ARM 400 - Segment A - Chapters 1, 2, & 3 Exam Questions
with Verified Answers |2026/2027 Update | A+ Graded
Lucy is a chef at a restaurant. She is growing tired of working such long hours and not reaping
the financial benefits. Lucy has been saving money with the goal of opening her own restaurant.
She recently talked to a financial advisor about the options market as a way to grow her savings
quickly. The financial advisor explained that it is a risky choice, but could potentially allow her to
reach her goal of owning a restaurant in the near future. Lucy has decided to invest her savings
in the options market. Which one of the following types of risk attitude does Lucy exhibit?
Select one:
A. Risk obsessed
B. Risk optimizing
C. Risk seeking
D. Risk managed - Answer -C. Risk seeking
BD Company has made widgets for over 79 years using the same production techniques for fear
of the huge costs from potential consumer lawsuits if production is changed and product quality
suffers. With respect to its risk attitude, this organization would be classified as
Select one:
A. Risk seeking.
B. Risk optimizing.
C. Risk naïve.
D. Risk avoiding. - Answer -D. Risk avoiding.
1|Page
,One advantage that a national organization would derive from creating risk centers is that it
Select one:
A. Allows more independence for the risk centers so that they are not burdened with
procedures.
B. May allow risks to be managed on a small scale thereby relieving the organization from
focusing attention on it.
C. Allows for participation by operational managers who may contribute to the risk analysis.
D. May segregate risks to protect the larger organization if the risk center fails. - Answer -C.
Allows for participation by operational managers who may contribute to the risk analysis.
After opening its third store, Shoehorn Shoes decided to purchase new inventory tracking
software for all of its stores. Which one of the following external or internal environments does
this decision relate to?
Select one:
A. Product environment
B. Physical environment
C. Economic environment
D. Operations environment - Answer -D. Operations environment
An organization evaluates key stakeholders' attitude toward risk in order to
Select one:
A. Understand what risks are acceptable and to develop an effective enterprise-wide risk
management program.
2|Page
, B. Understand the risk appetite in order to determine what information is disseminated.
C. Understand acceptable risks and gauge its ability to attract new shareholders.
D. Understand acceptable risks and gauge its ability to raise capital. - Answer -A. Understand
what risks are acceptable and to develop an effective enterprise-wide risk management
program.
Which one of the following should be part of an organization's standard operating procedures
(SOPs) concerning external stakeholder communications?
Select one:
A. Instructions regarding what types of information can and cannot be released
B. Instructions to avoid the use of social media
C. Instructions to always use written communication, rather than verbal or nonverbal
communication
D. Instructions requiring the use of formal, rather than informal communication - Answer -A.
Instructions regarding what types of information can and cannot be released
Green Corporation suffered severe losses due to tornados at its northern facility. The Board of
Directors issued a statement that the current costs outweighed any sustainable profits in the
near term. The risk manager can best assist the Board in its long term decision making by
Select one:
A. Following the directives of the board of directors preserving his/her position with the
company.
B. Offering a white paper on the merits of shutting down the facility, laying off the staff and
shifting the work to other locations.
3|Page
with Verified Answers |2026/2027 Update | A+ Graded
Lucy is a chef at a restaurant. She is growing tired of working such long hours and not reaping
the financial benefits. Lucy has been saving money with the goal of opening her own restaurant.
She recently talked to a financial advisor about the options market as a way to grow her savings
quickly. The financial advisor explained that it is a risky choice, but could potentially allow her to
reach her goal of owning a restaurant in the near future. Lucy has decided to invest her savings
in the options market. Which one of the following types of risk attitude does Lucy exhibit?
Select one:
A. Risk obsessed
B. Risk optimizing
C. Risk seeking
D. Risk managed - Answer -C. Risk seeking
BD Company has made widgets for over 79 years using the same production techniques for fear
of the huge costs from potential consumer lawsuits if production is changed and product quality
suffers. With respect to its risk attitude, this organization would be classified as
Select one:
A. Risk seeking.
B. Risk optimizing.
C. Risk naïve.
D. Risk avoiding. - Answer -D. Risk avoiding.
1|Page
,One advantage that a national organization would derive from creating risk centers is that it
Select one:
A. Allows more independence for the risk centers so that they are not burdened with
procedures.
B. May allow risks to be managed on a small scale thereby relieving the organization from
focusing attention on it.
C. Allows for participation by operational managers who may contribute to the risk analysis.
D. May segregate risks to protect the larger organization if the risk center fails. - Answer -C.
Allows for participation by operational managers who may contribute to the risk analysis.
After opening its third store, Shoehorn Shoes decided to purchase new inventory tracking
software for all of its stores. Which one of the following external or internal environments does
this decision relate to?
Select one:
A. Product environment
B. Physical environment
C. Economic environment
D. Operations environment - Answer -D. Operations environment
An organization evaluates key stakeholders' attitude toward risk in order to
Select one:
A. Understand what risks are acceptable and to develop an effective enterprise-wide risk
management program.
2|Page
, B. Understand the risk appetite in order to determine what information is disseminated.
C. Understand acceptable risks and gauge its ability to attract new shareholders.
D. Understand acceptable risks and gauge its ability to raise capital. - Answer -A. Understand
what risks are acceptable and to develop an effective enterprise-wide risk management
program.
Which one of the following should be part of an organization's standard operating procedures
(SOPs) concerning external stakeholder communications?
Select one:
A. Instructions regarding what types of information can and cannot be released
B. Instructions to avoid the use of social media
C. Instructions to always use written communication, rather than verbal or nonverbal
communication
D. Instructions requiring the use of formal, rather than informal communication - Answer -A.
Instructions regarding what types of information can and cannot be released
Green Corporation suffered severe losses due to tornados at its northern facility. The Board of
Directors issued a statement that the current costs outweighed any sustainable profits in the
near term. The risk manager can best assist the Board in its long term decision making by
Select one:
A. Following the directives of the board of directors preserving his/her position with the
company.
B. Offering a white paper on the merits of shutting down the facility, laying off the staff and
shifting the work to other locations.
3|Page
