ARM 401 Exam Questions with Correct Answers
100% Verified Graded A+
1. A risk map showing a large difference between inherent and residual risk
indicates which one of the following?
A. The risk is within the organization's risk appetite
B. The current risk treatment is ineffective
C. The current risk treatment is effective
D. The risk does not need to be treated
Answer: C
2. Lucas, a risk professional for Jones Incorporated, recently met with experts
from the utility industry to discuss the potential loss of supply and risks to the
infrastructure. Lucas must now decide which risks, and proposed treatments,
need to be communicated to the board of Jones Incorporated. Lucas should
make this decision based on
A. The supply source involved.
,B. The organization's risk appetite and tolerance levels.
C. Whether the risk in natural or man-made.
D. Whether any government regulations are involved or not.
Answer: B
3. SoCal Movie Company produces movies at a studio in Southern California.
The risk manager decided to identify the range of potential consequences
associated with various risks that the company faces. For example, if a severe
earthquake occurred while the company was filming a movie, there could
be deaths and injuries, destruction of movie sets, delays in production, costs
associated with filming at an alternative location, and loss of reputation and
good will. The type of analysis performed by the risk manager is called
A. SWOT analysis.
B. Scenario analysis.
C. Sensitivity analysis.
D. HAZOP analysis.
Answer: B
4. Insurance Company (IC) sells its coverages through independent insurance
agents. Independent agents represent several insurance companies. Tom, the
president of IC, has learned that the independent agent who is the highest
,producer for IC is considering selling his agency. IC is considering acquiring
the agency since Tom is concerned that if the agency is sold, IC may lose
a substantial amount of business. Tom asked IC's risk manager to analyze
the prospective purchase. The analysis revealed that the acquisition would
likely secure most of IC's book of business with the agency but also revealed
local competitors that would try to place the business as well. In addition,
the analysis revealed the opportunity for IC to move some accounts currently
placed with other insurers over to IC. Also, it was learned that a competitor
expressed an interest in the agency acquisition. The analysis performed by
the risk manager is a form of
A. Decision tree analysis.
B. HAZOP analysis.
C. Risk map analysis.
D. SWOT analysis.
Answer: D
5. Murray Trucking is interested in evaluating which risk factors are most likely
to lead to the most costly accidents. They are evaluating risk factors such as
speed, weather conditions, driver experience, distance traveled, and gross
vehicle weight. Which one of the following statistical measurements would be
, useful for the risk manager when calculating the probability of the different
risk factors causing severe accidents?
A. Telematics
B. Inverse covariance
C. Variance
D. Monte Carlo simulation
Answer: C
6. Blithe Manufacturing has experienced a drop in market share. The mar-
keting department has come up with a way to differentiate their product in
order to regain market share. Blithe has assembled a team of individuals
representing different organizational functions to analyze both internal and
external factors of the new product and decide whether or not it is feasible.
Which one of the following team approaches to risk identification is Blithe
using?
A. Delphi technique
B. HAZOP workshop
C. SWOT analysis
D. Scenario analysis
Answer: C
100% Verified Graded A+
1. A risk map showing a large difference between inherent and residual risk
indicates which one of the following?
A. The risk is within the organization's risk appetite
B. The current risk treatment is ineffective
C. The current risk treatment is effective
D. The risk does not need to be treated
Answer: C
2. Lucas, a risk professional for Jones Incorporated, recently met with experts
from the utility industry to discuss the potential loss of supply and risks to the
infrastructure. Lucas must now decide which risks, and proposed treatments,
need to be communicated to the board of Jones Incorporated. Lucas should
make this decision based on
A. The supply source involved.
,B. The organization's risk appetite and tolerance levels.
C. Whether the risk in natural or man-made.
D. Whether any government regulations are involved or not.
Answer: B
3. SoCal Movie Company produces movies at a studio in Southern California.
The risk manager decided to identify the range of potential consequences
associated with various risks that the company faces. For example, if a severe
earthquake occurred while the company was filming a movie, there could
be deaths and injuries, destruction of movie sets, delays in production, costs
associated with filming at an alternative location, and loss of reputation and
good will. The type of analysis performed by the risk manager is called
A. SWOT analysis.
B. Scenario analysis.
C. Sensitivity analysis.
D. HAZOP analysis.
Answer: B
4. Insurance Company (IC) sells its coverages through independent insurance
agents. Independent agents represent several insurance companies. Tom, the
president of IC, has learned that the independent agent who is the highest
,producer for IC is considering selling his agency. IC is considering acquiring
the agency since Tom is concerned that if the agency is sold, IC may lose
a substantial amount of business. Tom asked IC's risk manager to analyze
the prospective purchase. The analysis revealed that the acquisition would
likely secure most of IC's book of business with the agency but also revealed
local competitors that would try to place the business as well. In addition,
the analysis revealed the opportunity for IC to move some accounts currently
placed with other insurers over to IC. Also, it was learned that a competitor
expressed an interest in the agency acquisition. The analysis performed by
the risk manager is a form of
A. Decision tree analysis.
B. HAZOP analysis.
C. Risk map analysis.
D. SWOT analysis.
Answer: D
5. Murray Trucking is interested in evaluating which risk factors are most likely
to lead to the most costly accidents. They are evaluating risk factors such as
speed, weather conditions, driver experience, distance traveled, and gross
vehicle weight. Which one of the following statistical measurements would be
, useful for the risk manager when calculating the probability of the different
risk factors causing severe accidents?
A. Telematics
B. Inverse covariance
C. Variance
D. Monte Carlo simulation
Answer: C
6. Blithe Manufacturing has experienced a drop in market share. The mar-
keting department has come up with a way to differentiate their product in
order to regain market share. Blithe has assembled a team of individuals
representing different organizational functions to analyze both internal and
external factors of the new product and decide whether or not it is feasible.
Which one of the following team approaches to risk identification is Blithe
using?
A. Delphi technique
B. HAZOP workshop
C. SWOT analysis
D. Scenario analysis
Answer: C
