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ARM 402: Correctly Answered Questions (Verified)
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ARM 402: Correctly Answered Questions (Verified)
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ARM 402: Correctly Answered Questions (Verified)Risk treatment Right Ans - The selection and implementation of actions to
help manage or mitigate a risk
What does risk treatment involve? Right Ans - Making decisions based on
the results of a risk assessment
- Risk-response panning
What is the goal of each risk identified as needing treatment? Right Ans -
Select one or multiple treatment options that best help the organization
achieve its strategic objectives
What type of process is risk treatment? Right Ans - A continual process
What does risk treatment entail? Right Ans - Examining each risk
treatment option in terms of whether it leads to a tolerable level of residual
risk or helps the org maximize the potential benefits of an opportunity
What else does risk treatment involve? Right Ans - Selecting,
communicating, and implementing risk treatment options and measuring
effectiveness
Are treatment techniques mutually exclusive? Right Ans - No
- Many risks call for a combo of techniques
What does successful risk management depend on? Right Ans - Effective
communication
What does effective communication from risk professionals entail? Right
Ans - Inform decision makers and stakeholders of not only the overall strategy
but also the steps needed to implement it and how its success can be
measured
Risk Treatment Technique options Right Ans - Avoid the risk
Modify the risk
Transfer the risk
Retain the risk
Exploit the risk
,Avoid the risk Right Ans - Stop or canceling the activity that would cause
the risk
When does an org exercise risk avoidance? Right Ans - Risk is deemed too
high to take on in any form
Modify the risk Right Ans - Increasing or decreasing an event's likelihood
and/or consequences that will result in a positive or negative outcomes
Types of risk modification Right Ans - Loss prevention
Loss Reduction
Transfer the risk Right Ans - Sharing the risk with, or moving it entirely to,
another party
What is a prime example of risk transfer? Right Ans - Purchasing insurance
Retain the risk Right Ans - Accepting and absorbing some or all of the
consequences of the risk
When is risk retention used? Right Ans - Often used only after other
treatment techniques have been considered
When the potential negative consequences associated with it are low
What other techniques is risk retentions typically used with? Right Ans -
Risk modification and risk transfer
What should orgs do if they choose to retain their risk? Right Ans -
Carefully analyzed so that the org fully understands the extent of the risk
When would an org choose to retain more risk? Right Ans - In order to
exploit an opportunity
Exploit the risk Right Ans - Taking actions to maximize the expected gains
of opportunities
What should treatment selection include? Right Ans - Cost-benefit analysis
to ensure that the benefits of a treatment option outweigh the related costs
,Prouty Approach Right Ans - Analyzes a risk's loss likelihood and impact to
determine a proper treatment
Matrix to determine which treatment is best
Four categories of loss likelihood Right Ans - Almost nil
Slight
Moderate
Definite
Three categories of loss impact Right Ans - Slight
Significant
Severe
Are these categories objective or subjective? Right Ans - Subjective
What do the categories provide to risk management professionals Right
Ans - Means of communicating and justifying the priority they believe should
be placed on a risk as well as a means of providing risk treatment suggestions
Prouty Approach Example Right Ans -
What activities are retained and accounted for in the annual budget? Right
Ans - Activities with losses that have a slight chance of occurring and are of
low impact
What risks typically call for modification? Right Ans - Risks that fall in the
middle of loss likelihood and loss impact
What elements does a treatment plan must contain? Right Ans -
Explanation of treatment technique
Proposed actions
Resource requirements
Roles and responsibilities
Timeline
Monitoring requirements
Risk financing Right Ans - Form of risk treatment that is needed to pay for
the cost of an org's risk
, What does risk financing typically entail? Right Ans - Transfer or retention
of risk
What is dramatically changing the risk financing environment? Right Ans -
Technology
What must every org do in order to achieve strategic objectives? Right Ans
- Find ways to pay for the corresponding risks and treatments
The more risk an org retains... Right Ans - the more funds it must allocate
to finance those risks
What are those funds to finance those risks used for? Right Ans - Apply the
risk treatments of avoidance, modification, transfer, and retention
What risk treatments have been affected the most by technology? Right
Ans - Modification and transfer
What orgs are in a better position to take full advantage of emerging
technologies? Right Ans - Orgs that use risk committees composed of cross-
functional decision-makers and stakeholders and discuss emerging risks and
potential technological treatments
Why are risk committees important in terms of tech? Right Ans - Because
tech and its risk management ramifications evolves too fast for any single
person to keep track of
How has risk management become forward looking? Right Ans - Advances
in data capture, data storage, and data analytics
What do large datasets about past events using computers, IoT devices,
sensors, wearables, and telematic devices allow orgs to accurately do?
Right Ans - Identify patterns of risk, model risk, and predict risk
Because risks can be predicted so accurately, how far can it be modified?
Right Ans - To the point of being nearly preventable
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