ARM 401 - Segment A UPDATED ACTUAL Questions and CORRECT
Answers
1. T/F: It's important for False: Traditional risk management practices that focus on common
an organization to in- hazard risks are a part of holistic risk management; the two should
sure against common not be separated. Holistic risk management examines all areas of the
hazards risks, and this ap- business, including hazard risks.
proach to risk manage-
ment should be conduct-
ed separately from holis-
tic risk management
2. Holistic Approach to Man- -broader in scope, managing all areas of the business, not just hazard
aging Risk risks
-encompasses the analysis and predictability of business processes
and organizational decisions
-mandates the collaboration of internal and external stakeholders to
identify, assess, and treat risks
-all business decisions and operations carry some risk
3. 4 quadrants of risk 1. Hazard Risk
2. Strategic Risk
3. Operational Risk
4. Financial Risk
4. Strategic Risk Uncertainties associated with the organization's long-term goals and
management decisions
-may carry a greater risk dynamic, positive or negative
5. Operational Risk Uncertainties associated with the organization's procedures, systems
& policies
-can be compliance issues, legal issues, credit policies, customer ser-
vice procedures, software tools
6. Financial Risk Uncertainties associated with the organization's financial activities
,Can also involve:
, -cost of raw material
-depreciating equipment
-asset investments/ liquidity of assets
-loans
-revolving lines of credit
7. What kind of risk is a soft- strategic risk - the time, cost, and market uncertainties may prove
ware company taking by disastrous, or such a risk could generate new revenue and elevate the
creating a new product company
for a new market & why?
8. What are a good case Banks
study for operational
risks due to their risks
related to their: compli-
ance issues, legal issues,
credit policies, customer
service procedures, soft-
ware tools, and many oth-
er facets of their opera-
tions
9. What can be as simple as Analyzing and Managing Financial Risk
monitoring cash flow &
interest rates or as com-
plex as managing foreign
exchange transactions
10. taking a holistic approach it may uncover inconsistencies in how a company manages loss reten-
to financial risk & exam- tion.
ple Example: an organization that is exposed to millions of dollars of risk
in foreign exchange markets may find that it retains only $100,000 per
loss under its property insurance policy
Answers
1. T/F: It's important for False: Traditional risk management practices that focus on common
an organization to in- hazard risks are a part of holistic risk management; the two should
sure against common not be separated. Holistic risk management examines all areas of the
hazards risks, and this ap- business, including hazard risks.
proach to risk manage-
ment should be conduct-
ed separately from holis-
tic risk management
2. Holistic Approach to Man- -broader in scope, managing all areas of the business, not just hazard
aging Risk risks
-encompasses the analysis and predictability of business processes
and organizational decisions
-mandates the collaboration of internal and external stakeholders to
identify, assess, and treat risks
-all business decisions and operations carry some risk
3. 4 quadrants of risk 1. Hazard Risk
2. Strategic Risk
3. Operational Risk
4. Financial Risk
4. Strategic Risk Uncertainties associated with the organization's long-term goals and
management decisions
-may carry a greater risk dynamic, positive or negative
5. Operational Risk Uncertainties associated with the organization's procedures, systems
& policies
-can be compliance issues, legal issues, credit policies, customer ser-
vice procedures, software tools
6. Financial Risk Uncertainties associated with the organization's financial activities
,Can also involve:
, -cost of raw material
-depreciating equipment
-asset investments/ liquidity of assets
-loans
-revolving lines of credit
7. What kind of risk is a soft- strategic risk - the time, cost, and market uncertainties may prove
ware company taking by disastrous, or such a risk could generate new revenue and elevate the
creating a new product company
for a new market & why?
8. What are a good case Banks
study for operational
risks due to their risks
related to their: compli-
ance issues, legal issues,
credit policies, customer
service procedures, soft-
ware tools, and many oth-
er facets of their opera-
tions
9. What can be as simple as Analyzing and Managing Financial Risk
monitoring cash flow &
interest rates or as com-
plex as managing foreign
exchange transactions
10. taking a holistic approach it may uncover inconsistencies in how a company manages loss reten-
to financial risk & exam- tion.
ple Example: an organization that is exposed to millions of dollars of risk
in foreign exchange markets may find that it retains only $100,000 per
loss under its property insurance policy
