CPCU ETHICS FINAL EXAM AND PRACTICE EXAM
QUESTIONS ACTUAL EXAM COMPLETE 400 QUESTIONS
WITH DETAILED VERIFIED ANSWERS (100% CORRECT
ANSWERS) /ALREADY GRADED A+
For public entities such as cities, counties and public utilities, which one of the
following is normally the most important post-loss risk management goal?
Choose one answer.
A. Growth
B. Profitability
C. Continuity of operations
D. Earnings stability - ANSWER: C. Continuity of operations
Which one of the following is the goal of enterprise-wide risk management (ERM)?
Choose one answer.
A. Coordinate loss reduction efforts
B. Reduce risk management costs
C. Decentralize control of business decisions
D. Maximize the organization's value - ANSWER: D. Maximize the organization's
value
A risk management program must be monitored and periodically revised, and that
revision involves four steps. Which one of the following is one of those four steps?
Choose one answer.
A. Establish results-based rather than activity-based standards of acceptable
performance.
B. Compare actual results with the established performance standards.
C. Reduce any performance standards that have not been achieved by the actual
results.
D. Return to the first step in the risk management process to identify new loss
exposures. - ANSWER: B. Compare actual results with the established performance
standards.
Risk can be classified as subjective or objective. Which one of the following
statements is correct with respect to these risk classifications?
Choose one answer.
A. Subjective risk is risk associated with individuals; objective risk is risk associated
with objects or things.
B. Risk managers focus on objective risk and attempt to avoid allowing subjective
risk to affect their decisions.
C. Subjective risk can exist even where objective risk does not.
D. Individuals' subjective perception of risk in a given set of circumstances is
typically much higher than the objective risk. - ANSWER: C. Subjective risk can exist
even where objective risk does not.
,JNL Construction is a general contractor. As the risk management professional for
JNL, Marie should be aware of the company's contractual obligations, as well as the
contractual obligations that others owe JNL. This knowledge is necessary for Marie
to meet which one of the following pre-loss risk management goals?
Choose one answer.
A. Legality
B. Social responsibility
C. Tolerable uncertainty
D. Continuity of operations - ANSWER: A. Legality
Residual uncertainty is the level of risk that remains after organizations implement
their risk management plans. Which one of the following statements is correct with
respect to residual uncertainty?
Choose one answer.
A. Residual uncertainty is an objective measure, independent of an organization's
subjective view of the
risks to which it is exposed.
B. The cost of residual uncertainty is relatively easy to calculate and comprises an
important part of any cost of risk study.
C. Residual uncertainty can be minimized, but doing so is costly because more has to
be spent on attempts to control or finance the risks involved.
D. Cost of residual uncertainty is a factor only in the case of speculative risk; it is not
a consideration where pure risk is concerned. - ANSWER: C. Residual uncertainty can
be minimized, but doing so is costly because more has to be spent on attempts to
control or finance the risks involved.
Tania has been unemployed for six months, and her unpaid bills are mounting. She
recently damaged the front fender of her vehicle after running off the road. When
seeking repairs to the vehicle, she convinced the auto body shop to include damages
from previous incidents in the estimate. This would allow her to collect extra money
from her insurer. From an insurance and risk management perspective, Tania's
behavior is indicative of a
Choose one answer.
A. Legal hazard.
B. Moral hazard.
C. Morale hazard.
D. Physical hazard. - ANSWER: B. Moral hazard.
Which one of the following describes how an effective risk management program
should support an organization's pre-loss operational goals?
Choose one answer.
A. It should ensure that risk management costs are kept to a minimum.
B. It should eliminate uncertainty by identifying and managing loss exposures.
C. It should help ensure that the organization's legal obligations are satisfied.
D. It should ensure that no conflicts exist among the pre-loss goals. - ANSWER: C. It
should help ensure that the organization's legal obligations are satisfied.
,Which one of the following statements is true regarding risk management
techniques?
Choose one answer.
A. Data based on objective risk factors are usually the only criteria considered in
determining appropriate risk management techniques.
B. The risk management techniques selected by for-profit organizations should be
both effective in meeting the organizations' goals and economical.
C. In support of the goal of economy of operations, the risk management techniques
selected by most for-profit organizations should be the least expensive ones.
D. Nonfinancial considerations are usually disregarded in selecting risk management
techniques because they cannot be factored into a cost/benefit analysis. - ANSWER:
B. The risk management techniques selected by for-profit organizations should be
both effective in meeting the organizations' goals and economical.
Which one of the following is an element of a loss exposure?
Choose one answer.
A. The verification of risk
B. A cause of loss
C. The probability of a loss
D. The occurrence of a loss - ANSWER: B. A cause of loss
The statement "There is a 5 percent chance that John will be injured in an
automobile accident while driving to work tomorrow." is an example of
Choose one answer.
A. Quantifying risk.
B. Verifying risk.
C. Quantifying loss exposures.
D. Indentifying hazards. - ANSWER: A. Quantifying risk.
Dave owns a computer store. He stores backup media copies of confidential records
off site in case there is a fire at the computer store. The risk control technique Dave
is using to protect the confidential records is
Choose one answer.
A. Diversification.
B. Duplication.
C. Avoidance.
D. Separation. - ANSWER: B. Duplication.
Which one of the following statements regarding monitoring the results of a risk
management program is true?
Choose one answer.
A. A results standard focuses on the quality and quantity of the risk management
activities undertaken by the organization.
B. Risk management professionals generally prefer performance standards that are
solely dependent on the organization's loss record.
, C. Activities standards are necessary to obtain a complete picture of the success or
failure of a risk management program.
D. When performance substantially exceeds the standard, the risk management
professional knows that the standard has been appropriately set. - ANSWER: C.
Activities standards are necessary to obtain a complete picture of the success or
failure of a risk management program.
Delmond Manufacturing is opening a new manufacturing facility in a building that it
purchased from a competitor. Using the information below, which one of the
following represents the cost of risk of opening the new facility?
New building cost $60.0 million
Safety system upgrades $6.0 million
Insurance premiums $1.5 million
Retained losses $3.0 million
Risk management department budget at the site $1.0 million
Choose one answer.
A. $7.0 million
B. $10.0 million
C. $11.5 million
D. $71.5 million - ANSWER: C. $11.5 million
Achieving any post-loss goal involves expending risk management resources, which
may conflict with the pre-loss goal of
Choose one answer.
A. Economy of operations.
B. Earnings stability.
C. Social responsibility.
D. Tolerable uncertainty. - ANSWER: A. Economy of operations.
Another term for cause of loss is
Choose one answer.
A. Negative outcome.
B. Exposure.
C. Peril.
D. Hazard. - ANSWER: C. Peril
Which one of the following financial consequences of loss can be established with a
high degree of certainty fairly soon after the loss occurs?
Choose one answer.
A. The value of a pollution loss
B. The value of a building that has been damaged by fire
C. The value of business lost while the building damaged by fire is being restored
D. The value of liability claims related to a defective product - ANSWER: B. The value
of a building that has been damaged by fire
QUESTIONS ACTUAL EXAM COMPLETE 400 QUESTIONS
WITH DETAILED VERIFIED ANSWERS (100% CORRECT
ANSWERS) /ALREADY GRADED A+
For public entities such as cities, counties and public utilities, which one of the
following is normally the most important post-loss risk management goal?
Choose one answer.
A. Growth
B. Profitability
C. Continuity of operations
D. Earnings stability - ANSWER: C. Continuity of operations
Which one of the following is the goal of enterprise-wide risk management (ERM)?
Choose one answer.
A. Coordinate loss reduction efforts
B. Reduce risk management costs
C. Decentralize control of business decisions
D. Maximize the organization's value - ANSWER: D. Maximize the organization's
value
A risk management program must be monitored and periodically revised, and that
revision involves four steps. Which one of the following is one of those four steps?
Choose one answer.
A. Establish results-based rather than activity-based standards of acceptable
performance.
B. Compare actual results with the established performance standards.
C. Reduce any performance standards that have not been achieved by the actual
results.
D. Return to the first step in the risk management process to identify new loss
exposures. - ANSWER: B. Compare actual results with the established performance
standards.
Risk can be classified as subjective or objective. Which one of the following
statements is correct with respect to these risk classifications?
Choose one answer.
A. Subjective risk is risk associated with individuals; objective risk is risk associated
with objects or things.
B. Risk managers focus on objective risk and attempt to avoid allowing subjective
risk to affect their decisions.
C. Subjective risk can exist even where objective risk does not.
D. Individuals' subjective perception of risk in a given set of circumstances is
typically much higher than the objective risk. - ANSWER: C. Subjective risk can exist
even where objective risk does not.
,JNL Construction is a general contractor. As the risk management professional for
JNL, Marie should be aware of the company's contractual obligations, as well as the
contractual obligations that others owe JNL. This knowledge is necessary for Marie
to meet which one of the following pre-loss risk management goals?
Choose one answer.
A. Legality
B. Social responsibility
C. Tolerable uncertainty
D. Continuity of operations - ANSWER: A. Legality
Residual uncertainty is the level of risk that remains after organizations implement
their risk management plans. Which one of the following statements is correct with
respect to residual uncertainty?
Choose one answer.
A. Residual uncertainty is an objective measure, independent of an organization's
subjective view of the
risks to which it is exposed.
B. The cost of residual uncertainty is relatively easy to calculate and comprises an
important part of any cost of risk study.
C. Residual uncertainty can be minimized, but doing so is costly because more has to
be spent on attempts to control or finance the risks involved.
D. Cost of residual uncertainty is a factor only in the case of speculative risk; it is not
a consideration where pure risk is concerned. - ANSWER: C. Residual uncertainty can
be minimized, but doing so is costly because more has to be spent on attempts to
control or finance the risks involved.
Tania has been unemployed for six months, and her unpaid bills are mounting. She
recently damaged the front fender of her vehicle after running off the road. When
seeking repairs to the vehicle, she convinced the auto body shop to include damages
from previous incidents in the estimate. This would allow her to collect extra money
from her insurer. From an insurance and risk management perspective, Tania's
behavior is indicative of a
Choose one answer.
A. Legal hazard.
B. Moral hazard.
C. Morale hazard.
D. Physical hazard. - ANSWER: B. Moral hazard.
Which one of the following describes how an effective risk management program
should support an organization's pre-loss operational goals?
Choose one answer.
A. It should ensure that risk management costs are kept to a minimum.
B. It should eliminate uncertainty by identifying and managing loss exposures.
C. It should help ensure that the organization's legal obligations are satisfied.
D. It should ensure that no conflicts exist among the pre-loss goals. - ANSWER: C. It
should help ensure that the organization's legal obligations are satisfied.
,Which one of the following statements is true regarding risk management
techniques?
Choose one answer.
A. Data based on objective risk factors are usually the only criteria considered in
determining appropriate risk management techniques.
B. The risk management techniques selected by for-profit organizations should be
both effective in meeting the organizations' goals and economical.
C. In support of the goal of economy of operations, the risk management techniques
selected by most for-profit organizations should be the least expensive ones.
D. Nonfinancial considerations are usually disregarded in selecting risk management
techniques because they cannot be factored into a cost/benefit analysis. - ANSWER:
B. The risk management techniques selected by for-profit organizations should be
both effective in meeting the organizations' goals and economical.
Which one of the following is an element of a loss exposure?
Choose one answer.
A. The verification of risk
B. A cause of loss
C. The probability of a loss
D. The occurrence of a loss - ANSWER: B. A cause of loss
The statement "There is a 5 percent chance that John will be injured in an
automobile accident while driving to work tomorrow." is an example of
Choose one answer.
A. Quantifying risk.
B. Verifying risk.
C. Quantifying loss exposures.
D. Indentifying hazards. - ANSWER: A. Quantifying risk.
Dave owns a computer store. He stores backup media copies of confidential records
off site in case there is a fire at the computer store. The risk control technique Dave
is using to protect the confidential records is
Choose one answer.
A. Diversification.
B. Duplication.
C. Avoidance.
D. Separation. - ANSWER: B. Duplication.
Which one of the following statements regarding monitoring the results of a risk
management program is true?
Choose one answer.
A. A results standard focuses on the quality and quantity of the risk management
activities undertaken by the organization.
B. Risk management professionals generally prefer performance standards that are
solely dependent on the organization's loss record.
, C. Activities standards are necessary to obtain a complete picture of the success or
failure of a risk management program.
D. When performance substantially exceeds the standard, the risk management
professional knows that the standard has been appropriately set. - ANSWER: C.
Activities standards are necessary to obtain a complete picture of the success or
failure of a risk management program.
Delmond Manufacturing is opening a new manufacturing facility in a building that it
purchased from a competitor. Using the information below, which one of the
following represents the cost of risk of opening the new facility?
New building cost $60.0 million
Safety system upgrades $6.0 million
Insurance premiums $1.5 million
Retained losses $3.0 million
Risk management department budget at the site $1.0 million
Choose one answer.
A. $7.0 million
B. $10.0 million
C. $11.5 million
D. $71.5 million - ANSWER: C. $11.5 million
Achieving any post-loss goal involves expending risk management resources, which
may conflict with the pre-loss goal of
Choose one answer.
A. Economy of operations.
B. Earnings stability.
C. Social responsibility.
D. Tolerable uncertainty. - ANSWER: A. Economy of operations.
Another term for cause of loss is
Choose one answer.
A. Negative outcome.
B. Exposure.
C. Peril.
D. Hazard. - ANSWER: C. Peril
Which one of the following financial consequences of loss can be established with a
high degree of certainty fairly soon after the loss occurs?
Choose one answer.
A. The value of a pollution loss
B. The value of a building that has been damaged by fire
C. The value of business lost while the building damaged by fire is being restored
D. The value of liability claims related to a defective product - ANSWER: B. The value
of a building that has been damaged by fire
