ARM 400 LATEST 2026 UPDATED TEST PAPER QUESTIONS
AND ANSWERS MARKED A+
✔✔Which one of the following statements is correct regarding risk owners?
A. Generally, external stakeholders should not be considered to be risk owners.
B. Generally, the stakeholder who is most affected by or creates a risk should be its risk
owner.
C. The risk owner is usually a member of the senior management team.
D. The risk owner should be given full authority to make decisions without management
involvement. - ✔✔B
✔✔Shelton Manufacturing recently signed a contract with a new customer which will
require them to increase production by 20 percent. The organization has decided to
form a risk center to identify and assess the risks involved with this new contract, and
manage them efficiently. Which one of the following individuals should be the risk
owner?
A. Production manager
B. Sales manager
C. Senior manager
D. New customer - ✔✔A
✔✔One advantage that a national organization would derive from creating risk centers
is that it
A. May allow risks to be managed on a small scale thereby relieving the organization
from focusing attention on it.
B. Allows more independence for the risk centers so that they are not burdened with
procedures.
C. May segregate risks to protect the larger organization if the risk center fails.
D. Allows for participation by operational managers who may contribute to the risk
analysis. - ✔✔D
✔✔A vehicle manufacturer found that the exhaust system in certain models was not
working properly. Some exhaust gases were releasing into the vehicle body. Rather
than recalling the vehicles, they were shipped to South American markets. The
manufacturer
A. Is socially responsible because it shipped the vehicles out of the country thereby
avoiding any US casualties.
B. Is socially responsible because it does not force any individual to buy the vehicle.
C. Has ignored its social responsibility as well as the risks involved with these actions.
D. Has decided to transfer the risk to South American markets avoiding financial
penalties. - ✔✔C
✔✔Lucy is a chef at a restaurant. She is growing tired of working such long hours and
not reaping the financial benefits. Lucy has been saving money with the goal of opening
her own restaurant. She recently talked to a financial advisor about the options market
,as a way to grow her savings quickly. The financial advisor explained that it is a risky
choice, but could potentially allow her to reach her goal of owning a restaurant in the
near future. Lucy has decided to invest her savings in the options market. Which one of
the following types of risk attitude does Lucy exhibit?
A. Risk optimizing
B. Risk managed
C. Risk obsessed
D. Risk seeking - ✔✔D
✔✔Which one of the following best explains how a risk-managed organization views a
proposed new product line?
A. It determines the rewards of a new alternative and may underemphasize the impacts,
variances and negative effects.
B. It weighs the risk-reward relationship while realistically evaluating potential outcomes
and consequences.
C. It attempts to join with another organization for a joint venture taking little of the
actual risk on itself.
D. It seeks methods of transferring the potential risks or avoids the risk totally. - ✔✔B
✔✔The main advantage of a formal internal communication system is that
A. Employees do not have direct access to each other.
B. Formal internal communications takes time which may resolve issues.
C. Individuals know to whom to report.
D. It is easily accessed. - ✔✔C
✔✔BD Company has made widgets for over 79 years using the same production
techniques for fear of the huge costs from potential consumer lawsuits if production is
changed and product quality suffers. With respect to its risk attitude, this organization
would be classified as
A. Risk seeking.
B. Risk naïve.
C. Risk avoiding.
D. Risk optimizing. - ✔✔C
✔✔The service representatives for Tauton Insurance will be eligible for a bonus only if
the customer retention rate is increased by 5%. This is an example of which one of the
following standards?
A. A critical success factor derived from a strategic objective
B. A severe risk tolerance level
C. A key performance indicator based on financial ratios
D. A corrective measure linked with an identified tolerance level - ✔✔D
✔✔Key risk indicators (KRIs) help organizations identify issues that can lead to losses.
Effective KRIs are based on a company's
A. Organizational structure.
,B. Product or industry.
C. Strategic objectives.
D. Sales volume. - ✔✔C
✔✔An organization's goals and objectives are met by establishing and attaining
measurable standards for the many activities it pursues. Which one of the following
statements is correct with respect to those standards?
A. A key performance indicator (KPI) answers the question, "What will make our
organization a success?"
B. Generally, an organization's risk tolerance has little impact on its critical success
factors (CSFs) and key performance indicators (KPIs).
C. Organizations with key performance indicators (KPIs) established for critical success
factors (CSFs) will typically achieve organizational goals.
D. For each key performance indicator (KPI), there is a tolerance level for how much
deviation from the standard established in the KPI will be acceptable. - ✔✔D
✔✔Organizations use key risk indicators (KRIs) to plan for and respond to risk. Which
one of the following statements is correct with respect to KRIs?
A. A KRI can reveal an upward trend in the level of a risk that, if it continues, will exceed
the designated risk threshold for that risk.
B. KRIs are effective internal indicators of changes such as budget variances; however
they are not effective external indicators.
C. An organization's risk criteria, predefined tolerance ranges that measure variances
from expected outcomes, are based on risk thresholds.
D. Risk criteria relating to an organization's strategic risks generally do not serve as the
bases for KRIs, which tend to be operational in focus. - ✔✔A
✔✔Organizations use key risk indicators (KRIs) to plan for and respond to
A. Failure.
B. Risk.
C. Questions.
D. Emergencies. - ✔✔B
✔✔Which one of the following statements is true regarding the business process
management (BPM) life cycle model?
A. The model is driven by the collaboration of human and technological input.
B. The model is designed to review one business process at a time.
C. The model is primarily used by organizations in the manufacturing sector.
D. The model is ineffective unless all five steps are completed on a continuous basis. -
✔✔A
✔✔Carbon Manufacturing Company just hired a new chief risk officer (CRO) and one of
his first tasks was to recommend updated key risk indicators (KRIs) to the chief
executive officer (CEO). The CEO was especially interested in KRIs measuring the
, company's profitability. One area of measurement that the new CRO might want to use
is
A. Personnel changes.
B. Customer invoices.
C. Customer orders.
D. Aged accounts receivable. - ✔✔D
✔✔The business process management (BPM) life cycle incorporates five steps. Which
one of the following best describes the first step in the BPM process?
A. Critical processes that support achievement of the organization's goals are selected
for analysis.
B. Processes are modeled to identify the organization's response to what-if scenarios.
C. Processes are designed or redesigned by considering workflows and affected
personnel.
D. Processes are tracked so that statistics on their performance can be gathered. -
✔✔C
✔✔For an organization, a key performance indicator (KPI) measures the performance
of a specific activity at a predetermined level or amount. Which one of the following is
an example of a KPI based on a ratio?
A. Customer-focused website
B. High employee morale
C. Safe transport of customer goods
D. Inventory turnover - ✔✔D
✔✔North American Furnishings is using business process management to help it
identify risks that threaten its processes. Which one of the following risks would be
considered an internal risk?
A. The loss of available materials due to tornadoes
B. The loss of skilled craftspeople due to retirement
C. The drop in demand due to rising interest rates
D. The rise in the cost of materials due to new forestry regulations - ✔✔B
✔✔Which one of the following is an example of an internal key risk indicator (KRI) that a
contractor might monitor?
A. Cost of lumber
B. Interest rates
C. Availability of skilled labor
D. Budget variances - ✔✔D
✔✔One of the strategic objectives for Cromley Insurance Group is customer
satisfaction. Which one of the following is a critical success factor (CSF) that would help
refine this strategic objective?
A. High profitability
B. Increase retention ratio by 5%
AND ANSWERS MARKED A+
✔✔Which one of the following statements is correct regarding risk owners?
A. Generally, external stakeholders should not be considered to be risk owners.
B. Generally, the stakeholder who is most affected by or creates a risk should be its risk
owner.
C. The risk owner is usually a member of the senior management team.
D. The risk owner should be given full authority to make decisions without management
involvement. - ✔✔B
✔✔Shelton Manufacturing recently signed a contract with a new customer which will
require them to increase production by 20 percent. The organization has decided to
form a risk center to identify and assess the risks involved with this new contract, and
manage them efficiently. Which one of the following individuals should be the risk
owner?
A. Production manager
B. Sales manager
C. Senior manager
D. New customer - ✔✔A
✔✔One advantage that a national organization would derive from creating risk centers
is that it
A. May allow risks to be managed on a small scale thereby relieving the organization
from focusing attention on it.
B. Allows more independence for the risk centers so that they are not burdened with
procedures.
C. May segregate risks to protect the larger organization if the risk center fails.
D. Allows for participation by operational managers who may contribute to the risk
analysis. - ✔✔D
✔✔A vehicle manufacturer found that the exhaust system in certain models was not
working properly. Some exhaust gases were releasing into the vehicle body. Rather
than recalling the vehicles, they were shipped to South American markets. The
manufacturer
A. Is socially responsible because it shipped the vehicles out of the country thereby
avoiding any US casualties.
B. Is socially responsible because it does not force any individual to buy the vehicle.
C. Has ignored its social responsibility as well as the risks involved with these actions.
D. Has decided to transfer the risk to South American markets avoiding financial
penalties. - ✔✔C
✔✔Lucy is a chef at a restaurant. She is growing tired of working such long hours and
not reaping the financial benefits. Lucy has been saving money with the goal of opening
her own restaurant. She recently talked to a financial advisor about the options market
,as a way to grow her savings quickly. The financial advisor explained that it is a risky
choice, but could potentially allow her to reach her goal of owning a restaurant in the
near future. Lucy has decided to invest her savings in the options market. Which one of
the following types of risk attitude does Lucy exhibit?
A. Risk optimizing
B. Risk managed
C. Risk obsessed
D. Risk seeking - ✔✔D
✔✔Which one of the following best explains how a risk-managed organization views a
proposed new product line?
A. It determines the rewards of a new alternative and may underemphasize the impacts,
variances and negative effects.
B. It weighs the risk-reward relationship while realistically evaluating potential outcomes
and consequences.
C. It attempts to join with another organization for a joint venture taking little of the
actual risk on itself.
D. It seeks methods of transferring the potential risks or avoids the risk totally. - ✔✔B
✔✔The main advantage of a formal internal communication system is that
A. Employees do not have direct access to each other.
B. Formal internal communications takes time which may resolve issues.
C. Individuals know to whom to report.
D. It is easily accessed. - ✔✔C
✔✔BD Company has made widgets for over 79 years using the same production
techniques for fear of the huge costs from potential consumer lawsuits if production is
changed and product quality suffers. With respect to its risk attitude, this organization
would be classified as
A. Risk seeking.
B. Risk naïve.
C. Risk avoiding.
D. Risk optimizing. - ✔✔C
✔✔The service representatives for Tauton Insurance will be eligible for a bonus only if
the customer retention rate is increased by 5%. This is an example of which one of the
following standards?
A. A critical success factor derived from a strategic objective
B. A severe risk tolerance level
C. A key performance indicator based on financial ratios
D. A corrective measure linked with an identified tolerance level - ✔✔D
✔✔Key risk indicators (KRIs) help organizations identify issues that can lead to losses.
Effective KRIs are based on a company's
A. Organizational structure.
,B. Product or industry.
C. Strategic objectives.
D. Sales volume. - ✔✔C
✔✔An organization's goals and objectives are met by establishing and attaining
measurable standards for the many activities it pursues. Which one of the following
statements is correct with respect to those standards?
A. A key performance indicator (KPI) answers the question, "What will make our
organization a success?"
B. Generally, an organization's risk tolerance has little impact on its critical success
factors (CSFs) and key performance indicators (KPIs).
C. Organizations with key performance indicators (KPIs) established for critical success
factors (CSFs) will typically achieve organizational goals.
D. For each key performance indicator (KPI), there is a tolerance level for how much
deviation from the standard established in the KPI will be acceptable. - ✔✔D
✔✔Organizations use key risk indicators (KRIs) to plan for and respond to risk. Which
one of the following statements is correct with respect to KRIs?
A. A KRI can reveal an upward trend in the level of a risk that, if it continues, will exceed
the designated risk threshold for that risk.
B. KRIs are effective internal indicators of changes such as budget variances; however
they are not effective external indicators.
C. An organization's risk criteria, predefined tolerance ranges that measure variances
from expected outcomes, are based on risk thresholds.
D. Risk criteria relating to an organization's strategic risks generally do not serve as the
bases for KRIs, which tend to be operational in focus. - ✔✔A
✔✔Organizations use key risk indicators (KRIs) to plan for and respond to
A. Failure.
B. Risk.
C. Questions.
D. Emergencies. - ✔✔B
✔✔Which one of the following statements is true regarding the business process
management (BPM) life cycle model?
A. The model is driven by the collaboration of human and technological input.
B. The model is designed to review one business process at a time.
C. The model is primarily used by organizations in the manufacturing sector.
D. The model is ineffective unless all five steps are completed on a continuous basis. -
✔✔A
✔✔Carbon Manufacturing Company just hired a new chief risk officer (CRO) and one of
his first tasks was to recommend updated key risk indicators (KRIs) to the chief
executive officer (CEO). The CEO was especially interested in KRIs measuring the
, company's profitability. One area of measurement that the new CRO might want to use
is
A. Personnel changes.
B. Customer invoices.
C. Customer orders.
D. Aged accounts receivable. - ✔✔D
✔✔The business process management (BPM) life cycle incorporates five steps. Which
one of the following best describes the first step in the BPM process?
A. Critical processes that support achievement of the organization's goals are selected
for analysis.
B. Processes are modeled to identify the organization's response to what-if scenarios.
C. Processes are designed or redesigned by considering workflows and affected
personnel.
D. Processes are tracked so that statistics on their performance can be gathered. -
✔✔C
✔✔For an organization, a key performance indicator (KPI) measures the performance
of a specific activity at a predetermined level or amount. Which one of the following is
an example of a KPI based on a ratio?
A. Customer-focused website
B. High employee morale
C. Safe transport of customer goods
D. Inventory turnover - ✔✔D
✔✔North American Furnishings is using business process management to help it
identify risks that threaten its processes. Which one of the following risks would be
considered an internal risk?
A. The loss of available materials due to tornadoes
B. The loss of skilled craftspeople due to retirement
C. The drop in demand due to rising interest rates
D. The rise in the cost of materials due to new forestry regulations - ✔✔B
✔✔Which one of the following is an example of an internal key risk indicator (KRI) that a
contractor might monitor?
A. Cost of lumber
B. Interest rates
C. Availability of skilled labor
D. Budget variances - ✔✔D
✔✔One of the strategic objectives for Cromley Insurance Group is customer
satisfaction. Which one of the following is a critical success factor (CSF) that would help
refine this strategic objective?
A. High profitability
B. Increase retention ratio by 5%
