Download Risk Management Multiple Choice Questions and Answers and more Exams Credit and Risk Management in PDF only on Docsity!
2025 - 2026 ARM 400 EXAM/ACTUAL 240 QUESTIONS
AND ANSWERS|A+GRADE
Samuel was recently hired as a risk management professional for Parker Property Management. He has been asked by senior management to review the organization's current insurance policies to make sure that the organization is adequately protected, and also see if there are any opportunities to save on the premiums. Samuel must do which one of the following through internal communication before he will be able to complete this task? A. Determine the organization's risk appetite B. Identify all of the risks that the organization faces C. Earn the confidence of the organization's board of directorsD. Become familiar with industry regulations - ✓ ✓A Catastrophes such as recent earthquakes and the 2011 tsunami in Japan pointed out a need for many organizations to evaluate and manage their A. Supply-chain risk. B. Derivative risk. C. Compliance risk. D. Political risk. - ✓✓A Risk management professionals must collaborate with data analysts during which two steps of the risk management process?
A. Treat risks and monitor risk treatments B. Scan the environment and analyze risks C. Analyze risks and monitor risk treatmentsD. Identify risks and treat risks - ✓✓C Asking a question such as "How do you think this will work out?" can help a speaker do which one of the following? A. Request feedback and determine if the message has been understood B. Gain the support of executives and decision makers C. Build trust among a diverse group of individuals D. Deliver a message that recipients don't want to hear - ✓✓A Carla, the risk manager, was asked by senior management to deliver a presentation on cyber risk at an all employees meeting. Even though she was only allotted 30 minutes for her presentation, Carla felt that cyber risk was a very real risk for the corporation and she wanted employees to leave with some fear of it. She wanted to provide employees with as much technical information as possible, and familiarize them with all of the important jargon. Less than 20 minutes into her presentation, Carla could tell that many of the employees were not paying any attention to her presentation. Which one of the following steps in the communication process had Carla failed to consider? A. Pay attention to your body language B. Ask for feedback
C. Define the organization's risk appetite D. Enhance stakeholders' confidence in the process - ✓✓D Which of the following risk management program goals is an essential goal for all public entities? A. Earning stability B. Continuity of operations C. Growth D. Survival - ✓✓B The traditional definition of risk management reflects the traditional concept of risk as A. Both positive and negative.
B. Negative. C. Uncontrollable. D. Strategic. - ✓ ✓B During the past year, International Toys has undertaken four capital projects. The company has renovated and refurbished one of its aging warehouse buildings. It has purchased the most recent version of its current order processing computer software. It has added two trucks to its fleet of delivery vehicles. Lastly, it has purchased a new production machine that will allow it to launch a new product line. Which one of the following company projects is the most speculative risk? A. The two new trucks B. The warehouse refurbishment C. The software upgrade D. The new production machine - ✓✓D Which one of the following statements is true regarding the basic measures that apply to risk management? A. Consequences measure the degree to which an occurrence could positively or negatively affect an organization. B. Hedging is a risk management strategy that can reduce the risk of correlation. C. Risk increases as volatility decreases. D. Longer time horizons are generally less risky that shorter ones. - ✓✓A
An organization must meet the standard of care that it owes to others in order to ensure that A. Legal obligations are satisfied. B. Post-loss goals are in place.
C. Operations are efficient. D. Contracts are not breached. - ✓✓A According to the law of large numbers, as the number of exposure units insured increases, A. Fewer losses are expected to occur. B. The size of the average loss declines. C. The relative accuracy of predictions about future losses increases.D. The probability of an underwriting loss increases. - ✓✓C Risk can be classified as diversifiable or nondiversifiable. Which one of the following statements is true with respect to this type of risk classification? A. Diversifiable risks tend not to be correlated so they can be managed through diversification or spread of risk. B. Systemic risks are generally diversifiable. C. Private insurance tends to concentrate on nondiversifiable risks; government insurance is often suitable for diversifiable risks. D. Inflation, unemployment and natural disasters, such as hurricanes, are examplesof diversifiable risk. - ✓✓A The fundamental purpose of a risk management framework is to A. Maximize profits for all stakeholders. B. Integrate risk management throughout the organization.
A. Magnetometers. B. Drone technologies. C. Wearable technologies. D. Accelerometers. - ✓ ✓C Data Entry Company (DEC) offers customers data entry services. A customer can hire DEC to enter survey data to be analyzed. Many DEC employees spend long hours entering data on a computer. DEC has experienced neck strain and wrist pain complaints from their employees, increasing the company's workers compensation costs. DEC investigated the complaints of its data-entry employees. DEC adopted curved keyboards for data entry, wrist-rests for those entering data, and uniform chair heights and display monitor heights to reduce neck strain claims. The science of designing work spaces based on the health concerns of those who will operate in the work space is called A. Big data. B. Accelerometer technology. C. Predictive analytics. D. Ergonomics. - ✓ ✓D Which one of the following statements about the use of drones is true? A. The use of drones is limited to military applications.
B. Space and weight limitations prevent drones from being equipped with sensors and cameras. C. Drones may be equipped with cameras that relay data in real-time. D. The reliance on humans to operate drones severely limits their application forcommercial uses. - ✓✓C Many auto manufacturers have automated a portion of their assembly lines by introducing a smart product. The smart product performs repetitive tasks, such as making the same weld on each vehicle frame as it passes the smart product. These smart products, which can be fixed or mobile, reduce repetitive motion injuries that humans might suffer. They can also be used to perform dangerous tasks and in heavy-lifting jobs. These smart products are called A. Wearables. B. Automated sensors. C. Robots. D. Drones. - ✓✓C Take Your Order (TYO) is a company that specializes in taking product orders for vendors. The manufacturer of a product can run a television or internet ad for a product with a toll-free number. Customer calls for the products are routed to TYO, where one hundred operators are available to receive the calls. Each operator is assigned a cubicle with a computer terminal, video display monitor, and a
A. Radiant sensors. B. Thermal sensors. C. Biochemical sensors. D. Mechanical sensors. - ✓✓C AMRM Insurance Company sells insurance in Virginia, North Carolina, South Carolina, and Georgia. The company has compiled a policyowner data base that can be used to send text messages when hurricanes approach. The company provides early warnings, storm updates from the National Weather Service, and hurricane safety measures. The company credits the system with reduced hurricane claims. The use of the texting system is an example of A. Preventive analytics. B. Artificial intelligence. C. Sensor networks. D. Experience rating. - ✓✓A In an effort to reduce expenses, increase profitability, and reduce human errors; ABC Insurance Company decided to automate most of its personal lines underwriting function. The company now uses standardized application forms that are submitted electronically to one of the company's regional offices. At each regional office, a computer with a scanner reads the applications. The computer has been programmed with acceptable answers to the questions. If the answers on
the application are all acceptable, the policy is automatically issued. Rejected applications are automatically forwarded to a human underwriter who reviews them. The use of this technology has reduced the company's expense ratio by two and a half percent, and reduced the time it takes to issue a policy. ABC Insurance Company's use of computers to evaluate applications electronically is an application of A. Radiant sensors. B. Actuator technology.C. Risk - ✓✓D Autonomous Vehicle Applications (AVA) is a start-up company that develops safety technologies that can be sold to companies that are producing autonomous vehicles. One technology AVA is developing allows an autonomous vehicle to detect, extract, and analyze images; and then to respond to the images. For example, the technology would detect a presence in a crosswalk, extract the image, and a computer would analyze the image. When the image was determined to be a human being, the vehicle would slow down or stop until the crosswalk was clear. This technology, which is designed to capture and analyze images, and to act on the recognition of the image; is called A. Visual acuity. B. Computer vision.
D. Catastrophe modeling. - ✓✓B The emerging technologies applied to risk assessment and control link the physical domain to the virtual domain. Together, these domains linked by the emerging technologies create a A. Connected ecosystem. B. Risk management information system. C. Smart system. D. Risk management matrix. - ✓✓A Precision Electronic Components manufactures circuit boards, microchips, and other electronic products. Given the precision necessary for their products, the manufacturing environment must be controlled. Temperature, humidity, static electricity and other factors must be monitored. After losing several batches of products due to human monitoring failures and imprecise adjustments, the company moved to a system of sensors. The sensors monitor and regulate temperature, humidity, static electricity, and other factors. The sensors transmit data to and from each other, and the manufacturing environment is continuously adjusted to assure production is successful. The network of sensors transmitting data and the autonomous corrective actions without human interaction is called A. Sensitivity analysis. B. Computer-directed manufacturing.
C. Web-based manufacturing. D. The Internet of Things. - ✓✓D It is necessary to assess the risk appetite of a business supplier prior to doing business because understanding the risk appetite allows the organization to A. Ascertain whether the relationship is a good fit. B. Negotiate better prices and delivery times. C. Better control its production. D. Leverage its payments to the supplier to the organization's advantage - ✓✓ A An organization evaluates key stakeholders' attitude toward risk in order to A. Understand what risks are acceptable and to develop an effective enterprise- wide risk management program. B. Understand acceptable risks and gauge its ability to attract new shareholders. C. Understand acceptable risks and gauge its ability to raise capital. D. Understand the risk appetite in order to determine what information isdisseminated. - ✓✓A A speaker imparts information in verbal communications by A. Using appropriate facial expressions and gestures while other parties express their opinions and concerns. B. Expressing facts and emotions quickly, inviting written questions for discussion at a future session.
After opening its third store, Shoehorn Shoes decided to purchase new inventory tracking software for all of its stores. Which one of the following external or internal environments does this decision relate to? A. Operations environment B. Physical environment C. Economic environment D. Product environment - ✓✓A Senior management of CAZ Company decides to cut its involvement with the local youth association and no longer allow its employees to work with kids during business hours. Additionally, they will no longer fund the Youth House. Which one of the following best describes how this action may affect its risk management profile? A. Corporation may increase its external social risk by negating any goodwill the community has for the company. B. Corporation may increase its financial exposure by not having tax credits to offset its profits or losses. C. Corporation may decrease its external political risk by removing itself from any community involvement. D. Corporation may decrease its operations environment as the staff will havemore time to devote to the company. - ✓✓A
Which one of the following organizational policies or practices is based on a code of ethics? A. An annual compliance audit of each field underwriting office that is conducted by the home office staff B. The designation of 2 workdays a year for employees to participate in local civic and volunteer activities C. A company policy that offers a 10 percent discount to teachers and members of the military D. A disclosure requirement regarding any potential conflict of interest anaccountant might have in working with specific clients - ✓✓D Which one of the following statements is correct regarding an organization's code of ethics? A. The code of ethics should provide an organization with a set of parameters within which it should operate, with little room for interpretation. B. The code of ethics should provide a list of dos and don'ts that employees can use as a framework in making day-to-day decisions. C. The code of ethics should include principles and concepts that are dynamic enough to remain relevant in a rapidly changing business environment. D. The code of ethics should primarily consider the social and ethical needs of itsexternal stakeholders. - ✓✓C
