ARM 400 RISK IN AN EVOLVING
WORLD REVIEW 2026
EXAMINATION TEST ACCURATE
ANSWERS
◉ The traditional definition of risk management reflects the traditional
concept of risk as.
Answer: Negative
◉ Which one of the following 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 reducing.
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
resources. 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 activity?.
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
organization'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 legal
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 its 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 marketing
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 increases, 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 consequences
, ◉ 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 diversification 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 particularly 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
WORLD REVIEW 2026
EXAMINATION TEST ACCURATE
ANSWERS
◉ The traditional definition of risk management reflects the traditional
concept of risk as.
Answer: Negative
◉ Which one of the following 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 reducing.
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
resources. 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 activity?.
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
organization'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 legal
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 its 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 marketing
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 increases, 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 consequences
, ◉ 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 diversification 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 particularly 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
