ARM Practice Exam Questions
General Liability Insurance - Answer -Covers the insured's legal defense costs when defending against a
claim of liability.
Commercial package policies typically include these kind of coverages - Answer -business property,
liability, and business income
Morale Hazard - Answer -an insured person's attitude about his belongings.
Product Liability - Answer -Most general liability insurance policies include coverage for this
Property Losses - Answer -In the insurance industry the term "net income losses" is usually associated
with
Avoidance can be called abandonment when the organization - Answer -A cause of loss
Avoidance can be called abandonment when the organization - Answer -Decides to eliminate an existing
loss exposure
Which risk control technique is being used by a manufacturer that installs a wet-pipe sprinkler system in
its warehouse - Answer -Reduction
,The purpose of all workers compensation laws is to provide this - Answer -Medical and wage
replacement benefits to injured employees.
Integration of the management principles governing the organization with the risk management process
is - Answer -Risk governance
Based on the ISO 31000 definition of risk assessment, what step includes determining the level of risk
and its potential effects on the organization? - Answer -Risk Analysis
What is true regarding the International Organization for Standardization's ISO 31000 standard? -
Answer -ISO 31000 applies regardless of whether the risk has positive and/or negative consequences.
Solvency II includes standards for what that was not addressed in Solvency I? - Answer -Risk
Management
Which one of the following statements regarding the scope of ISO 31000 is true? - Answer -ISO 31000
may be applied to risks that can have positive consequences.
Based on Basel III principles, what group should take the lead in establishing a strong risk management
culture? - Answer -Board of directors
What is true about risk management, Solvency II, and Basel II and III standards? - Answer -C. Many risk
management standards, such as ISO 31000, are voluntary.
What is a key feature of the COSO standard but not other risk management standards? - Answer -
Control Activites
The requirements of the Sarbanes-Oxley Act are a major reason for the development of which one of
the following? - Answer -COSO Enterprise Risk Management—Integrated Framework
Solvency II is a new regulatory standard in the European Union (EU) to establish principles for risk
management and consistency in regulation for what industry? - Answer -Insurance
, In 1999, the Basel Committee issued a proposal for a revised Capital Adequacy Framework which
consisted of three pillars. One pillar is a review of an institution's internal assessment process and
capital adequacy. This pillar is... - Answer -Supervisory
MVS = - Answer -Fair Value of Assets - Fair Value of Liabilities
Risk managers can have a hard time valuing this kind of property due to the unique features of each
tract - Answer -Unimproved Land
The measure employed that compares the amount the insurer has paid in losses to the premiums it has
earned - Answer -Loss Ratio
What kind of organization would most likely be affected by commodity price risk? - Answer -A
Manufacturer
What type of financial risk has only negative potential? - Answer -Credit Risk
The fund's manager said that on any given day, there is a 5% probability of losing more than 3% of the
investment's worth. The statistic quoted by the fund manager is - Answer -Value At Risk (VaR)
What is true if earnings at risk are $200,000 with 90% confidence? - Answer -Earnings at risk are
projected to be less than $200,000 10% of the time
Leverage refers to - Answer -Using borrowed money to invest.
The Basel I capital requirements differ from capital-to-assets ratios used prior to 2003 by - Answer -
Considering the relative risk of the assets.
A significant difference between the Basel I regulatory capital requirements and the Basel II regulatory
capital requirements is that Basel II... - Answer -Includes a capital requirement for operational risk that
Basel I does not include.
General Liability Insurance - Answer -Covers the insured's legal defense costs when defending against a
claim of liability.
Commercial package policies typically include these kind of coverages - Answer -business property,
liability, and business income
Morale Hazard - Answer -an insured person's attitude about his belongings.
Product Liability - Answer -Most general liability insurance policies include coverage for this
Property Losses - Answer -In the insurance industry the term "net income losses" is usually associated
with
Avoidance can be called abandonment when the organization - Answer -A cause of loss
Avoidance can be called abandonment when the organization - Answer -Decides to eliminate an existing
loss exposure
Which risk control technique is being used by a manufacturer that installs a wet-pipe sprinkler system in
its warehouse - Answer -Reduction
,The purpose of all workers compensation laws is to provide this - Answer -Medical and wage
replacement benefits to injured employees.
Integration of the management principles governing the organization with the risk management process
is - Answer -Risk governance
Based on the ISO 31000 definition of risk assessment, what step includes determining the level of risk
and its potential effects on the organization? - Answer -Risk Analysis
What is true regarding the International Organization for Standardization's ISO 31000 standard? -
Answer -ISO 31000 applies regardless of whether the risk has positive and/or negative consequences.
Solvency II includes standards for what that was not addressed in Solvency I? - Answer -Risk
Management
Which one of the following statements regarding the scope of ISO 31000 is true? - Answer -ISO 31000
may be applied to risks that can have positive consequences.
Based on Basel III principles, what group should take the lead in establishing a strong risk management
culture? - Answer -Board of directors
What is true about risk management, Solvency II, and Basel II and III standards? - Answer -C. Many risk
management standards, such as ISO 31000, are voluntary.
What is a key feature of the COSO standard but not other risk management standards? - Answer -
Control Activites
The requirements of the Sarbanes-Oxley Act are a major reason for the development of which one of
the following? - Answer -COSO Enterprise Risk Management—Integrated Framework
Solvency II is a new regulatory standard in the European Union (EU) to establish principles for risk
management and consistency in regulation for what industry? - Answer -Insurance
, In 1999, the Basel Committee issued a proposal for a revised Capital Adequacy Framework which
consisted of three pillars. One pillar is a review of an institution's internal assessment process and
capital adequacy. This pillar is... - Answer -Supervisory
MVS = - Answer -Fair Value of Assets - Fair Value of Liabilities
Risk managers can have a hard time valuing this kind of property due to the unique features of each
tract - Answer -Unimproved Land
The measure employed that compares the amount the insurer has paid in losses to the premiums it has
earned - Answer -Loss Ratio
What kind of organization would most likely be affected by commodity price risk? - Answer -A
Manufacturer
What type of financial risk has only negative potential? - Answer -Credit Risk
The fund's manager said that on any given day, there is a 5% probability of losing more than 3% of the
investment's worth. The statistic quoted by the fund manager is - Answer -Value At Risk (VaR)
What is true if earnings at risk are $200,000 with 90% confidence? - Answer -Earnings at risk are
projected to be less than $200,000 10% of the time
Leverage refers to - Answer -Using borrowed money to invest.
The Basel I capital requirements differ from capital-to-assets ratios used prior to 2003 by - Answer -
Considering the relative risk of the assets.
A significant difference between the Basel I regulatory capital requirements and the Basel II regulatory
capital requirements is that Basel II... - Answer -Includes a capital requirement for operational risk that
Basel I does not include.
