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ARM 401 Exam Questions with Correct Answers.
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ARM 401 Exam Questions with Correct Answersholistic approach to managing risk - CORRECT ANSWER - -broader in scope, managing all areas of the
business, not just hazard risks
-encompasses the analysis and predictability of business processes and organizational decisions
-mandates the collaboration of internal and external stakeholders to identify, assess, and treat risks
-involves looking at what might be gained from decisions or actions
-can uncover inconsistencies in how a company managers loss retention
-can help orgs better absorb losses
strategic risk - CORRECT ANSWER - -uncertainties associated with the organization's long-term goals and
management decisions
-may carry a greater risk dynamic, positive or negative, that the other categories
operational risk - CORRECT ANSWER - uncertainties associated with the organization's procedures,
systems, and policies
financial risk - CORRECT ANSWER - uncertainties associated with the organization's financial activities
today's conception of risk - CORRECT ANSWER - incorporates the idea that taking risks is fundamentally
necessary for growth
predictive modeling - CORRECT ANSWER - can empower decision making by uncovering previously
imperceptible risk factors
Internet of Things - CORRECT ANSWER - network of devices that sense their environment, process data,
and share it instantly
cloud computing - CORRECT ANSWER - enables orgs to store and share data through wireless internet
and networking services
blockchain technology - CORRECT ANSWER - -facilitates secure transactions without the need for a third
party
-protects against cyber threats
,-eliminates the need to verify the accuracy of risk management data
-lets risk managers spend more time on forward-looking functions
what fuels the future of holistic risk management? - CORRECT ANSWER - the capture, storage, and
analysis of data
covariance - CORRECT ANSWER - -the measure of how two random risk variables will change in relation
to each other
-calculates correlation between the variables
variance - CORRECT ANSWER - -the spread of the data set, or how far apart the numbers are in relation
to the mean
team approaches to risk identification - CORRECT ANSWER - 1. facilitated workshops
2. Delphi technique
3. scenario analysis
4. HAZOP
5. SWOT
why is it important to take a team-oriented approach to identifying risks? - CORRECT ANSWER - -provide
diverse perspectives on risks
-can reveal how risks are connected across an org, reducing the likelihood for risks to be overlooked
facilitated workshops - CORRECT ANSWER - -a neutral party, who has no stake in the outcome,
administers the risk workshop and propels the group to achieve its goal
-wise to include people from diverse groups
-can be used for a specific project or process, as well as to identify those risks that affect overall org
objectives
-if using to identify all org risks: facilitator must be skilled in risk ID and management as well as group
communication and be prepared for a long-term project
delphi technique - CORRECT ANSWER - -uses the opinions of a select group of experts to identify risks
-typically they don't meet but respond to a survey or inquiry instead
-question-and-response cycle: answer question anonymously, see results, answer same question until
reach consensus
-benefits: cost-effective, eliminates group bias and encourages honesty by anonymity
,-disadvantages: experts' opinions may be limited to their current thinking on a subject
scenario analysis - CORRECT ANSWER - -identifies risks and predicts the potential consequences of those
specific risks
-can help identify a range of potential consequences and prioritize risks
-benefit is it brings all the concerns of different parts of the org together so they can be addressed as a
whole
-should assemble an internal cross-functional team to get a multidimensional view
-disadvantage: may be limited by the imagination and brainstorming capabilities of the team selected
HAZOP - CORRECT ANSWER - -a comprehensive review of a process or system
-a team of subject matter experts and stakeholders identifies the risks associated with a given process
and recommends a solution
-primarily used to design complex, scientific systems
-used when virtually all risks must be eliminated
steps in HAZOP process - CORRECT ANSWER - 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 - CORRECT ANSWER - -team approach that's useful in analyzing a new project or product
-strengths and weaknesses are internal environmental factors
-opportunities and threats are external environmental factors
-a goal is necessary to keep the SOT analysis from becoming too general or failing to provide actionable
info
-concludes with a "go" or "no go" recommendation
assessing risks of an organization - CORRECT ANSWER - -unique qualities of org
-industry it's in
, -internal/external factors
-upstream and downstream external factors (upstream: suppliers and manufacturers; downstream:
distribution channels and consumer demands)
traditional risk assessment tools and techniques - CORRECT ANSWER - 1. risk thresholds
2. checklists
3. workshops
4. risk registers and risk maps
5. process flow analysis
6. audits
7. cause and effect analysis
8. fault tree analysis
9. failure mode and effects analysis
risk thresholds - CORRECT ANSWER - -when an org must decide what it's willing to sacrifice or accept in
exchange for achieving its goals
checklists - CORRECT ANSWER - -easy to use and communicate known risks to employees with little
efforts
-don't help identify unknown risks
workshops - CORRECT ANSWER - -allows attendees to brainstorm and assess risks in an open,
collaborative forum
-gives more perspectives
-downside is the potential for senior management to influence the flow of ideas from stakeholders;
some people conform
risk registers and risk maps - CORRECT ANSWER - -used to sort and rank a large number of risks
-risk register: a ledger of identified risks that're recorded in a table in a document; data in this is specific
to the org
-risk map: a graphic diagram showing the components of a the register; identify, prioritize, and quantify
risks in a two dimensional pictorial that illustrates frequency and severity on vertical and horizontal axes
process flow analysis - CORRECT ANSWER - -dissects processes within the org from input to output for
the purpose of improving them
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