ARM 400 EXPECTED EXAM QUESTIONS
AND THEIR ANSWERS
what two things lie at the base of every risk
management concept
the intersection of different types of risk
a method for identifying, assessing, and treating all risks
traditional risk assessment techniques focus on what
root cause analysis - which identifies a loss's predominant
cause
what is wrong with Root Cause Analyses
it can only look backward and might not catch all root
causes
what are the 3 steps in how big data transforms RM
data capture
data storage
data analytics
what enables data capture
smart products - uses sensors and data
collection/transmission in order to be more useful
what allows a vast amount of data to be stored and
shared
cloud computing
4 ways insurers use data to provide better
results/decisions
organizing large volumes of new data
discovering new relationships in data
,exploring new sources of data
developing new products
what is text mining
obtaining information through language recognition
what is Value at Risk
a technique to quantify financial risk by measuring the
likelihood of losing more than a specific dollar amount over
a specific period of time
what is one way organizations reduce downside risk
threshold limits - basically management is alerted once
established risk criteria triggers are hit
how does risk management align with organizational
objectives
intelligent, strategic risk taking
identification and management of cross enterprise risks
improved capital allocation
what 4 things make up cost of risk
costs of accidental losses not reimbursed by insurance or
other
insurance premiums and expenses
costs of risk control techniques
costs of administering risk management techniques
what benefits does an organization get from reducing
uncertainty
alleviates managements fears about potential losses
increases profit potential
makes the organization a safer investment
what are the 6 basic risk measures
exposure
volatility
likelihood
, consequences
time horizon
correlation
how can you neutralize the risk of time horizons
matching the duration of your assets and liabilities
the most essential attribute of anyone who manages
risk
be able to classify it
what is pure risk
Chance of loss or no loss, no chance of gain
what is speculative risk
a risk situation that includes a chance of loss and a
potential for gain. Speculative risks are not insurable.
what 2 factors affect speculative risk the most
price risk and credit risk
what is price risk
uncertainty about cash flows resulting from possible
changes in the costs of inputs to the business
what is credit risk
the risk that customers or creditors fail to make payments
insurable risks are generally classified as...
pure
objective
diversifiable
subjective risk
The perceived amount of risk based on an individual's or
organization's opinion.
objective risk
The measurable variation in uncertain outcomes based on
facts and data.
AND THEIR ANSWERS
what two things lie at the base of every risk
management concept
the intersection of different types of risk
a method for identifying, assessing, and treating all risks
traditional risk assessment techniques focus on what
root cause analysis - which identifies a loss's predominant
cause
what is wrong with Root Cause Analyses
it can only look backward and might not catch all root
causes
what are the 3 steps in how big data transforms RM
data capture
data storage
data analytics
what enables data capture
smart products - uses sensors and data
collection/transmission in order to be more useful
what allows a vast amount of data to be stored and
shared
cloud computing
4 ways insurers use data to provide better
results/decisions
organizing large volumes of new data
discovering new relationships in data
,exploring new sources of data
developing new products
what is text mining
obtaining information through language recognition
what is Value at Risk
a technique to quantify financial risk by measuring the
likelihood of losing more than a specific dollar amount over
a specific period of time
what is one way organizations reduce downside risk
threshold limits - basically management is alerted once
established risk criteria triggers are hit
how does risk management align with organizational
objectives
intelligent, strategic risk taking
identification and management of cross enterprise risks
improved capital allocation
what 4 things make up cost of risk
costs of accidental losses not reimbursed by insurance or
other
insurance premiums and expenses
costs of risk control techniques
costs of administering risk management techniques
what benefits does an organization get from reducing
uncertainty
alleviates managements fears about potential losses
increases profit potential
makes the organization a safer investment
what are the 6 basic risk measures
exposure
volatility
likelihood
, consequences
time horizon
correlation
how can you neutralize the risk of time horizons
matching the duration of your assets and liabilities
the most essential attribute of anyone who manages
risk
be able to classify it
what is pure risk
Chance of loss or no loss, no chance of gain
what is speculative risk
a risk situation that includes a chance of loss and a
potential for gain. Speculative risks are not insurable.
what 2 factors affect speculative risk the most
price risk and credit risk
what is price risk
uncertainty about cash flows resulting from possible
changes in the costs of inputs to the business
what is credit risk
the risk that customers or creditors fail to make payments
insurable risks are generally classified as...
pure
objective
diversifiable
subjective risk
The perceived amount of risk based on an individual's or
organization's opinion.
objective risk
The measurable variation in uncertain outcomes based on
facts and data.
