid through inflation of the dollar or growing the
economy to outweigh the debt)
266. What were the results of Fiscal Crisis?
Unknown we do not know
267. What is much of the economy is driven by?
Consumer confidence. If consumers are more confident = there are more purchases of durable
goods. If consumers lack confidence = they have more savings
268. What is the biggest threat that could lead us into another financial crisis?
Lack of faith in the US dollar
269. True or False: More than 100% of our GDP is in outstanding debt
True
270. What do governments usually run?
Deficits spending more than they raise in taxes
271. How do governments make up for this shortfall?
By selling bonds (borrowing money from private investors with the promise of repaying it, with
interest, at a specified future date)

272. When does a financial crisis occur?


When investors begin to doubt the governments future ability to repay. This causes the
government to offer higher interest in order to compensate investors for increased risk.
272. What is the #3 high concern of systemic risk?
The Water Crises
274. What is the water crisis connected to?
Extreme weather (global warming, hurricanes, typhoons, droughts, etc.)
Water Security?
Impact of food availability and prices (scarcity)
275.

True or False: The water crisis is not just a third world concern and can lead to
geopolitical problems
True
276. What is the #5 high concern systemic risk?
Climate Change
277. Is there a trade off between Economic Growth and Climate Change?
Yes, what can we do? Should we stop production and economic growth in order to stop
pollution?
278. What is Vulnerability in relation to climate change?
Who can adapt the best. Failure to adapt effects the most vulnerable.
279. What is the cost of adaptation to climate change in developing countries?
$70 -$100B per year up until 2050
280.
How much time will it take for the poorest countries to adapt as well as we can today?
100 years
281. What do developing countries tend to lack?
The infrastructure and capacity to deal with extreme droughts, floods, reduced crop yields,
increased stressed on energy and water supply.
282. What are some other risks not emphasized in the reading?
Urbanization and existential threats
283. Where is urbanization a problem?
It is not a big US problem, but is a problem in poorer countries (pandemics, safety, etc.)
More than half of the worlds population lives in cities Poorer countries have limited capacity to
manage the risks created by urbanization (ecological disruptions, pollution, climate change, and
environmental disasters). Communicable diseases spread more quickly in densely populated
areas which in turn, increases the risk of global pandemics.

283. What are Existential Threats examples of?


The unknown unknowns
284. What are examples of existential threats?
Manmade viruses, computers taking over the world, alien invasions, etc.
285.
1.
2.
3.
4.
5.

What are the 5 Trends to Watch?


Demographic trends
Societal Concerns
Technological Trends
Environmental Trends
Science and Technology Trends

286. What are Demographic Trends?


Have been flagged, including the risk of being unable to deal with rapid population growth and
the growing burden of an ageing population which could also be a source of great opportunities
for society and business if managed effectively. Concerns were also raised about unmanaged
migration flows, overpopulation and energy crises.
287. What is an example of a demographic trend?
Aging population
288. What are Societal Concerns?
Include the breakdown of social structures, the decline of trust in institutions, the lack of
leadership and persisting gender inequalities. Risks related to ideological polarization, extremism
in particular those of a religious or political nature and intra-state conflicts such as civil wars,
were also frequently highlighted.
289. What Several concerns in the societal concern category relate to?
The future of the youth: the quality of and access to education, the marginalization of young
generations and high rates of youth unemployment
290. What are examples of societal concerns?
Extremism, youth unemployment, gender inequalities
291. What are Technological trends?
Includes data mismanagement, loss of privacy, increase in surveillance, and possible abuse of
new and more complex information technology, which is further explored in Part 2.4. These risks
are becoming potentially more impactful as social media transitioned from a purely social
pastime into the corporate communications environment.
292.

What are the two Environmental trends worth tracking?


a. Two significant kinds of pollution: Plastic waste pollution and endocrine disruptors in
the environment

b. The development and production of unconventional oil and natural gas resources,
such as oil sands and shales, which require processes and technologies (e.g. fracking)
that differ considerably from those used for conventional resources in terms of energy
input, cost and environmental impact. Their impact and sustainability are being
increasingly questioned.
293. What is the significance of plastic waste pollution?
It could degrade marine ecosystems and spoil shorelines, posing a credible threat to ecosystems
and human health.
294. What is the significance of endocrine disruptors in the environment?
They have been linked to human health problems through interference with hormonal systems.
295. What are the risks associated with Science & Technology?
Several emerging risks are associated with the use of new technology, such as the potential
toxicity of nanomaterials, the future evolution and impact of 3-D printing, and uncertainty about
the potential impact of widespread use of autonomous vehicles, which are capable of sensing
their environment and navigating on their own. The potential for abuse, or an accident involving
synthetic biology, could even pose an existential risk.
296. What is Economic risk related to?
Monetary policy
297.

As a consequence of the 2008 financial crisis, central banks in many countries have been
pursuing ______?
An ultra-loose monetary policy. Although theoretical fears of high inflation and unintended asset
bubbles have so far mainly been contained, central banks are expected to tighten monetary
policy. The resulting higher interest rates could see volatility in asset prices, capital flows and
exchange rates, and rising government debt due to higher interest costs.
298.

The rise of the bitcoin and the possibility of other new modes of payment could create
new ______?
Economic risks as well as opportunities. Risks relate to the facilitation of money laundering,
corruption, illicit financial flows as well as volatility and susceptibility to security threats and
market manipulation. China is among the governments that have already begun to restrict the use
of virtual currencies.
299. What are Social & Political risks?
The costs of living longer was raised as an X-factor risk to watch in the 2013 edition of this
report, and risks related to longevity remain significant as medical advances increase life
expectancy, posing funding challenges in retirement financing, long-term care and healthcare.
Along the same lines, the prevalence of overweight and obesity is increasing and could result in
significant economic cost.
300. What are the three Specific Risk Focus?
1. Geopolitical Risk

2. Youth
3. Digital Disintegration
301.

What does Geopolitical Risk involve?


a. Low level conflicts
b. Geopolitics & Systemic Sectors
i. Energy US as exporter
ii. Financial Services
iii. Healthcare flying elsewhere to get a surgery that you cannot get here

302.

What does Youth involve?


a. Education & Unemployment
b. Supporting Older generations problem in the US due to Social Security and
Medicare
c. Professional vs. Formal Education
d. Education vs. Training
e. Youth, dissatisfaction, & politics

303.
True

True or False: in Spain and Greece there is over 50% youth unemployment?

304. What is Digital Disintegration?


How long can you survive without certain technologies?
305.
Yes

Has cyberspace has proven resilient so far?

306. What are digital disintegration concerns?


a. Cyberwarfare
b. Smart Grid
c. Global Navigation Satellite Systems (GNSS)
d. Snowden
e. Disruptive Technologies
306.
1.
2.
3.
4.
5.
6.
7.
8.

What is the Strategy for Managing Global Risks (Risk Management Process)?
Identify Risk
Prioritize Top Risks
Undertake Risk Assessment
Identify Risk Management Options
Design Risk Management Strategy
Design Crisis Management Strategy new step
Implement
Monitor

307.

What are the issues with the Strategy for Managing Global Risks?

The trade-offs between efficiency (profitability in times of normal operations) and


preparation (resilience in the face of negative events affecting the firm)
Public-Private Partnerships
Long-Term Thinking
Large-Scale Disasters

308. What are examples of management and monitoring strategies?


Mitigation measures, accountability measures, supply chain diversification, Avoiding less
profitable risks, transferring the risk, retaining the risk, early warning systems, simulations and
tabletop exercises, and back up sites
309. What does a crisis management strategy complement?
A firms risk management strategy by defining roles and decision making procedures for
preserving the continuity of business to reduce the economic, social and reputational impacts to
the firm in the event of an emergency.
310. What is the best way to evaluate global risks?
likelihood and impact, systemic connections, and how concerned you are
311. What is the biggest global risk?
Fiscal crisis in key economics
312. Some Trends to Watch in understanding systemic risks include:
Demographic trends (aging) and Economic trends (monetary policy)
313. Occurrence that causes significant negative impact for several countries and industries over
a time frame up to 10 years is the definition of:
Global Risk
314. There are four underlying themes of the Global Risk Report, they include:
Long Term Thinking and Global Governance but not Corporate Resilience
315. Systemic risks are characterized by:
Risk sharing or contagion, as one loss triggers a chain of others, and hysteresis or systems being
unable to recover equilibrium after a shock.
316. Which of the following were discussed as part of the geopolitical risk (in focus)
Financial Services
317. According to figure 1.4, which risk identified in the Global Risks Report has the most
interconnections?
Fiscal Crisis
318. Which of the following is an example of economic risks identified in the Global Risks
Report?
Fiscal Crisis in Key Economics

319. The risks identified in the global risks report analyzed along 3 parameters:
Qualitative (highest concern), quantitative (likelihood and impact), and systemic
(interdependencies)
320. How does the global risks report determine which risks to include in the report?
Survey of risk experts
321. According to figure 1.1, the global risks landscape, which risk is the worst based on
likelihood and impact?
Climate Change

Module 12
322. True or False: There is no precision in the ability to classify something as a Natural
Disasters
True
323. What is a natural disaster?
It is a combination of the following factors and can happen anywhere:
Fatalities
Damage
Economic effects
324. True or False: only a couple of disasters overlap on the Deadliest Natural Disasters chart
and the Costliest Natural Disasters (insured losses) chart
True, meaning cost and fatalities do not go together.
325. What is the difference between a natural disaster and a great natural disaster?
Death toll
Damage
Effect on economy
326. True or False: It is hard to bring precision to natural events
True
327. The dense population in Asia leads to disasters such as _____?
Fatalities
328. Economically developed countries (US, Europe, Japan) leads to disasters such as ______?
Economic losses
329. How are recent Natural Disasters determined?
It is all up to perception of time. There are human vs. geological timeframes.

330.
10K

How many people did Typhoon Haiyan in the Philippines kill?

331.
How many damage did the Earthquake/Tsunami in Japan in 2011 cause?
19K+ killed, 330K buildings destroyed, nuclear meltdown, Insured losses $35B, Economic
losses $200B
332. What was the problem with the tsunami disaster in Japan?
The lack of warning. Everyone had 20 minutes to move 6 miles inland before the ocean water
destroyed everything
333. What was the damage of the Earthquake in Haiti?
230K killed from a population total of 10M, 2.3% of population killed
334. What was the damage of the 1918 Flu?
8M dead in WWI, 3% of worlds population died (50M)
335.

True or False: according to a study conducted by Gregory Van Der Vink, 80% of deaths
from disasters in 15 countries (Leading countries: China, Bangladesh, Indonesia). Of these
15 countries, 87% below democracy index, 73% below median GDP
True
336.

Disasters are not only based on location, economic development, and population, but
also based on _____?
Government. Dictatorships and poorer countries are more related to disaster.
337.

Identify who said the following quote; Deaths from natural disasters can no longer be
dismissed as random acts of nature. The are direct and inevitable consequences of high-risk
land use and failures of government to adapt or respond to such known risks
Gregory Van Der Vink

338. If people expect other people to be altruistic in times of emergency, what is the result?
People wont prepare properly because they know that someone will help them afterwards if they
loose something
339. What does human response to disaster create?
Incentives in non-emergency times
340. Can we step up to the plate when necessary?
Yes, because people tend to be altruistic in times of emergency
341. What number of Economic Losses are insured losses?
Anywhere from 25-50% in developed nations
Much smaller in developing nations
In 2011, $110 of $370B in losses were insured

342.

What causes economic losses?


Infrastructure
Role of insurance in economic development

343. What does no insurance mean?


Slower recovery and no capital rebound
344.

How do we analyze Natural Hazard Risks?


Probability/frequency
o Earthquakes (floods, tornadoes, etc.) will happen
o Return period (how many years between similar magnitude events)
Magnitude
o Typically an inverse relationship between frequency and magnitude (really bad
hurricanes dont make landfall every year)

345. How are Magnitude and Return Period typically related?


Inversely related.
346. When was the last time that a category 3 hurricane made landfall in the US?
2005, according to the number of days between storms chart, we are long overdue
347. What does Tornado Alley typically include?
The Plains states from the Dakotas to Texas. However, a new study shows that the frequency and
severity of tornadoes are actually much more widespread, so Tornado Alley should also include
several states in the Upper Midwest and Deep South, along with Florida.
348.

True or False: Hurricane exposure in Florida is extremely high. Hence why home owners
insurance is so high in South Florida.
True
349. Is there randomness to disasters?
There is no randomness, just things we cant predict yet
350.
No

Can we stop natural hazards?

351. Can we stop natural disasters?


Possibly with the advancement of technology
352. Do we want to stop natural disasters?
If we all want to avoid natural disasters why dont we all live in Montana?
Consider the economic benefits to taking on natural hazards (risk vs. reward)
Port locations add economic value
353.

What is Resilience?

Can you bounce back after the event? How long (time, energy, money) will it take you to
bounce back after an event
354. What is Mitigation?
Can we do something ahead of time to reduce our exposure?
a. Actions to eliminate or reduce future deaths, losses, etc. from natural hazards
b. Engineering, physical, social, political
c. Three little pigs what type of house to build to reduce exposure (protect lives, not
prevent accident). How to build things that will withstand the losses?
355. What is geological time?
Hundreds of years rather than days, weeks, and months)
356. True or False: risk and exposure has been changing
True. We may make progress (become less vulnerable) however, exposure (population, economic
development) is growing. Net result: we may or may not be making progress
357. Why is exponential growth of human population a problem?
There are more people, and therefore if a natural hazard or disaster occurs it is more likely to
effect someone
357.

What happens the more we can manipulate our environment?


a. Increase in population growth:
i. Lower infant mortality rates
ii. Longer life (lower death rates in younger years) more people reach the age of
reproduction and they have more children
iii. Population explosion varies with:
1. Economic development
2. Urbanization

358. What do more developed countries have?


Lower populations, lower birth rates, higher death rates, and lower growth rates than developing
countries.
In developed countries, average age of people having kids has increased (people are older and
are waiting to have children)
359. In developing countries
People are getting busy
High birth rates offset high death rates
359. As death rates drop.
Birth rates slower to react
360. Reality TV should have ____ effect on birth rates
Negative

361. True or False: By 2050:


i. If women have 1.6 children => population drops to 3.6B most developed countries
ii. If women have 2 children => population grows to 10.8B
iii. If women have 2.6 children => population grows to 27B least developed countries
True
362.
Yes

Will birth and death rates vary with economic development?

363. Describe the Demographic Transition


There are three phases:
1. Pre-transition: high birth & death rates => population maintenance (most of human
history) least developed nations
2. Transition: low death rates and high birth rates => population explosion (17002000) most countries are in this phase currently
3. Post-Transition (developed nations): low death rates and birth rates => population
maintenance developed nations
363. What are the Big Population Problems?
A combination of disasters and population growth
364.

True or False: We may have better science and technology, but that does not mean we
know the unknown unknowns or are better prepared for it
True
365. What is carrying capacity and why is it a huge factor?
It is how much we can manipulate the environment
a. The ability of the environment to support a population
b. Population size is limited/regulated by resources available in environment
366. What is the Irish Potato Famine an example of?
Example of Carrying Capacity; a significant portion of population left Ireland for new world
367. What are the opportunities? Where can reward be earned?
Mitigation
Resilience
Engineering
Science
Climate change
367.

True or False: According to the Hyogo Framework for Action: 2005-2015: Building the
Resilience of Nations and Communities in Disasters, nothing points to specific
communities and determines why they are resilient. There is no formula.
True
368.

Great disasters (mega-disasters) are actually very ________

Concentrated
369. What percent of disasters caused what percent of deaths?
.26% of disasters caused 78.2% of deaths
370. What percent of disasters caused what percent of economic losses?
.28% of disasters caused 40% of the economic losses
371.

Poor countries are characterized by what?


a. High share of risk
b. Greater economic losses (% of GDP) highest percentage of losses and they cannot
afford it
c. Least resilient
d. Leads to real poverty

372. What type of events are the real drivers of loss?


The big events. There is no overlap between the ones that cause deaths and economic losses.
373. What is the International poverty line?
$1.25 a day separates those from being considered poor and not being poor
374.
Is risk evenly distributed?
No. For example, Japan has 22.5M people exposed to Typhoons while the Philippines has 16M
people exposed. However, the average Annual Death Toll is 17X higher in the Philippines.
375. Who are the outliers that have the biggest exposure to natural disasters risk?
Small island developing states (SIDS) & land locked developing countries (LLDC)
376. What measures exposure to natural disaster risk?
Potential losses relative to wealth/development/GDP
377. What are the 4 Disaster Risk Drivers?
1. Poor urban governance not a lot of land use requirements (weak infrastructure)
2. Vulnerable rural livelihoods
3. Declining ecosystems limited resources, carrying capacity decreases
4. Global climate change higher sea levels, more severe storms, droughts, and floods
377. Who is especially vulnerable to these drivers?
Poor Countries
378. What is associated with poor urban governance?
Informal settlements, location of development
379. What defines vulnerable rural livelihoods?
The international poverty line ($1.25 per day)

380.
Declining ecosystems is characterized by?
The production of enough food, water, energy, uses ecosystem maybe too much
381. Why are poor nations worse off?
Less resilient
No insurance/social coverage no enabling to rebuild once a disaster has occurred
Lead to income & consumption shortfalls (which they cant afford)
Negatively affect welfare and human development (where they are already behind)
382. What besides Natural Disasters should we be worried about?
Human activities
383. Most global catastrophes will occur from _____?
Human activities, industrial civilization and advanced technologies
384. What human activity is the biggest worry?
Infectious pandemic diseases
385. What are some examples of human activity?
Nuclear war, biotechnology, nuclear terrorism
386. What does the Hyogo Framework do?
1. Ensure that disaster risk reduction is a national and local priority with a strong
institutional basis for implementation
2. Identify, assess, and monitor disaster risks and enhance early warning major
undertaking of coastal areas give people opportunity to evacuate works well for
things that we can see coming
3. Use knowledge, innovation and education to build a culture of safety and resilience at all
levels
4. Reduce underlying risk factors
5. Strengthen disaster preparedness for effective response at all levels
387.
Yes.

Is our progress mixed?

388. What needs progress?


a. Strengthened capacities, institutional systems, and legislation to address disaster
preparedness and response
b. Enhancement in early warning
389.
Is there mainstreaming of disaster risk reduction in planning and development?
No because it is not a national priority
390. Where have we made progress?
1. Upgrades to squatter settlements
2. Provide access to land/infrastructure for urban poor

3.
4.
5.
6.
7.
8.
9.

Rural livelihood strengthening


Ecosystem protection
Use of micro-insurance/microfinance
Climate Change adaption
Poverty reduction
Effective Risk Reduction Governance
Disaster Risk Reduction (Investment not a cost)

389. Where have we not make progress?


Using Haiti as an example:
o Warnings were given at least 2 years in advance
o Weak governance
o Feeble infrastructure
o Illiteracy
o Fragile communities in treacherous areas
Shorelines
Fault lines
Mountainsides
390.

What can we do to make progress?


a. Establishing and promoting best building practices
b. Safety inspections, remedial construction, technical know-how sharing
c. Early warning technologies
d. Better international response
e. Provide essential infrastructure
f. Relocate communities
g. Sea walls, retaining walls, structural support
h. Survivable power, water systems
i. First response capabilities

391. Can we out-engineer mother nature?


We often cannot
392. What did the the Great Eastern Japan Earthquake rank?
A level 7, the maximum scale value, on the international Nuclear Event Scale. It was a
magnitude of a 9.0 and was the 4th largest earthquake in the past 108 years. The Tsunami height
reached 40.5 meters and traveled 10 km in distance.
392.

True or False: Great natural disasters overwhelm regions and international assistance is
needed to rescue and care for people, clean up the destruction, and begin the process of
reconstruction.
True
393. As the global population of human increase _____?
The number of deaths by natural disasters is expected to rise, but the relationship has
complexities.

394. What are Natural Hazards?


They may be assessed as the probability of a dangerous event occurring.
395. When can we try to prevent natural hazards from causing disasters?
Risks must be evaluated.
396. Natural hazards are _____
Inevitable, but natural disasters arent.
397. What does the mitigation process include?
The creation of plans and taking action to eliminate or reduce the threat of future death and
destruction when natural hazards suddenly become great threats. These Mitigation actions can
include engineering, physical, social of political.
398. There is an inverse correlation between _____ and _____.
The frequency and the magnitude of a process. The frequent occurrences are low in magnitude,
involving little energy in each event. As the magnitude increases, the frequency decreases.
399. What is the return period?
The recurrence interval = the number of years between same sized events. The larger and more
energetic the event, the longer the return period is.
400. Have most of the more developed countries gone through a demographic transition?
Yes. This transition is one in which birth and death rates have become more favorable. (now low
death and birth rates rather than high).
401. Describe the demographic transition phases?
1. Before the transition, high death rates are offset by high birth rates to maintain a
population
2. During the transition, low death rates coupled with continuing high birth rates cause
population to soar
3. After the transition: low death rates combine with low birth rates to achieve a stable
population at a significantly higher level.
401. What do poorer countries appear to have?
A disproportionately high share of risk and also experience greater economic losses.
402.

_____ are not random phenomena, and rather the consequences per calamity continue to
magnify because of human action.
Natural disasters
403. Where is global disaster risk highly concentrated?
in poorer countries with weaker governance. Particularly in low and low-middle income
countries with rapid economic growth, the exposure of people and assets to natural hazards is

growing at a faster rate than risk-reducing capacities are being strengthened, leading to
increasing disaster risk.
404.

Countries with small and vulnerable economies, such as many small- island developing
states (SIDS) and land-locked developing countries (LLDCs), have the highest economic
vulnerability to ____________
Natural hazards. Many also have extreme trade limitations.
405.

Poorer communities suffer a disproportionate share of disaster loss because ______?


Poor households are usually less resilient to loss and are rarely covered by insurance or
social protection.

406. Disaster impacts lead to _____ and _______ shortfalls and ______ affect welfare and
human development, often over the long term.
Income, consumption, negatively
407.

True or False: Progress towards reducing disaster risk is still mixed.


True. In general terms, countries are making significant progress in strengthening capacities,
institutional systems and legislation to address deficiencies in disaster preparedness and
response. Good progress is also being made in other areas, such as the enhancement of early
warning. In contrast, countries report little progress in mainstreaming disaster risk reduction
considerations into social, economic, urban, environmental and infrastructural planning and
development.

408.

Documented experience in upgrading squatter settlements, providing access to land and


infrastructure for the urban poor, strengthening rural livelihoods, protecting ecosystems, and
using microfinance, micro-insurance and index-based insurance to strengthen resilience
shows _____________.
That it is possible to address the underlying drivers of disaster risk. However, in most
countries these experiences are not integrated into the policy mainstream.

409.

What is the challenge of Global Disaster Risk?


1. Risk is intensively concentrated
2. Risk is unevenly distributed
3. Risk is increasing
4. Small and vulnerable economies are less resilient
5. The underlying risk drivers
a. Poor urban governance
b. Vulnerable rural livelihoods
c. Declining ecosystems
d. Global climate change (the greatest global outcome of environmental
inequity)
i. Changes in means and extremes lead to increasing hazard and
declining resilience
ii. Climate change magnifies the uneven distribution of disaster risk

410.

According to the reading, progress has been made in addressing disaster risk in the
following areas:
1. The Hyogo Framework for Action
2. Climate Change Adaptation
3. Poverty Reduction

410. We have more natural disasters today than we did 50 years ago
False
411. What makes a hurricane a natural disaster?
A combination of the number of fatalities, dollars of damage, and the long tem economic effects
412. Which event caused the most deaths?
Earthquake in Haiti (2010), 230k deaths
414. To calculate the rate of growth a population is displaying, you must measure the ___ rate
and subtract the ____ rate.
Fertility (birth), mortality
415. What might make a country less resilient and less strong?
High risk location and low wealth
Q: People tend to step up to the plate (are altruistic) in times of emergency
A: True
416. No two countries have the exact same rate of population growth. Which of the following is
true of population growth:
Less developed countries have higher population growth because of higher birth rates and
steady/lower death rates
417. Which of the following states would not be included in the NEW tornado alley?
California
418. Which of the following states are included in NEW tornado alley?
Alabama, Florida, Mississippi, and Texas
419. Which of the following best describes the demographic transition in that has low death rates
and low birth rates?
Post-transition
420. Because risk isnt evenly distributed, which types of countries have the largest exposure (as
a percentage of GDP) to natural disasters?
SIDS (small island developing states) and LLDC (land-locked developing countries)
421. In the process of ____, we make plans to take actions to eliminate or reduce the threat of
future death and destruction when natural hazards suddenly become great threats.

Mitigation
422. Which of the following is not a reason that poorer nations are worse off with regard to
natural disasters?
Military inefficiency
423. Which are reasons that poorer nations are worse off in regard to natural disasters?
Not resilient, lack of insurance, income and consumption shortfalls
424. What can turn a natural hazard into a natural disaster?
Fatalities, Damage, and Economic Weakness
425. We are making progress in assessing natural disasters
True
426. We are ready for natural disasters
False

Module 13
427. The number of people over 80 and over will:
Double in the next couple of decades
428. Global aging is going to have the biggest impact on:
Worker productivity/economic growth, health care costs, and social programs, and poverty
(underreported)
429. What is the bigger problem facing worker productivity/economic growth?
Brain Drain (knowledge leaving workforce) and RAD (retired at desk)
430. How many people in the US workforce per retiree (receiving Social Security in 2010)
2.9
431. How many people in the US workforce per retiree (receiving Social Security in 2030)
1.9
432. What percentage of GDP was spent on healthcare in 2011?
17%
433. What percentage of GDP will be spent on health care in 2035?
30%
434. What do we do about social programs going forward?
Cut benefits, increase taxes, or take funds from other programs (currently, 6.4% of income goes
to Social Security and Medicare)

435. By 2020, how much will the working population be contracting in Europe and Japan?
0.5-1.5%
436. The US can expect to become more influential because of the aging population
True
437. In Is Global Aging a Major Problem?, Howe and Jackson posit that China could be
The first country to grow old before it grows rich
438. Which of the following is not one of the major challenges of an aging population?
Older people making poor decision
439. Which of the following is a major challenges of an aging population?
Challenge of enabling and supporting environment, health and well being issues, and economic
development issues
440. The number of people 80+ will double in 12 years (by 2025)
False. 30 years
441. Which of the following is a challenge with the aging population?
Poverty, health, generational equity, and labor inefficiency
442. What type of relationship is typical between worker productivity and age?
Inverse
443. With human input declining, what needs to be done to GDP growth?
Improved efficiency
443. What problem will China be facing in the future?
The 4-2-1 Problem
445. The biggest Aging Population problem is
Health Care and retirement savings
446. What is the appropriate retirement age (opinion)
65 years old
447. Which country is the riskiest? (I dont know right answer)
Venezuela
448. Political risk will?
Grow in the future
449. Which question will represent Political analysis?
Will ___ pay its debt?

450. With regard to international affairs and political risk, the US is:
Dont really know
451. Corporations are better prepared for political risk today than 10 years ago?
True
452. Looking forward 1 decade, what will happen to the global population?
The global population aging and decline (unless we have a pandemic). We are aging and
population growth is starting to slow down.
453. What questions should we ask going forward?
How the aging population will affect economic growth, living standards, fiscal policy, etc.
454. Are there uniform effects of the aging population?
No, it will not effect the entire globe the same. Different countries will have different effects.
455. Why is the US better off than some other countries?
We are in bad shape, but it is all relative. We have higher birth rates, higher mortality rates, more
immigration.
456. True or False: There are more services for the elderly (aging population).
True, the question is who will provide these services?
457. What is the problem with this?
There are fewer in workforce to provide these services
458. What is the bucket of capabilities?
An economics perspective what are we as a generation going to do to provide these services?
459. What is the basis of workforce?
A combination of the body and the mind
460. What is Manual Labor?
The body part of the workforce.
Aging population does not help, as people age, they do not preform as well
Not many people are going to be in this industry as time progresses
461. What is the Knowledge based workforce?
The mind part of the workforce
Older workforce has experience/knowledge that is valuable.
More people are in service-based industries.
This is good for the aging population.
Older people have experience and knowledge that is still beneficial to society.
462.

What is there opportunity for in the knowledge based workforce?

There is opportunity for current workers to tap retired workers as resource learning information
technology and training
463. What do many people fear?
That aging costs are going to outweigh benefits. What is the true cost to society of an aging
population?
464. What are the 5 Aging Trends?
1. Aging population
2. Life expectancy is increasing (lifespan?)
3. The number of people 80+ will double in 30 years
4. Median age of Western Europe & Japan
1980 34 and 33
2030 47 and 52
5. Italy, Spain, & Japan
More than half of all adults will be older than official retirement age
That is a 1:1 ratio (not good)
More people in their 70s than 20s
465. Within 50 years, the median age __________ by almost 20. It changed drastically.
Increased
466.
True

True or False: People 65 and older outnumber those 5 and under?

467. The number of people 80 and older will ____ in 30 years


Double
468. What is the ratio of adults older than the official retirement age in Italy, Spain, and Japan?
1:1; more than half of all adults are older than the retirement age . This ratio is not good
469. What are the 3 major categories of challenges of an aging population?
1. Economic development issues
2. Health and well-being issues
3. Challenge of enabling and supportive environments
470.
11

How many specific challenges fall in these 3 categories?

471. What are these specific challenges within the 3 main categories?
1. Slower economic growth
2. Poverty among elderly real problem
3. Generational equity how much are you going to have to sacrifice to support older
generations
4. Inadequate investment in physical and human capital - are we spending too much on
older generations and not enough on younger?
5. Inefficiency in labor markets are we producing the right products and services?

6. Suboptimal consumption profiles


7. Not uniform across countries some are seeing an aging population coupled with
population decline
8. Non-communicable diseases become an increasing burden (#1 killer of elderly is
diabetes)
9. Family structures are changing, care options for elderly sandwich families
10. Shrinking ratio of workers to pensioners (pay-as-you-go systems)
Social insurance systems are less sustainable
Effects on social entitlement programs
11. Social/Political Impacts
472. What category does the following fact fall under?
With human input declining, there is a need for improved efficiency and for GDP growth
Economic development
473.
Yes

Could we see declining GDP even with more effective use of capital?

474.
Age.

Worker productivity typically declines with ________?

475. What age range describes optimal production?


When people are in their mid 30s - late 40s
476. People are less __________ and _____ as they get older.
Entrepreneurial and innovative (they are less likely to take risk because they have a lot more to
lose and less time to recover)
477. What happens when a large % of the population are consuming rather than saving?
There are net outflows of cash instead of inflows
478. Does capital for investment dry-up?
People go elsewhere for capital and there is a loss of influence
479. What is one issue with investing money?
If inflation increases, the value of the money you saved decreases
480. What is characteristic of the saving rates and investments category?
People have growing risk aversion and shorter investment windows
481. _______ are more volatile and have a shorter investment window
Stocks
482. _____ are more stable and have a longer investment window
Bonds
483. True or False: Impact is not uniform different countries have different growth

True
484. US population growth comes from _________?
Immigration
485. What 2 questions are associated with immigration?
1. Where will next wave of workforce be?
2. Where will retirees be?
486. Who said The Floridazation of the developed world?
Peter Peterson
487. What are Half backs?
Older people who moved to Florida to retire but didnt like it so moved back up to the North East
but only made it halfway. Many retirees are in North Carolina.
488. How has society found a way to use gray skills to alleviate burden on younger
generations?
By using the experience of age
489. What country is relatively better off than rest of developed world?
The US
490. How much are we projected to drop in global GDP?
The US will drop from 34% to 24% of global GDP. US didnt drop as much as other developed
countries.
491. How much will Canada, France, Germany, Italy, Japan, UK combined drop in global GDP?
Combined they will drop from 38% to 16%
492. What are the costs to maintain the current social programs for retirees?
An additional 7% of GDP needs to go to government budgets to support these programs
493. What type of payment system are these programs?
Pay as you go system current workers support current retirees
494. Which is easier to fix: Social Security or Medicare?
Social Security is easier to fix than Medicare
495. What percent of medical care is consumed is the last 4 years of your life?
90%
496. What are the 3 options to fix the problems caused by these programs?
We need to cut benefits, raise taxes, or take money out of GDP
497. Why will we most likely go for the first two options of tax hikes and benefit cuts?

Remember that the elderly vote and there will end up being an overburden of taxes destroying
growth
498. Where does the third option of taking it from GDP suggest we do?
Take it from everywhere else (ex. defense, education, humanitarian, etc.)
499. Do old people get as upset as young people?
Apparently not
500. According to the social / political upheaval category, what is the current problem?
Countries are aging, and since older people dont get as upset, they are less likely to cause
problems in future. This suggests that demographics will win war on terror.
501. What is the new problem with the suggestion that demographics will win the war on
terror?
New countries can emerge
502. What type of countries are the ones to go through the full demographic transition?
Todays developed nations
503. What was events occurred during the USs transition in 1700-1900s?
Revolutions, civil wars, WWI, WWII, Korea, Vietnam, etc. It is not a smooth transition.
504. What are the shorter focuses of developed countries?
Reduce will to fight along with reducing financial capabilities. As countries develop and people
get older, they are less likely to fight in wars because they are more focused on internal
problems.
505. What is the implication of the fact that older people tend to become more conservative?
It changes the politics, and more
506. Is Rate of Change a Problem?
Yes
507.

The Demographic Transition includes the following stages:


High birth/death rates
High birth/low death rates
Low birth/low death rates
What is needed to transfer from the 2nd to the third phase?
Historically, major growth in wealth to manage the next stage of transition
508.

What country will be the first country to go through transition without becoming
wealthy first?
China
509. How long did it take France to go through the transition?

It took France 114 years,


510. How long did it take the US to go through the transition?
It took the US 69 years
511.How long will it take China to go through the transition?
It will take China 27 years
512. What is the purpose of Chinas one child law?
They are trying to control population
513.
True

True or False: France and US became wealthy and then went through the transition?

514. What are the current problems in developed countries?


Rising standards of living, urbanization, growing income inequality, environmental degradation,
etc. And all of these problems cost money to manage them.
515. What is the problem with China going through the transition?
China doesnt have the money to manage the problems that countries that have gone through the
transition are seeing today.
516. What are the results of an aging population?
1. Population and GDP of developed nations decrease as a percentage of global totals loss
of influence
2. US however is best positioned of all developed nations to manage trends (less aging of
population)
3. US actually will become more influential
4. Some developing countries see youth bulges leads to instability
5. Will developed nations have the man-power to respond?
If not less war/conflict
517. Based on the reading is Global Aging a problem?
YES: Based on everything that we just discussed, yes it is a big problem.
NO: This answer is based on the fact that it is a bigger problem in other countries and is not a
problem in the US. Although the US is growing older, it is doing so at a lesser extent and less
quickly than other great powers. Therefore the costs of aging will be lower for the US than for
potential competitors.
518. What are sandwich families seen in develop nations?
There are 4 grandparents, 2 parents, and many children. Then the elderly decide to move in and
there are 3 generations of people all living together.
519. What is Chinas 4-2-1 problem?
Because they restricted number of children, they have 4 grandparents, 2 parents, and one kid
to support grandparents (inverse pyramid rather than sandwich problem)

520.
Yes

Is the US considered better funded that other countries?

521. What is Pax Americana?


Peace through America. We have seen this in Roman times, British rule, etc.
522. What is Pax Americana Geriatrica?
Peace through Aging. We have been seeing this since WWII, peace through MAD and peace
through aging.
523. What are the Opportunities and Outcomes?
Needs for a variety of services
o Health care, housing, inflation guards, pharmaceuticals
Fewer people are becoming doctors
o Bioengineering, travel, entertainment
Smaller rather than bigger housing
Levels of disposable income of elderly
Labor shortages (wage growth to bring people in is directly related to inflation if we
have to pay more, we charge more for products)
524. By 2030, ____ of the world will be 65 years or older.
1/8th
525. What is the aging problem brought on b?
Declining birth rates and increasing life expectancy.
526. What was the drop in death rates a function of?
(1) the dramatic decline in both infant mortality and child mortality due to women being
healthier during pregnancy and nursing periods and do the universal inoculation of children
against principal childhood diseases and (2) longer life spans due to medical advances against
key adult illnesses such as cancer and heart disease.
527. What is Infant mortality?
When a baby dies in the first year of birth
528. What is Child mortality?
When a child dies in the first five years of life
529. What do declining mortality rates yield an aging population in need of?
A variety of services such as health care, housing, and guards against inflation.
530. What are these services provided by?
This is usually provided by the tax dollars of a younger generation. The labor force is
increasingly called upon to provide more help for the senior class.

531. What do declining birth and death rates mean in terms of services?
More services will be needed while fewer individuals will be in the workforce and be able to
provide it.
532. What will be the key to expanding economies and increased abilities to provide public
services rather than expanding the work force?
Expanding minds not bodies
533. What is The Floridization of the developed world?
Where retirees continue to flock in unprecedented numbers to a certain part of the country.
534. What are the major challenges of aging population?
1. Economic development issues
2. Health and well being issues
3. The challenge of enabling and supportive environments
535. The percentage of those older than 60 years is _____ while the labor force percentage is
______?
Increasing, decreasing.
536. True or False: The costs of global aging will outweigh the benefits, and the capacity of the
developed world to pay for these costs is questionable.
True
537. What are the effects of aging on populations?
1. Slower economic growth
2. Poverty among the elderly
3. Generational equity
4. Inadequate investment in physical and human capital
5. Inefficiency in labor markets
6. Suboptimal consumption profiles
7. Unsustainable public transfer systems
538. Both the _____ and the ____ of less developed countries will decline as a percentage of
global totals, thus leading to a loss of influence.
Population, GDP
539. What will rise leading to increased influence?
The US share will rise and thus they will have more influence
540. The threat of ethnic and religious conflict will continue as a ______throughout the world.
Security challenge
541. The 2020s will be a decade of _________?
Maximum political danger.

542. The world will struggle to ___________?


Remain culturally attractive and politically relevant to younger peoples.
543. What will be the result of using GDP decreases to fund social programs?
Decrease in military conflict throughout the globe as societies face manpower shortages while
dealing with social services for the elderly.
544. What decade is the critical decade?
The 2020s is when the ability of developed nations to maintain the global security is questions.
This is a decade of rapid population aging and population decline. Large postwar baby boom
generations move fully into retirement.
545. The trends of population aging directly effect _______?
Population size and GDP size and hence the manpower and economic resources that the nations
can deploy. These can also indirectly affect capabilities and alter national goals.
546. True or False: Economies with graying workforces will be less entrepreneurial?
True
547. What will happen to saving rates with the aging problem?
Savings rates will decline as a larger share of the population moves into the retirement years.
548. What does graying mean?
It means paying for more pensions, health care, and nursing homes for the elderly.
549. What is the GDP of a state the product of?
It is the product of the number of workers and overall productivity.
550. What happens when a work force shrinks and more people enter retirement?
GDP will shrink too unless productivity levels rise enough to compensate for the loss.

Module 14
551. Which of the following describes political risk analysis?
It is more subjective than economic risk analysis
552. All of the following are examples of external shocks except:
Transfer of power; Obama Care
553. What are examples of external shocks?
Refugee influx, tsunami, and terror campaign
554. Which of these is considered to be economic analysis?
Can a particular country pay its debt?
555. Which of the following is not a component of the economy category of DESIX?

Level of globalization
556. Which of the following is a component of the economy category of DESIX?
Growth, Investment, and External Sector
557. Level of globalization, geostrategic conditions, and disaster response/emergency are all
examples of which category in the DESIX?
Security
558. Which of the following tells corporate leaders whether a particular country WILL pay its
debt?
Political Risk Analysis
559. Which countries are the most stable with regard to political risk?
Ones that can avoid creating shocks and ones that ride out those that do occur
560. What is the measure for political risk?
Stability
570. Which of the following is the third party principal reason listed by Bremmer in his
assessment of political risk analysis?
The offshoring trend is growing and should be monitored
571. Which is broadly defined as the effect of politics on markets?
Political risk
572. What does economic analysis of potential international expansion take into account?
Political risk
573. What is understanding the political context vital to?
Success
574. When developed countries are looking to expand, the growth possibilities are fairly
_______for corporations due to aging population.
Small; therefore they may need to look at developing countries for chances to grow.
575. What is political risk?
The impact of politics on markets and activities /any factors that can stabilize or destabilize a
market
576. What are examples of activities regarding political risk?
Passage of laws
Foibles of leaders
Rise of popular movements

All factors that may stabilize or destabilize a country

577. What does political risk analysis involve?


More subjective analysis than economic risk analysis
Broad observable trends
Nuances of society and quirks of personality
578. Economic analysis is _______ in nature.
Quantitative
579. Political risk analysis is __________.
Subjective. It is not exact. It is a broad, observable trend.
580. Political Risk Analysis can be conducted ________ and _________?
Internally and externally
581. What are examples of companies that conduct internal political risk analysis?
Royal Dutch/Shell and AIG
582.

What are examples of companies that you can hire to preform External political risk
analysis?
Consultants such as AO measures exchange transfer risk, political violence risk, sovereign nonpayment risk, political interference, legal and regulatory risks, supply chain, banking
sectors, business risks
583. What type of countries have fairly low risk ratings?
Developed countries
584. Political Risk Analysis is a ________ approach of looking at risk.
Qualitative
585. Why do we need political risk analysis?
International Markets more interconnected than ever before
585. What is the difference between economic and political analysis?
The types of questions being asked
586. What types of questions does economic analysis ask?
Can a particular country pay its debt?
586.
What type of questions does political analysis ask?
Will a particular country pay its debt?
587. How is Political Risk measure?
Measured by Stability
588. What two factors effect stability?

1. Strength against shocks


2. Shocks themselves
589. What does strength against shocks include?
Can political leaders implement policies in spite of shocks that occur
Can they avoid policies that actually create shocks (internal)
Countries that can avoid creating shocks and ride out those that do occur are the most
stable with regard to political risk
590. Shocks can be ________ and ____________?
Internal and External
591. What are examples of internal shocks?
Demonstrations in Egypt = Arab Spring
Transfer of power = Cuba, Elections, ObamaCare
592. What are examples of external shocks?
Refugee influx across the border
Tsunami
Terror campaign
593. Where can shocks occur?
They can occur in BOTH developing and developed countries.
594. What does stability and openness refer to?
How transparent things are
595. Compare and contrast the US vs. Cuba
Both considered stable
One is open (US), one is closed (Cuba)
Transition from one to the other (open to closed) can be problematic
596.
Is South Africa, Soviet Union, and China considered open or closed?
Economically open but politically closed
597. How do you quantify stability?
By using a framework for analyzing shocks and response to shocks for each country
598. What are the four categories of the stability index (DESIX)?
1. Government
2. Society
3. Security
4. Economy
599. What does DESIX stand for?
Deutsche Bank Eurasia Group Stability Index

600. What does the government section of the DESIX stand for?
a. Current government strength
b. Rule of law
c. Level of corruption
601. What does the society section of the DESIX stand for?
a. Social tension
b. Youth dissatisfaction
c. Health, education, etc.
602.

What does the security section of the DESIX stand for?


a. Level of globalization
b. Geostrategic condition
c. Disaster response / emergency

603.

What does the economy section of the DESIX stand for?


a. Growth
b. Investment
c. Debt
d. External sector

604.
True

True or False: Each country has a DESIX score.

605. What can corporations use the DESIX score for?


Industry decisions
Strategy decisions
Risk tolerance
605. What is the Energy industry concerned about?
Political risk but takes on a lot of it willingly,
606. In terms of risk, what is the light manufacturing industry?
Risk adverse
607. In terms of risk, what is the pharmaceuticals industry?
Risk adverse and concerned about intellectual property
608. What do the energy, pharmaceuticals, and light manufacturing industry have in common?
Same scores, much different responses to those scores
609. How can corporations deal with Political Risk through Risk Management?
Obtaining Local partners
Limiting Research and Design (R&D) by protecting intellectual property
Having Insurance

Hedging (multiple countries / locations)


610. What are many organizations today searching for?
Global opportunities and growth
611.What type of companies need growth?
Larger organizations need growth
612.
Proper ________ expansion is profitable
International
613.

True or False: Most developed countries are the most stable but have the least growth
opportunities
True
614. What do companies fear?
Companies fear unpredictable change even as they seek profit from the opportunities that change
creates.
615. To help outweigh dangers against opportunities, corporations mulling foreign ventures
routinely consult __________ analysts.
Economic risk
616.

Basing decisions on economic data without understanding the political context is good or
bad?

Bad
617. What is the bread and butter of economic risk analysis?
Per capita income, growth, and inflation
618. What is political risk (the impact of politics on markets) influenced by?
The passage of laws, the foibles of leaders, and the rise of popular movements. All of the factors
that might politically stabilize or destabilize a country.
619. What does the significance of a risk depend upon?
The context if the investment decision.
620. What does any company with exposure in foreign markets need?
Early and accurate information on political developments.
621. What are the four reasons for early and accurate information on political developments?
1. International markets are more interconnected than ever before
2. The US is making the world a more volatile place and that has changed risk calculations
everywhere
3. The offshoring trending is growing. Businesses shift operations to where labor is cheap.
4. The world is increasingly dependent for energy on states troubled by considerable
political risk such as Saudi Arabia, Iran, Nigeria, Russia, and Venezuela.

622. What does economic risk analysis tell corporate leaders?


Whether a particular country can pay its debt
623. What does political risk analysis tell corporate leaders?
Whether a country will pay its debt.
624. What is a nations stability determined by?
1. Political leaders capacity to implement the policies they want even amidst shocks
2. Their ability to avoid generating shocks f their own.
625.
No

Is the presence of shocks alone a sign of instability?

626. What type of variables are more difficult to measure? Political or economic?
Political risk variables are more difficult to measure than economic variables. Politics is
influenced by human behavior and the sudden confluence of events for which no direct
calibrations exist.
627. True or False: The US is making the world a more volatile place?
Yes, especially in the Bush Era
628. What trend is growing?
Offshoring trend is growing
629. Whom is the US becoming increasingly reliant on and for what?
Energy from political risk states Saudi Arabia, Iran, Nigeria, Russia, Venezuela
630.

How did the Bush Era change the dynamics of the USs relationship in international
affairs and foreign policy?
Prior to September 11, 2001, whenever there was a problem, we formed a coalition and
partnerships in order to support peace processes. Afterwards, Bush stood up and said to Allies
and said that we will do what we need to do to take care of ourselves (this made enemies)
631. What three elections had results that were challenged and ultimately decided by court
rulings?
2000: US
2003 Taiwan
2004 Ukraine

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