ARM 54 Practice Exam With Complete Solutions 2024
Risks from accidental loss, including the possibility of loss or no loss defines - Answer ️️ -
Hazard risk
The traditional definition of risk management reflects the traditional concept of risk as - Answer ️️
-Negative
Which one of the ...
ARM 54 Practice E xam With Complete Solutions 2024 Risks from accidental loss, including the possibility of loss or no loss defines - Answer ✔️✔️-
Hazard risk The traditional definition of risk management reflects the traditional concept of risk as - Answer ✔️✔️-Negative Which one of the fo llowing statements is true regarding the evolution of risk and risk management? - Answer ✔️✔️-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 reduc ing - Answer ✔️✔️-
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? - Answer ✔️✔️-Reduced waste of resources -Risk management reduces waste of resourc es. 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 ac tivity? - Answer ✔️✔️-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 - Answer ✔️✔️-Systemic risk Which one of the following risk management program goals enhances an organization's reputation? - Answer ✔️✔️-Social responsibility -Social responsibility is the risk management program goal that will most likely enhance an organiza tion's reputation. An organization must meet the standard of care that it owes to others in order to ensure that - Answer ✔️✔️-Legal obligations are satisfied -An organization must meet the standard of care that it owes to others in order to ensure that leg al obligations are satisfied. Risk management programs should - Answer ✔️✔️-Operate economically and efficiently Which one of the following is essential to an effective risk management program? - Answer ✔️✔️-
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? - Answer ✔️✔️-Exposure In an effort to grow i ts 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 marketin g decision? - Answer ✔️✔️-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, - Answer ✔️✔️-The relative accuracy of predictions about future losses increases -According to the law of large numbers, as the number of exposure units insured increa ses, 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? - Answer ✔️✔️-Likelihood and consequence s Risk can be classified as diversifiable or nondiversifiable. Which one of the following statements is true with respect to this type of risk classification? - Answer ✔️✔️-Diversifiable risks tend not to be correlated so they can be managed through divers ification 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 pa rticularly 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? - Answer ✔️✔️-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 - Answer ✔️✔️-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 - Answer ✔️✔️-Both a hazard risk and an operational risk -
Carol's theft risk can be classifie d 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 theoretica l concept is - Answer ✔️✔️-The portfolio theory The concept of correlation, in the context of why enterprise risk management works, - Answer ✔️✔️-Is the proposition that correlation increases risk while uncorrelated risks can reduce risk -The concept of cor relation, 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 speci ally designed to encapsulate and protect the cargo they are carrying. What risk management technique is being used? - Answer ✔️✔️-Loss reduction Which one of the following statements is true regarding enterprise risk management (ERM)? - Answer ✔️✔️-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? - Answer ✔️✔️-The Risk Maturity Model (RMM) Conra d 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 manage ment technique of - Answer ✔️✔️-Loss reduction Integration of the management principles governing the organization with the risk management process is - Answer ✔️✔️-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? - Answer ✔️✔️-Organizations follow risk management standards voluntarily The structure that supports the organization's risk management objectives and strategies is the - Answer ✔️✔️-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 Eur ope. The company would like to develop a risk management program for its supply -chain risk. A recognized international standard for this purpose is - Answer ✔️✔️-ISO 31000 Which one of the following statements is true regarding the International Organizati on for Standardization's ISO 31000 standard? - Answer ✔️✔️-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 pr ocess includes risk identification, risk analysis, and risk evaluation. This part of the process is - Answer ✔️✔️-Risk assessment -The ISO 31000 risk assessment includes risk identification, risk analysis, and risk evaluation. Based on the ISO 31000 definit ion of risk assessment, which one of the following steps includes determining the level of risk and its potential effects on the organization? - Answer ✔️✔️-Risk analysis -Risk analysis is the step of risk assessment that includes determining the level of r isk and its potential effects on the organization.
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