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ARM 401 EXAM|816 QUESTIONS AND ANSWERS|100% SCORES
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ARM 401 EXAM|816 QUESTIONS ANDANSWERS|100% SCORES
What does the holistic approach to managing risk encompass? - -Analysis
and predictability of business processes and organizational decisions
-What is the premise of holistic risk management? - -All business decisions
and operations carry some risk
-What are the four quadrants of risk? - -Hazard risk, Operational Risk,
Strategic Risk, Financial Risk
-What is today's conception of risk? - -The idea that taking risks is
fundamentally necessary for growth
-Benefits of holistic risk management - -· Growth
· Analyzes risk variables and potential outcomes that increase the odds that
the result will be positive
· Help organizations better absorb losses
· Example: Gains in one area of the org can be used to offset losses in
another
-Benefits of a holistic approach to financial risk - -Uncover inconsistencies in
how a company manages loss retention
-Predictive modeling - -Taking data and using software tools to analyze,
extrapolate, and predict outcomes
-What device generate the data used in advanced analytics and predictive
modeling? - -The Internet of Things
-Internet of Things Devices in use - -· Telematics in automobiles
· Sensors in buildings
· Drones
· Smartphones and tablets
· Heath trackers
· Robots
· High-definition cameras with sensors
-What protects data? - -Blockchain technology
-Blockchain technology - -· Decentralized data-storage technology and real-
time ledger that contains a secure history of transactions
· Facilitates secure transactions without the need for a third party
,-What has a significant impact on risk management decision making? - -
Risk factors
-What measurements do risk managers use in order to assess the
interactions between risk factors? - -Variance and covariance
-Covariance - -· The measure of how two random risk variables will change
in relation to each other
· Used to calculate the correlation between the variables
-Variance - -· Spread of the data set - how far apart the numbers are in
relation to the mean
-What are correlation and covariance useful for? - -· Selecting sources of
risk for a financial portfolio
-Why do risk professionals measure correlation and covariance? - -· Identify
and quantify relationships among various sources of risk
· Communicate the degree of uncertainty in a risk portfolio
· Prioritize investments in loss control
· Optimize financing for multiple sources of risk
· Evaluate the effectiveness of a risk management program
-Monte Carlo simulation - -· Statistical computer model that simulates the
effects that various types of uncertainty may have on a process
· Computer randomly selects values for each variable and generates
thousands of possible scenarios. The results are assembled into probability
distributions representing possible outcomes
-What does the Monte Carlo simulation uncover in terms of risk? - -· May be
able to uncover the effectiveness fo the risk management program itself
· Risk manager may be able to pinpoint strengths or weaknesses in risk
evaluation processes
-Team approaches to identifying risk - -· Facilitated workshops
· Delphi technique
· Scenario analysis
· HAZOP (Hazard and operability study)
· SWOT (Strengths, weaknesses, opportunities, and threats)
-Facilitated Workshops - -Neutral party (the facilitator) who has no stake in
the outcome or participation responsibilities, administers the risk workshop
and propels the group to achieve its goal
, -Delphi Technique - -· Uses the opinions of a select group of experts to
identify risks
· Submitting two rounds of queries to the selected experts. Each expert
responds to a question and the combined answers are presented to the
group. The same question is asked to the experts and asked to consider
revising their responses based on the results that were reported to the
group. This is done until a consensus is reached
-Benefits of the Delphi Technique - -· Cost-effective
· The responses are anonymous which eliminates group bias
-Disadvantage to the Delphi Technique - -Experts' opinions may be limited
to their current thinking on a subject
-Scenario Analysis - -· Identifies risks and predicts the potential
consequences of those specific risks
· Can help identify a range of potential consequences and prioritize risks
-Advantages to scenario analysis - -· Internal cross-functional team to gain
multidimensional view of risk's potential consequences
· Brings all concerns together so they can be addressed as a whole
-Disadvantages to scenario analysis - -· The risk identification process may
be limited by the imagination and brainstorming capabilities of the team
selected
· Leads to overlooking key risks or consequences of risk
-HAZOP - -· Hazard and operability study - comprehensive review of a
process or system
· Team of subject matter experts and stakeholders identifies the risks
associated with a given process and recommends a solution
-When is HAZOP studies used? - -When all risks must be eliminated
-Steps in HAZOP study - -1. Subdivides the project or system design into
small components
2. Reviews each component to identify risks
3. Identifies the cause and potential outcomes for each risk
4. Develops a solution for each risk
5. Ensures that solutions work and reevaluates as necessary
-SWOT Analysis - -strengths, weaknesses, opportunities, threats
-What is SWOT analysis useful for? - -· Analyzing a new project or product
· When there is a specific goal, such as determining whether engaging in a
new product or project is feasible
, -What environment are strengths and weaknesses in? - -Internal
environment
-What environment are opportunities and threats in? - -External
environment
-Examples of strengths - -· Technology
· Distribution channels
· Customer Loyalty
· Product quality
-Examples of Weaknesses - -· High cost structure
· Absence of key skills
· Staff turnover
· Brand recognition
-Examples of opportunities - -· New technology
· New distribution channels
· Unmet customer needs
· Change in demographics
-Examples of threats - -· Shift in customer tastes
· Emergence of competitors
· New regulations
· Tax increases
-What is necessary in order to keep the SWOT analysis from becoming too
general? - -A goal
-What is identified by pairing strengths and opportunities? - -Competitive
Advantage
-What is identified by pairing weaknesses with threats? - -Risks to avoid
-What should one consider when assessing an org's risk? - -Unique qualities
of the org
Industry in which it operates
Its products, services, and processes
Internal factors
External factors -- upstream and downstream external factors
-Risk Assessment Tools and Techniques - -Risk Thresholds
Checklists
Workshops
Risk Registers and Risk Maps
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