ARM 400 COMPREHENSIVE UPDATED EXAM QUESTIONS
AND ANSWERS MARKED A+
✔✔Diversifiable Risk - ✔✔A risk that affects only some individuals, businesses, or small
groups.
✔✔Systemic Risk - ✔✔The potential for a major disruption in the function of an entire
market or financial system. Generally nondiversifiable.
✔✔Market Risk - ✔✔Uncertainty about an investment's future value because of
potential changes in the market for that type of investment.
✔✔Liquidity Risk - ✔✔The risk that an asset cannot be sold on short notice without
incurring a loss.
✔✔Risk Management Framework - ✔✔A foundation for applying the risk management
process throughout the organization.
✔✔Risk Criteria - ✔✔Information used as a basis for measuring the significance of a
risk.
✔✔Internal Control - ✔✔A system or process that an organization uses to achieve its
operational goals, internal and external financial reporting goals, or legal and regulatory
compliance goals.
✔✔Insurtech - ✔✔The use of emerging technologies in the insurance industry.
✔✔Sensor - ✔✔A device that detects and measures stimuli in its environment.
✔✔Preventive Analytics - ✔✔Statistical and analytical techniques used to influence or
prevent future events or behaviors.
✔✔Transducer - ✔✔A device that converts one form of energy into another.
✔✔Actuator - ✔✔A mechanical device that turns energy into motion or otherwise
effectuates a change in position or rotation using a signal and an energy source.
✔✔Accelerometer - ✔✔A device that measures acceleration, motion, and tilt.
✔✔Ergonomics - ✔✔The science of designing work space and equipment based on the
needs of the people who use the work space and equipment.
✔✔Stakeholder - ✔✔Any individual or organization that is directly or indirectly involved
with or affected by organizational decisions or activities.
, ✔✔Risk Center - ✔✔A discrete unit within an organization, having a leader and specific
objectives, at which level a particular risk (or group of risks) is most appropriately and
effectively managed.
✔✔Risk Owner - ✔✔An individual accountable for the identification, assessment,
treatment, and monitoring of risks in a specific environment.
✔✔Code of Ethics - ✔✔The minimum standards of expected behavior for those to
whom the code applies.
✔✔Social Responsibility - ✔✔An organization's responsibility to its stakeholders and
society to consider the consequences of its actions on all stakeholders and to protect
the welfare of society overall.
✔✔Key Performance Indicators (KPIs) - ✔✔A measurement that defines how
successfully an organization is progressing toward its long-term goals.
✔✔Critical Success Factors (CSFs) - ✔✔An element, necessary for an organization's
success, that is derived from a strategic objective.
✔✔Risk Tolerance - ✔✔The amount of uncertainty an organization is prepared to
accept in total or more narrowly within a certain business unit, a particular risk category
or for a specific initiative. (Used with permission of RIMS.)
✔✔Key Risk Indicators (KRIs) - ✔✔A tool used by an organization to measure the
uncertainty of meeting a strategic business objective.
✔✔Economic Capital - ✔✔The amount of capital required by an organization to ensure
solvency at a given probability level, such as 99 percent, based on the fair value of its
assets minus the fair value of its liabilities.
✔✔Business Process Management (BPM) - ✔✔A systematic, iterative plan to analyze
and improve business processes through life-cycle phases to achieve long-term goals
and client satisfaction.
✔✔Risk Indicator - ✔✔A tool used by an organization to measure the level of
uncertainty in an activity, project, or process.
✔✔Control Environment - ✔✔The degree of importance a board of directors and
management place on their organization's internal control system and their related
actions.
AND ANSWERS MARKED A+
✔✔Diversifiable Risk - ✔✔A risk that affects only some individuals, businesses, or small
groups.
✔✔Systemic Risk - ✔✔The potential for a major disruption in the function of an entire
market or financial system. Generally nondiversifiable.
✔✔Market Risk - ✔✔Uncertainty about an investment's future value because of
potential changes in the market for that type of investment.
✔✔Liquidity Risk - ✔✔The risk that an asset cannot be sold on short notice without
incurring a loss.
✔✔Risk Management Framework - ✔✔A foundation for applying the risk management
process throughout the organization.
✔✔Risk Criteria - ✔✔Information used as a basis for measuring the significance of a
risk.
✔✔Internal Control - ✔✔A system or process that an organization uses to achieve its
operational goals, internal and external financial reporting goals, or legal and regulatory
compliance goals.
✔✔Insurtech - ✔✔The use of emerging technologies in the insurance industry.
✔✔Sensor - ✔✔A device that detects and measures stimuli in its environment.
✔✔Preventive Analytics - ✔✔Statistical and analytical techniques used to influence or
prevent future events or behaviors.
✔✔Transducer - ✔✔A device that converts one form of energy into another.
✔✔Actuator - ✔✔A mechanical device that turns energy into motion or otherwise
effectuates a change in position or rotation using a signal and an energy source.
✔✔Accelerometer - ✔✔A device that measures acceleration, motion, and tilt.
✔✔Ergonomics - ✔✔The science of designing work space and equipment based on the
needs of the people who use the work space and equipment.
✔✔Stakeholder - ✔✔Any individual or organization that is directly or indirectly involved
with or affected by organizational decisions or activities.
, ✔✔Risk Center - ✔✔A discrete unit within an organization, having a leader and specific
objectives, at which level a particular risk (or group of risks) is most appropriately and
effectively managed.
✔✔Risk Owner - ✔✔An individual accountable for the identification, assessment,
treatment, and monitoring of risks in a specific environment.
✔✔Code of Ethics - ✔✔The minimum standards of expected behavior for those to
whom the code applies.
✔✔Social Responsibility - ✔✔An organization's responsibility to its stakeholders and
society to consider the consequences of its actions on all stakeholders and to protect
the welfare of society overall.
✔✔Key Performance Indicators (KPIs) - ✔✔A measurement that defines how
successfully an organization is progressing toward its long-term goals.
✔✔Critical Success Factors (CSFs) - ✔✔An element, necessary for an organization's
success, that is derived from a strategic objective.
✔✔Risk Tolerance - ✔✔The amount of uncertainty an organization is prepared to
accept in total or more narrowly within a certain business unit, a particular risk category
or for a specific initiative. (Used with permission of RIMS.)
✔✔Key Risk Indicators (KRIs) - ✔✔A tool used by an organization to measure the
uncertainty of meeting a strategic business objective.
✔✔Economic Capital - ✔✔The amount of capital required by an organization to ensure
solvency at a given probability level, such as 99 percent, based on the fair value of its
assets minus the fair value of its liabilities.
✔✔Business Process Management (BPM) - ✔✔A systematic, iterative plan to analyze
and improve business processes through life-cycle phases to achieve long-term goals
and client satisfaction.
✔✔Risk Indicator - ✔✔A tool used by an organization to measure the level of
uncertainty in an activity, project, or process.
✔✔Control Environment - ✔✔The degree of importance a board of directors and
management place on their organization's internal control system and their related
actions.
