ARM 401 With Solutions Verified By Experts
Benefits of a holistic approach to financial risk Uncover inconsistencies in how a
company manages loss retention
Predictive modeling Taking data and using software tools to analyze, extrapolate, and
predict outcomes
What device generate the data used in advanced analytics and predictive modeling? The
Internet of Things
Internet of Things Devices in use · Telematics in automobiles
· Sensors in buildings
· Drones
· Smartphones and tablets
· Heath trackers
· Robots
· High-definition cameras with sensors
,ARM 401 With Solutions Verified By Experts
What protects data? Blockchain technology
Blockchain technology · Decentralized data-storage technology and real-time ledger that
contains a secure history of transactions
· Facilitates secure transactions without the need for a third party
What has a significant impact on risk management decision making? Risk factors
What measurements do risk managers use in order to assess the interactions between risk
factors? Variance and covariance
Covariance · The measure of how two random risk variables will change in relation to
each other
· Used to calculate the correlation between the variables
Variance · Spread of the data set - how far apart the numbers are in relation to the mean
,ARM 401 With Solutions Verified By Experts
What are correlation and covariance useful for? · Selecting sources of risk for a financial
portfolio
Why do risk professionals measure correlation and covariance? · Identify and quantify
relationships among various sources of risk
· Communicate the degree of uncertainty in a risk portfolio
· Prioritize investments in loss control
· Optimize financing for multiple sources of risk
· Evaluate the effectiveness of a risk management program
Monte Carlo simulation · Statistical computer model that simulates the effects that various
types of uncertainty may have on a process
· Computer randomly selects values for each variable and generates thousands of possible
scenarios. The results are assembled into probability distributions representing possible
outcomes
What does the Monte Carlo simulation uncover in terms of risk? · May be able to uncover
the effectiveness fo the risk management program itself
· Risk manager may be able to pinpoint strengths or weaknesses in risk evaluation processes
, ARM 401 With Solutions Verified By Experts
Team approaches to identifying risk · Facilitated workshops
· Delphi technique
· Scenario analysis
· HAZOP (Hazard and operability study)
· SWOT (Strengths, weaknesses, opportunities, and threats)
Facilitated Workshops Neutral party (the facilitator) who has no stake in the outcome or
participation responsibilities, administers the risk workshop and propels the group to achieve its
goal
Delphi Technique · Uses the opinions of a select group of experts to identify risks
· Submitting two rounds of queries to the selected experts. Each expert responds to a question
and the combined answers are presented to the group. The same question is asked to the experts
and asked to consider revising their responses based on the results that were reported to the
group. This is done until a consensus is reached
Benefits of the Delphi Technique · Cost-effective
· The responses are anonymous which eliminates group bias
Benefits of a holistic approach to financial risk Uncover inconsistencies in how a
company manages loss retention
Predictive modeling Taking data and using software tools to analyze, extrapolate, and
predict outcomes
What device generate the data used in advanced analytics and predictive modeling? The
Internet of Things
Internet of Things Devices in use · Telematics in automobiles
· Sensors in buildings
· Drones
· Smartphones and tablets
· Heath trackers
· Robots
· High-definition cameras with sensors
,ARM 401 With Solutions Verified By Experts
What protects data? Blockchain technology
Blockchain technology · Decentralized data-storage technology and real-time ledger that
contains a secure history of transactions
· Facilitates secure transactions without the need for a third party
What has a significant impact on risk management decision making? Risk factors
What measurements do risk managers use in order to assess the interactions between risk
factors? Variance and covariance
Covariance · The measure of how two random risk variables will change in relation to
each other
· Used to calculate the correlation between the variables
Variance · Spread of the data set - how far apart the numbers are in relation to the mean
,ARM 401 With Solutions Verified By Experts
What are correlation and covariance useful for? · Selecting sources of risk for a financial
portfolio
Why do risk professionals measure correlation and covariance? · Identify and quantify
relationships among various sources of risk
· Communicate the degree of uncertainty in a risk portfolio
· Prioritize investments in loss control
· Optimize financing for multiple sources of risk
· Evaluate the effectiveness of a risk management program
Monte Carlo simulation · Statistical computer model that simulates the effects that various
types of uncertainty may have on a process
· Computer randomly selects values for each variable and generates thousands of possible
scenarios. The results are assembled into probability distributions representing possible
outcomes
What does the Monte Carlo simulation uncover in terms of risk? · May be able to uncover
the effectiveness fo the risk management program itself
· Risk manager may be able to pinpoint strengths or weaknesses in risk evaluation processes
, ARM 401 With Solutions Verified By Experts
Team approaches to identifying risk · Facilitated workshops
· Delphi technique
· Scenario analysis
· HAZOP (Hazard and operability study)
· SWOT (Strengths, weaknesses, opportunities, and threats)
Facilitated Workshops Neutral party (the facilitator) who has no stake in the outcome or
participation responsibilities, administers the risk workshop and propels the group to achieve its
goal
Delphi Technique · Uses the opinions of a select group of experts to identify risks
· Submitting two rounds of queries to the selected experts. Each expert responds to a question
and the combined answers are presented to the group. The same question is asked to the experts
and asked to consider revising their responses based on the results that were reported to the
group. This is done until a consensus is reached
Benefits of the Delphi Technique · Cost-effective
· The responses are anonymous which eliminates group bias
