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ARM 54 Practice Exam with complete solutions 2024.
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ARM 54 Practice Exam with complete solutions 2024.
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ARM 54 Practice Exam with completesolutions 2024
Risks yfrom yaccidental yloss, yincluding ythe ypossibility yof yloss yor yno yloss
ydefines y- yANSWER✓✓-Hazard yrisk
The ytraditional ydefinition yof yrisk ymanagement yreflects ythe ytraditional yconcept
yof yrisk yas y- yANSWER✓✓-Negative
Which yone yof ythe yfollowing ystatements yis ytrue yregarding ythe yevolution yof
yrisk yand yrisk ymanagement? y- yANSWER✓✓-The ydefinition yof yrisk yhas
yevolved yto yinclude ypositive yas ywell yas ynegative yattributes
The yDodd-Frank yAct, ySolvency yII, yand yBasel yIII yall yhave ythe ypurpose yof
yreducing y- yANSWER✓✓-Systemic yrisk
Which yone yof ythe yfollowing yis ya ycommon yrisk ymanagement ybenefit ythe
yentire yeconomy ywould yrealize yas ya yconsequence yof ya yrisk ymanagement
yprogram? y- yANSWER✓✓-Reduced ywaste yof yresources-Risk ymanagement
yreduces ywaste yof yresources. yAllocating yresources yfor ypotential ylosses yis ya
ycost ybecause ythe yresources ycannot ybe yused yfor yother ypurposes ythat ycould
ypromote ygrowth.
To yan yinsured yorganization, ywhich yone yof ythe yfollowing yis yan yexample yof ya
ycost yof yrisk yassociated ywith yan yasset yor yactivity? y- yANSWER✓✓-Cost yof
ysprinkler ysystems
One ybenefit yof yrisk ymanagement yto ythe yeconomy yis ythe yreduction yof ythe
ypotential yfor ya ymajor ydisruption yin ythe yfunctioning yof yfinancial ymarkets yand
ythe yfinancial ysystem. yThis yrisk ythat yis yreduced yis ycalled y- yANSWER✓✓-
Systemic yrisk
Which yone yof ythe yfollowing yrisk ymanagement yprogram ygoals yenhances yan
yorganization's yreputation? y- yANSWER✓✓-Social yresponsibility-Social
yresponsibility yis ythe yrisk ymanagement yprogram ygoal ythat ywill ymost ylikely
yenhance yan yorganization's yreputation.
An yorganization ymust ymeet ythe ystandard yof ycare ythat yit yowes yto yothers yin
yorder yto yensure ythat y- yANSWER✓✓-Legal yobligations yare ysatisfied-An
,yorganization ymust ymeet ythe ystandard yof ycare ythat yit yowes yto yothers yin
yorder yto yensure ythat ylegal yobligations yare ysatisfied.
Risk ymanagement yprograms yshould y- yANSWER✓✓-Operate yeconomically yand
yefficiently
Which yone yof ythe yfollowing yis yessential yto yan yeffective yrisk ymanagement
yprogram? y- yANSWER✓✓-Support yof ythe yorganization's ysenior ymanagement-
Support yof ythe yorganization's ysenior ymanagement yis yessential yto yan
yeffective yrisk ymanagement yprogram.
Which yone yof ythe yfollowing yprovides ya ymeasure yof ythe ymaximum ypotential
ydamage yassociated ywith yan yoccurrence? y- yANSWER✓✓-Exposure
In yan yeffort yto ygrow yits ypersonal ylines ybook, yan yinsurer ydecides yto yoffer
ydiscounts yon yhomeowners yand ypersonal yauto yinsurance yto ythe yemployees
yof yits ylargest ybusiness ylines yaccount. yWhich yone yof ythe yfollowing yrisk
ymeasures yis ymost ylikely yto yincrease yas ya yresult yof ythis ymarketing
ydecision? y- yANSWER✓✓-Correlation-The yinsurer's yrisk ycorrelation ywill ymost
ylikely yincrease yas ya yresult yof ythis ymarketing ydecision.
According yto ythe ylaw yof ylarge ynumbers, yas ythe ynumber yof yexposure yunits
yinsured yincreases, y- yANSWER✓✓-The yrelative yaccuracy yof ypredictions yabout
yfuture ylosses yincreases-According yto ythe ylaw yof ylarge ynumbers, yas ythe
ynumber yof yexposure yunits yinsured yincreases, ythe yrelative yaccuracy yof
ypredictions yabout yfuture ylosses yincreases.
The yrelationship ybetween ywhich ytwo ybasic ymeasures yis ycritical yfor yrisk
ymanagement yin yassessing yrisk yand ydeciding ywhether yand yhow yto ymanage
yit? y- yANSWER✓✓-Likelihood yand yconsequences
Risk ycan ybe yclassified yas ydiversifiable yor ynondiversifiable. yWhich yone yof ythe
yfollowing ystatements yis ytrue ywith yrespect yto ythis ytype yof yrisk yclassification?
y- yANSWER✓✓-Diversifiable yrisks ytend ynot yto ybe ycorrelated yso ythey ycan ybe
ymanaged ythrough ydiversification yor yspread yof yrisk-Diversifiable yrisks ytend
ynot yto ybe ycorrelated yso ythey ycan ybe ymanaged ythrough ydiversification yor
yspread yof yrisk.
George yworks yfor ya ylarge ycompany yand ypart yof yhis yjob yis yto ymonitor
yassets yaccording yto ytheir yliquidity. yGeorge yis yparticularly yconcerned ythat
ythe ycompany yfleet ycars yare yaffecting yits yliquidity yand yrising yfuel yprices yare
yhaving yan yadverse yeffect yduring ytight yeconomic ymarkets. yIf yGeorge's
yconcerns ywere ycategorized yas ycauses yof yloss yaccording yto ythe yquadrants
yof yrisk, yhis yconcern ymost ydirectly yrelates yto ywhich yone yof ythe yfollowing
ytypes yof yrisks? y- yANSWER✓✓-Financial yrisks
, Billy yowns ya ybeach yfront ycottage ywhich yhas ybecome yhis yprimary yresidence.
yBilly's yprimary yconcern yis ythat yhis yhome ywill ybe yhit yby ya yhurricane yand
ybadly ydamaged yor yeven ydestroyed. yFor yBilly, ythis yhurricane yrisk yis ya y-
yANSWER✓✓-Subjective yrisk
Carol yhas yworked yas ya ypayroll yclerk yfor ya ysmall yorganization yfor y20 yyears.
yOver ythe yyears yshe yreceived yonly ytwo ysmall ysalary yincreases yand ybegan yto
yembezzle yfunds yfrom ythe ycompany ysince yshe yfelt yshe ywas ynot yadequately
ycompensated yfor yher yjob yefforts. yIn yterms yof ythe yquadrants yof yrisk, yCarol's
ytheft yrisk ycan ybe yclassified yas y- yANSWER✓✓-Both ya yhazard yrisk yand yan
yoperational yrisk-Carol's ytheft yrisk ycan ybe yclassified yas yboth ya yhazard yrisk
yand yan yoperational yrisk.
Three ymain ytheoretical yconcepts yexplain yhow yenterprise yrisk ymanagement
y(ERM) yworks. yOne ytheoretical yconcept yconsiders ynot yonly ythe ycombination
yof yindividual yrisks ybut yalso ytheir yinteractions. yThis ytheoretical yconcept yis y-
yANSWER✓✓-The yportfolio ytheory
The yconcept yof ycorrelation, yin ythe ycontext yof ywhy yenterprise yrisk
ymanagement yworks, y- yANSWER✓✓-Is ythe yproposition ythat ycorrelation
yincreases yrisk ywhile yuncorrelated yrisks ycan yreduce yrisk-The yconcept yof
ycorrelation, yin ythe ycontext yof ywhy yenterprise yrisk ymanagement yworks, yis
ythe yproposition ythat ycorrelation yincreases yrisk ywhile yuncorrelated yrisks ycan
yreduce yrisk.
Major yCorporation ydelivers yits yproducts ynationally yusing yits yown yfleet yof
yvehicles ythat yare yspecially ydesigned yto yencapsulate yand yprotect ythe ycargo
ythey yare ycarrying. yWhat yrisk ymanagement ytechnique yis ybeing yused? y-
yANSWER✓✓-Loss yreduction
Which yone yof ythe yfollowing ystatements yis ytrue yregarding yenterprise yrisk
ymanagement y(ERM)? y- yANSWER✓✓-The yERM yframework yencompasses yall
ystakeholders yin ythe yorganization
Which yone yof ythe yfollowing yis yan yobjective yand yconsistent ymeasurement
ytool ythat ycan ybe yused yby yorganizations yto yconduct yperiodic yself-
assessments? y- yANSWER✓✓-The yRisk yMaturity yModel y(RMM)
Conrad ySales yCompany's yvehicles yare yequipped ywith ya ydevice ythat yallows
ythem yto ylocate yeach yvehicle yfor ytracking ypurposes. yIf ya yvehicle yis ystolen,
ythe ytracking ydevices ycan ybe yused yto yrecover ythe yvehicle ymore yquickly.
yConrad ySales yCompany yis yusing ythe yrisk ymanagement ytechnique yof y-
yANSWER✓✓-Loss yreduction
Integration yof ythe ymanagement yprinciples ygoverning ythe yorganization ywith
ythe yrisk ymanagement yprocess yis y- yANSWER✓✓-Risk ygovernance
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