ARM 400 CORRECT FINAL EXAM QUESTIONS AND
ANSWERS SURE A+
✔✔An organization has established a key performance indicator to "reduce employee
injuries by 6%." Which one of the following would indicate a low risk tolerance for this
KPI? - ✔✔Reduce employee injuries by 5 to 6%
✔✔Which one of the following is a main characteristic of effective key risk indicators
(KRIs)? - ✔✔They are based on quantifiable information
✔✔The fees paid to external auditors to verify the corporation's financial statements are
an example of - ✔✔A monitoring cost
✔✔Humongous Corporation has announced that it seeks strategic growth through
acquisition. It is carefully eyeing a smaller company, Tiny Corporation. Tiny Corporation
is aware of such scrutiny and interest. Within Tiny Corporation, a market force that can
help align interests of its corporate decision makers and shareholders is which one of
the following? - ✔✔Takeover threats
✔✔Organizations are increasingly creating chief risk officer (CRO) positions. Which one
of the following statements is correct with respect to CROs? - ✔✔The CROs rank and
, importance to the board of directors are equal to those of the organizations other
executive officers
✔✔Karen Williams, a retired chief financial officer of a bank, was invited to join the
board of directors of ABC Property and Liability Insurance Company. She was asked to
serve on the Audit Committee and the risk committee of the ABC board. Which of the
following statements is true regarding Karen's service on the ABC board of directors? -
✔✔The entire board of directors retains oversight responsibility over risks that are
assigned to Karen's Audit Committee
✔✔Which one of the following statements is true regarding the roles of a risk champion
and a chief risk officer? - ✔✔A chief risk officer is more likely to have a dedicated staff
to assist with the responsibilities of his or her job.
✔✔Which of the following statements best describes the risk governance role and
responsibility of a corporate board of directors? - ✔✔To set the organizations risk
appetite and to stay informed of the most significant risks to the organization and
management's responses
✔✔One of the categories of agency costs associated with managing the relationship
between management and shareholders is - ✔✔Monitoring costs
✔✔As a market force to help align manager and shareholder interests, takeover threats
are - ✔✔Less likely now than in the past because of statutory changes
✔✔While corporate governance is concerned with separating ownership and control, it
is also concerned with separating control from - ✔✔Oversight
✔✔Mechanisms that can be used to align a corporations managerial and shareholders
interests include all of the following, EXCEPT - ✔✔Risk-averse behavior
✔✔Which one of the following statements is true regarding separation of ownership and
control in corporations? - ✔✔The incentive for managers and non-management board
members to pursue their own interests at the expense of shareholders gives rise to
agency costs
✔✔Some best practices models call for the formation of a risk committee with a risk
management focus at the organization's executive management level. Which one of the
following statements best describes one of the responsibilities of an executive-level risk
committee? - ✔✔To approve the organization's risk management strategies, including
their design and implementation
ANSWERS SURE A+
✔✔An organization has established a key performance indicator to "reduce employee
injuries by 6%." Which one of the following would indicate a low risk tolerance for this
KPI? - ✔✔Reduce employee injuries by 5 to 6%
✔✔Which one of the following is a main characteristic of effective key risk indicators
(KRIs)? - ✔✔They are based on quantifiable information
✔✔The fees paid to external auditors to verify the corporation's financial statements are
an example of - ✔✔A monitoring cost
✔✔Humongous Corporation has announced that it seeks strategic growth through
acquisition. It is carefully eyeing a smaller company, Tiny Corporation. Tiny Corporation
is aware of such scrutiny and interest. Within Tiny Corporation, a market force that can
help align interests of its corporate decision makers and shareholders is which one of
the following? - ✔✔Takeover threats
✔✔Organizations are increasingly creating chief risk officer (CRO) positions. Which one
of the following statements is correct with respect to CROs? - ✔✔The CROs rank and
, importance to the board of directors are equal to those of the organizations other
executive officers
✔✔Karen Williams, a retired chief financial officer of a bank, was invited to join the
board of directors of ABC Property and Liability Insurance Company. She was asked to
serve on the Audit Committee and the risk committee of the ABC board. Which of the
following statements is true regarding Karen's service on the ABC board of directors? -
✔✔The entire board of directors retains oversight responsibility over risks that are
assigned to Karen's Audit Committee
✔✔Which one of the following statements is true regarding the roles of a risk champion
and a chief risk officer? - ✔✔A chief risk officer is more likely to have a dedicated staff
to assist with the responsibilities of his or her job.
✔✔Which of the following statements best describes the risk governance role and
responsibility of a corporate board of directors? - ✔✔To set the organizations risk
appetite and to stay informed of the most significant risks to the organization and
management's responses
✔✔One of the categories of agency costs associated with managing the relationship
between management and shareholders is - ✔✔Monitoring costs
✔✔As a market force to help align manager and shareholder interests, takeover threats
are - ✔✔Less likely now than in the past because of statutory changes
✔✔While corporate governance is concerned with separating ownership and control, it
is also concerned with separating control from - ✔✔Oversight
✔✔Mechanisms that can be used to align a corporations managerial and shareholders
interests include all of the following, EXCEPT - ✔✔Risk-averse behavior
✔✔Which one of the following statements is true regarding separation of ownership and
control in corporations? - ✔✔The incentive for managers and non-management board
members to pursue their own interests at the expense of shareholders gives rise to
agency costs
✔✔Some best practices models call for the formation of a risk committee with a risk
management focus at the organization's executive management level. Which one of the
following statements best describes one of the responsibilities of an executive-level risk
committee? - ✔✔To approve the organization's risk management strategies, including
their design and implementation
