Exam (elaborations)
CPCU 500 Final Practice Test
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CPCU 500 Final Practice Test
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CPCU 500 Final Practice TestRisk involves The possibility of a negative outcome. Possibility means - -That
an outcome may or may not occur.
-Probabilities are stated as decimal figure, a percentage, or a - -Fraction
-To understand risk, one needs to know the probability of an outcome or
event occurring. Which one of the following statements is correct with
respect to probability? - -It can be used to decide which activities to
undertake.
-The statement, "There is a five percent chance that John will be injured in
an automobile accident while driving to work tomorrow," is an example of - -
Quantifying risk
-One of the elements of risk is uncertainty. Which one of the following best
describes the uncertainty that risk involves? - -Uncertainty as to the type
and timing of an outcome.
-In the context of risk, the chance of being injured while driving to and from
work, loading a truck at work, moving furniture at home, or falling in an icy
parking lot at the mall are all examples of - -Possibilities
-Which one of the following is measurable and quantifies risk? - -Probability
-Risk can be classified as pure or speculative. Which one of the following is
the best example of a speculative risk? - -Investing in shares of stock.
-Classifying risk appropriately can help in managing risk. Which one of the
following statements is correct with respect to the classification of risk. - -A
pure risk is a chance of loss or no loss, but no chance of gain.
-Risk can be classified as subjective or objective. Which one of the following
statements is correct wit respect to these risk classifications? - -Subjective
risk can exist even where objective risk does not.
-Which one of the following statements is accurate regarding pure and
speculative risks? - -Every business venture involves speculative risks.
-Regarding diversifiable and nondiversifiable risk, which one of the following
statements is accurate? - -Systemic risks are generally nondiversifiable.
-Classifying the various types of risk can help in assessing, controlling, and
financing risk as part of the risk management process. Which one of the
,following statements is true regarding the typical classifications of risk? - -
Classifications of risk can help with controlling and financing risk.
-Insurance deals primarily with - -Pure risks
-One approach to categorizing risks involves dividing risks into risk
quadrants. The risks categorized as hazards are - -Traditionally managed by
risk management professionals.
-The focus of risk quadrants is different from the focus of risk classifications.
While the classifications of risk focus on some aspect of risk itself, the four
quadrants of risk focus on - -The source of risk and who has traditionally
managed them.
-Risk can be classified as divesifiable or nondiversifiable. Which one of the
following statements is true with respect to this type of risk classification? - -
Diversifiable risks tend to be correlated so they can be managed through
diversification or spread of risk.
-Which one of the following is a main theoretical concept that explains how
traditional risk management works? - -Silo approach.
-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 usually the single largest impediment to
successful implementation of enterprise risk management (ERM)? - -The
traditional organizational culture.
-The single largest impediment to successful implementation of an
enterprise risk management (ERM) program is - -Traditional organizational
culture with entrenched risk silos.
-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.
-Three main theoretical concepts explain why ERM works. Which one of the
following correctly lists those three concepts? - -Interdependency,
correlation, and portfolio theory.
-A risk management plan that considers all of the risks that an organization
faces, including operational, financial, and strategic risks, is called - -An
enterprise risk management plan.
, -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.
-Insurers and risk managers can use the large volumes of data collected and
organized through telematics to help improve results for which one of the
following types of insurance? - -Automobile
-The consensus process by which the veracity of data is confirmed and
verified is known as - -Mining
-Which one of the following is the network through which sensors and other
smart products capture and transmit data? - -Internet of things
-The use of data gleaned from sensors to react immediately to hazardous
situations is know as - -Real time risk management
-Which one of the following products has led to significant improvements in
supply chain management by allowing for the immediate identification of
discrepancies and interruptions as well as timely actions that can prevent or
reduce losses? - -Closed-loop system
-Which one of the following is a virtual ledger of data that has been verified,
timestamped, encrypted, and protected against tampering? - -Blockchain
-Which one of the following statements is true regarding risk management
efforts on the part of individuals, organizations, and society in general? - -
Risk management makes those who own or run an organization more willing
to undertake risky activities.
-Organizations find it difficult to establish a benchmark against which the
performance of their risk management program can be assessed because it
is difficult to assign a specific value to the - -Cost of residual uncertainty
-Which one of the following cost is part of the overall financial consequences
of risk? - -The cost of the value lost due to events that caused a loss.
-The two benefits of risk management affecting individuals, organizations,
and society are: it preserves financial resources by reducing expected losses
and it - -Reduces the residual uncertainty associated with risk.
-Aligning risks with the organization's risk appetite defines - -Tolerable
uncertainty
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