ARM 400 Exam Questions with correct Answers

Provides a measure of the maximum potential damage associated with an occurrence - Answer- exposure ________________ is an essential goal for all public entities - Answer- continuity of operations An organization must meet the standard of care that it owes to others in order to ensure that... - Answer- legal obligations are satisfied What are the five steps of the risk management process? - Answer- - scan environment - identify risk - analyze risk - treat risk - monitor and review Which one of the following statements is true regarding the evolution of risk and risk management? - Answer- the definition of risk has evolved to include positive as well as negative attributes Risk management professionals must collaborate with data analysts during which two steps of the risk management process? - Answer- analyze risk and monitor risk treatments Jane always drives to visit her children who live 1,000 miles away. She enjoys driving and feels safer in a vehicle than on an airplane because she feels she has more control of her fate. The driving versus flying decision is an example of: - Answer- subjective risk _______________ enhances an organizations reputation - Answer- social responsibility Samuel was recently hired as a risk management professional for Parker Property Management. He has been asked by senior management to review the organizations current insurance policies to make sure that the organization is adequately protected, and also see if there are any opportunities to save on the premiums. Samuel must do which of the following through internal communication before he will be able to complete the task? - Answer- determine the organizations risk appetite Billy owns a beach front cottage which has become his primary residence. Billy's primary concern is that his home will be hit by a hurricane and badly damaged or even destroyed. For Billy, this hurricane risk is a... - Answer- subjective risk Risk can be classified as subjective or objective. Which one of the following statements is correct with respect to these risk classifications? - Answer- subjective risk can exist even where objective risk does not Asking a question such as "How do you think this will work out?" can help a speaker do which of the following? - Answer- request feedback and determine if the message has been understood Which one of the following is an internal source that can often provide information regarding risks that aren't obvious? - Answer- internal auditing (the internal audit function can often provide information regarding risk that aren't obvious, such as employees creating a risk by not adhering to certain processes) The fundamental purpose of a risk management framework is to... - Answer- integrate risk management throughout the organization In an effort to grow personal lines book, an insurer decides to offer discounts on homeowners and personal auto insurance to the employees of its largest business lines account. Which one of the following risk measures is most likely to increase as a result of this marketing decision? - Answer- Correlation (think law of large numbers) Which one of the following statements is true regarding the basic measures that apply to risk management? - Answer- consequences measure the degree to which an occurrence could positively or negatively affect an organization The traditional definition of risk management reflects the traditional concept of risk as ___________ - Answer- negative Sets of data that are too large to be gathered and analyzed by traditional methods - Answer- big data An innovative item that uses sensors; wireless sensor networks; and data collection, transmission, and analysis to further enable the item to be faster more useful, or otherwise improved. - Answer- smart product A network of objects that transmit data to and from each other without human interaction. - Answer- internet of things Information, technology, and storage services contractually provided from remote locations, through the internet or another network, without a direct server connection. - Answer- cloud computing A distributed digital ledger that facilitates secure transactions without the need for a third party. - Answer- blockchain The use of technological devices in vehicles with wireless communication and GPS tracking that transmit data to businesses or government agencies; some return information for the driver. - Answer- Telematics Obtaining information through language recognition. - Answer- text mining Amount of risk an organization is willing to take on in order to achieve an anticipated result or return. - Answer- risk appetite A technique to quantify financial risk by measuring the likelihood of losing more than a specific dollar amount over a specific period of time. - Answer- value at risk The total cost incurred by an organization because of the possibility of accidental loss. - Answer- cost of risk Any condition that presents a possibility of gain or loss, whether or not an actual loss occurs. - Answer- exposure Frequent fluctuations, such as in the price of an asset. - Answer- volatility A qualitative estimate of the certainty with which the outcome of a specific even can be predicted. - Answer- likelihood The effects, positive or negative, of an occurrence - Answer- consequences Estimated duration. - Answer- time horizon A relationship between variables. - Answer- correlation A chance of loss or no loss, but no chance of gain. - Answer- pure risk A chance of loss, no loss, or gain. - Answer- speculative risk The risk that customers or other creditors will fail to make promised payments as they come due. - Answer- credit risk The perceived amount of risk based on an individual's or organization's opinion. - Answer- subjective risk The measurable variation in uncertain outcomes based on facts and data. - Answer- objective risk A risk that affects only some individuals, businesses, or small groups. - Answer- diversifiable risk The potential for a major disruption in the function of an entire market or financial system. - Answer- systemic risk Uncertainty about investments future value because of potential changes in the market for that type of investment. - Answer- market risk The risk that an asset cannot be sold on short notice without incurring loss. - Answer- liquidity risk A foundation for applying the risk management process throughout the organization. - Answer- risk management framework Information used as a basis for measuring the significance of a risk. - Answer- risk criteria 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. - Answer- internal control The use of emerging technologies in the insurance industry - Answer- insurtech An innovative item that uses sensors; wireless sensor networks; and data collection, transmission, and analysis to further enable the item to be faster, more useful, or otherwise improved - Answer- smart product A network of objects that transmit data to and from each other without human interaction - Answer- internet of things A device that detects and measures stimuli in its environment - Answer- sensor Statistical and analytical techniques used to influence or prevent future events or behaviors - Answer- preventative analytics A device that converts one form of energy into anothe - Answer- transducer A mechanical device that turns energy into motion or otherwise effectuates a change in position or rotation using a signal and an energy source - Answer- actuator A device that measures acceleration, motion, and tilt - Answer- accelerometer The science of designing work space and equipment based on the needs of the people who use the work space and equipment - Answer- ergonomics The national oceanic and atmospheric administration (NOAA), a US Government agency, monitors tsunami risk. Earthquakes under the sea often cause large waves which can have a disastrous impact on coastal communities. In addition to monitoring earthquake data and tides, NOAA recently added a new tool -- tsunami detection buoys. The buoys are placed in the sea and they are equipped with sensors to detect high wave levels so that an early warning can be given to a coastal area if an evacuation is needed. This application of the use of smart products illustrates their use in... - Answer- catastrophe management The science of designing work spaces based on interaction between people and the equipment in the work space is called.... - Answer- ergonomics In addition to metal detectors, many airports have installed a second type of scanning technology for checked baggage and cargo. The checked bags and cargo pass through a portal with scanners programmed to detect and test for explosive trace fumes. These scanners, which detect explosives based on air samples, are an example of what type of sensor used for risk assessment and control? - Answer- biochemical sensors Which on of the following statements about the use of drones is true? - Answer- drones may e equipped with cameras that relay data in real time Southwest Interstate Railroad (SIR) is concerned about the number derailments in recent years. It's not cost effective to use human assets to inspect tracks, bridges, and trestles. Instead, SIR has started to use drones. A drone can fly low over tracks and above/below bridges and trestles. The drones record video that is transmitted to corporate headquarters where it is simultaneously scanned for derailment hazards. In the past six months, the drones detected a track blockage caused by a rock slide and damage to tracks in a remote area cause by an earthquake. SIR dispatched work crews to make the tracks once again passable, and no derailments occurred. SIR's use of drones, video, real-term video scanning, and computer analysis illustrates which one of the following? - Answer- preventative analytics The difference between risk tech and insurt