ARM 401 TIPS 2026/2027 TEST PAPER QUESTIONS AND
SOLUTIONS RATED A+
✔✔Causal factors - ✔✔Factors that increase risk for an event.
✔✔Failure mode and effects analysis (FMEA) - ✔✔a systematic approach to analyzing
the causes and effects of product failures; An analysis that reverses the direction of
reasoning in fault tree analysis by starting with causes and branching out to
consequences.
✔✔Failure mode - ✔✔The manner in which a perceived or actual defect in an item,
process, or design occurs.
✔✔Effects analysis - ✔✔The study of a failure's consequences to determine a risk
event's root cause(s).
✔✔Indenture level - ✔✔An item's relative complexity within an assembly, system, or
function.
✔✔Local effect - ✔✔The consequence of a failure mode on the operation, function, or
status of the specific item or system level under analysis.
✔✔Next-higher-level effect - ✔✔The consequence of a failure mode on the operation,
function, or status of the items in the indenture level immediately above the indenture
level under analysis.
✔✔End effect - ✔✔The consequence of a failure mode on the operation, function, or
status of the highest indenture level.
✔✔Criticality analysis - ✔✔An analysis that identifies the critical components of a
system and ranks the severity of losing each component.
✔✔Criticality - ✔✔A product of consequence and occurrence ranking, taken from the
risk priority number calculation, used to determine the relative risk of a failure mode and
effects analysis item.
✔✔Risk priority number (RPN) - ✔✔The product of rankings for consequence,
occurrence, and detection used to identify critical failure modes when assessing risk
within a design or process.
✔✔Fault tree analysis (FTA) - ✔✔An analysis that takes a particular system failure and
traces the events leading to the system failure backwards in time.
✔✔Root cause - ✔✔The event or circumstance that directly leads to an occurrence.
, ✔✔Probability analysis - ✔✔A technique for forecasting events, such as accidental and
business losses, on the assumption that they are governed by an unchanging
probability distribution.
✔✔Probability distribution - ✔✔A presentation (table, chart, or graph) of probability
estimates of a particular set of circumstances and of the probability of each possible
outcome.
✔✔Theoretical probability - ✔✔Probability that is based on theoretical principles rather
than on actual experience.
✔✔Empirical probability (a posteriori probability) - ✔✔A probability measure that is
based on actual experience through historical data or from the observation of facts.
✔✔Law of large numbers - ✔✔the larger the number of individuals that are randomly
drawn from a population, the more representative the resulting group will be of the
entire population
✔✔Value at risk (VaR) - ✔✔A technique to quantify financial risk by measuring the
likelihood of losing more than a specific dollar amount over a specific period of time.
✔✔Earnings at risk (EaR) - ✔✔A technique to assess earnings volatility by measuring
the likelihood that earnings will be below a specific dollar amount over a specific period
of time.
✔✔Conditional value at risk (CVaR) - ✔✔A technique to quantify the likelihood of losing
a specific dollar amount that exceeds the VaR threshold.
✔✔Monte Carlo simulation - ✔✔a risk analysis technique in which probable future
events are simulated on a computer, generating estimated rates of return and risk
indexes
✔✔Trend analysis - ✔✔hypothetical extension of a past series of events into the future
✔✔Regression analysis - ✔✔A statistical technique that is used to estimate
relationships between variables.
✔✔Linear regression analysis - ✔✔a form of statistical analysis that seeks the equation
for the straight line that best describes the relationship between two ratio variables
✔✔Economic data - ✔✔Data regarding interest rates, asset prices, exchange rates, the
Consumer Price Index, and other information about the global, the national, or a
regional economy.
SOLUTIONS RATED A+
✔✔Causal factors - ✔✔Factors that increase risk for an event.
✔✔Failure mode and effects analysis (FMEA) - ✔✔a systematic approach to analyzing
the causes and effects of product failures; An analysis that reverses the direction of
reasoning in fault tree analysis by starting with causes and branching out to
consequences.
✔✔Failure mode - ✔✔The manner in which a perceived or actual defect in an item,
process, or design occurs.
✔✔Effects analysis - ✔✔The study of a failure's consequences to determine a risk
event's root cause(s).
✔✔Indenture level - ✔✔An item's relative complexity within an assembly, system, or
function.
✔✔Local effect - ✔✔The consequence of a failure mode on the operation, function, or
status of the specific item or system level under analysis.
✔✔Next-higher-level effect - ✔✔The consequence of a failure mode on the operation,
function, or status of the items in the indenture level immediately above the indenture
level under analysis.
✔✔End effect - ✔✔The consequence of a failure mode on the operation, function, or
status of the highest indenture level.
✔✔Criticality analysis - ✔✔An analysis that identifies the critical components of a
system and ranks the severity of losing each component.
✔✔Criticality - ✔✔A product of consequence and occurrence ranking, taken from the
risk priority number calculation, used to determine the relative risk of a failure mode and
effects analysis item.
✔✔Risk priority number (RPN) - ✔✔The product of rankings for consequence,
occurrence, and detection used to identify critical failure modes when assessing risk
within a design or process.
✔✔Fault tree analysis (FTA) - ✔✔An analysis that takes a particular system failure and
traces the events leading to the system failure backwards in time.
✔✔Root cause - ✔✔The event or circumstance that directly leads to an occurrence.
, ✔✔Probability analysis - ✔✔A technique for forecasting events, such as accidental and
business losses, on the assumption that they are governed by an unchanging
probability distribution.
✔✔Probability distribution - ✔✔A presentation (table, chart, or graph) of probability
estimates of a particular set of circumstances and of the probability of each possible
outcome.
✔✔Theoretical probability - ✔✔Probability that is based on theoretical principles rather
than on actual experience.
✔✔Empirical probability (a posteriori probability) - ✔✔A probability measure that is
based on actual experience through historical data or from the observation of facts.
✔✔Law of large numbers - ✔✔the larger the number of individuals that are randomly
drawn from a population, the more representative the resulting group will be of the
entire population
✔✔Value at risk (VaR) - ✔✔A technique to quantify financial risk by measuring the
likelihood of losing more than a specific dollar amount over a specific period of time.
✔✔Earnings at risk (EaR) - ✔✔A technique to assess earnings volatility by measuring
the likelihood that earnings will be below a specific dollar amount over a specific period
of time.
✔✔Conditional value at risk (CVaR) - ✔✔A technique to quantify the likelihood of losing
a specific dollar amount that exceeds the VaR threshold.
✔✔Monte Carlo simulation - ✔✔a risk analysis technique in which probable future
events are simulated on a computer, generating estimated rates of return and risk
indexes
✔✔Trend analysis - ✔✔hypothetical extension of a past series of events into the future
✔✔Regression analysis - ✔✔A statistical technique that is used to estimate
relationships between variables.
✔✔Linear regression analysis - ✔✔a form of statistical analysis that seeks the equation
for the straight line that best describes the relationship between two ratio variables
✔✔Economic data - ✔✔Data regarding interest rates, asset prices, exchange rates, the
Consumer Price Index, and other information about the global, the national, or a
regional economy.
