ARM 54 Practice Exam With Complete Solutions 2023
Risks from accidental loss, including the possibility of loss or no loss defines
Hazard risk
The traditional definition of risk management reflects the traditional concept of risk as
Negative
Which one of the following statements is true rega...
ARM 54 Practice Exam With Complete Solutions 2023
Risks from accidental loss, including the possibility of loss or no loss defines
Hazard risk
The traditional definition of risk management reflects the traditional concept of
risk as
Negative
Which one of the following statements is true regarding the evolution of risk and
risk management?
The definition of risk has evolved to include positive as well as negative attributes
The Dodd-Frank Act, Solvency II, and Basel III all have the purpose of reducing
Systemic risk
Which one of the following is a common risk management benefit the entire
economy would realize as a consequence of a risk management program?
Reduced waste of resources-Risk management reduces waste of resources. Allocating
resources for potential losses is a cost because the resources cannot be used for other
purposes that could promote growth.
To an insured organization, which one of the following is an example of a cost of
risk associated with an asset or activity?
Cost of sprinkler systems
One benefit of risk management to the economy is the reduction of the potential
for a major disruption in the functioning of financial markets and the financial
system. This risk that is reduced is called
Systemic risk
Which one of the following risk management program goals enhances an
organization's reputation?
Social responsibility-Social responsibility is the risk management program goal that will
most likely enhance an organization's reputation.
An organization must meet the standard of care that it owes to others in order to
ensure that
Legal obligations are satisfied-An organization must meet the standard of care that it
owes to others in order to ensure that legal obligations are satisfied.
Risk management programs should
Operate economically and efficiently
Which one of the following is essential to an effective risk management program?
Support of the organization's senior management-Support of the organization's senior
management is essential to an effective risk management program.
Which one of the following provides a measure of the maximum potential damage
associated with an occurrence?
Exposure
In an effort to grow its personal lines book, an insurer decides to offer discounts
on homeowners and personal auto insurance to the employees of its largest
business lines account. Which one of the following risk measures is most likely
to increase as a result of this marketing decision?
Correlation-The insurer's risk correlation will most likely increase as a result of this
marketing decision.
,According to the law of large numbers, as the number of exposure units insured
increases,
The relative accuracy of predictions about future losses increases-According to the law
of large numbers, as the number of exposure units insured increases, the relative
accuracy of predictions about future losses increases.
The relationship between which two basic measures is critical for risk
management in assessing risk and deciding whether and how to manage it?
Likelihood and consequences
Risk can be classified as diversifiable or nondiversifiable. Which one of the
following statements is true with respect to this type of risk classification?
Diversifiable risks tend not to be correlated so they can be managed through
diversification or spread of risk-Diversifiable risks tend not to be correlated so they can
be managed through diversification or spread of risk.
George works for a large company and part of his job is to monitor assets
according to their liquidity. George is particularly concerned that the company
fleet cars are affecting its liquidity and rising fuel prices are having an adverse
effect during tight economic markets. If George's concerns were categorized as
causes of loss according to the quadrants of risk, his concern most directly
relates to which one of the following types of risks?
Financial risks
Billy owns a beach front cottage which has become his primary residence. Billy's
primary concern is that his home will be hit by a hurricane and badly damaged or
even destroyed. For Billy, this hurricane risk is a
Subjective risk
Carol has worked as a payroll clerk for a small organization for 20 years. Over the
years she received only two small salary increases and began to embezzle funds
from the company since she felt she was not adequately compensated for her job
efforts. In terms of the quadrants of risk, Carol's theft risk can be classified as
Both a hazard risk and an operational risk-Carol's theft risk can be classified as both a
hazard risk and an operational risk.
Three main theoretical concepts explain how enterprise risk management (ERM)
works. One theoretical concept considers not only the combination of individual
risks but also their interactions. This theoretical concept is
The portfolio theory
The concept of correlation, in the context of why enterprise risk management
works,
Is the proposition that correlation increases risk while uncorrelated risks can reduce
risk-The concept of correlation, in the context of why enterprise risk management works,
is the proposition that correlation increases risk while uncorrelated risks can reduce risk.
Major Corporation delivers its products nationally using its own fleet of vehicles
that are specially designed to encapsulate and protect the cargo they are
carrying. What risk management technique is being used?
Loss reduction
Which one of the following statements is true regarding enterprise risk
management (ERM)?
The ERM framework encompasses all stakeholders in the organization
, Which one of the following is an objective and consistent measurement tool that
can be used by organizations to conduct periodic self-assessments?
The Risk Maturity Model (RMM)
Conrad Sales Company's vehicles are equipped with a device that allows them to
locate each vehicle for tracking purposes. If a vehicle is stolen, the tracking
devices can be used to recover the vehicle more quickly. Conrad Sales Company
is using the risk management technique of
Loss reduction
Integration of the management principles governing the organization with the risk
management process is
Risk governance
As the risk manager for Alpha Corp, Ann Marie recommended that Alpha should
follow an international risk management standard and framework. Which one of
the following describes risk management standards developed by recognized
authorities?
Organizations follow risk management standards voluntarily
The structure that supports the organization's risk management objectives and
strategies is the
Risk management framework
A U.S.-based athletic apparel company has manufacturing plants in the Pacific
Rim. Its major product markets are the U.S., Canada, and Europe. The company
would like to develop a risk management program for its supply-chain risk. A
recognized international standard for this purpose is
ISO 31000
Which one of the following statements is true regarding the International
Organization for Standardization's ISO 31000 standard?
ISO 31000 applies regardless of whether the risk has positive and/or negative
consequences
The ISO 31000 Standard provides risk management principles, a framework, and
a process. One part of the process includes risk identification, risk analysis, and
risk evaluation. This part of the process is
Risk assessment-The ISO 31000 risk assessment includes risk identification, risk
analysis, and risk evaluation.
Based on the ISO 31000 definition of risk assessment, which one of the following
steps includes determining the level of risk and its potential effects on the
organization?
Risk analysis-Risk analysis is the step of risk assessment that includes determining the
level of risk and its potential effects on the organization.
Information used to evaluate the significance of an organization's various risks is
known as
Risk criteria
Which one of the following best describes a result of an organization's adaptive
strategy?
Gaining and maintaining a competitive advantage
An evolving trend in risk management is to
Prepare for unknown risks
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