ARM 401 CERTIFICATION EVALUATION
TEST PAPER COMPLETE QUESTIONS AND
SOLUTIONS
●● Lucas, a risk professional for Jones Incorporated, recently met with
experts from the utility industry to discuss the potential loss of supply
and risks to the infrastructure. Lucas must now decide which risks, and
proposed treatments, need to be communicated to the board of Jones
Incorporated. Lucas should make this decision based on
A. The supply source involved.
B. The organization's risk appetite and tolerance levels.
C. Whether the risk in natural or man-made.
D. Whether any government regulations are involved or not.
Answer: B
●● SoCal Movie Company produces movies at a studio in Southern
California. The risk manager decided to identify the range of potential
consequences associated with various risks that the company faces. For
example, if a severe earthquake occurred while the company was filming
a movie, there could be deaths and injuries, destruction of movie sets,
delays in production, costs associated with filming at an alternative
location, and loss of reputation and good will. The type of analysis
performed by the risk manager is called
A. SWOT analysis.
,B. Scenario analysis.
C. Sensitivity analysis.
D. HAZOP analysis.
Answer: B
●● Insurance Company (IC) sells its coverages through independent
insurance agents. Independent agents represent several insurance
companies. Tom, the president of IC, has learned that the independent
agent who is the highest producer for IC is considering selling his
agency. IC is considering acquiring the agency since Tom is concerned
that if the agency is sold, IC may lose a substantial amount of business.
Tom asked IC's risk manager to analyze the prospective purchase. The
analysis revealed that the acquisition would likely secure most of IC's
book of business with the agency but also revealed local competitors that
would try to place the business as well. In addition, the analysis revealed
the opportunity for IC to move some accounts currently placed with
other insurers over to IC. Also, it was learned that a competitor
expressed an interest in the agency acquisition. The analysis performed
by the risk manager is a
Answer: D
●● Murray Trucking is interested in evaluating which risk factors are
most likely to lead to the most costly accidents. They are evaluating risk
factors such as speed, weather conditions, driver experience, distance
traveled, and gross vehicle weight. Which one of the following statistical
measurements would be useful for the risk manager when calculating the
probability of the different risk factors causing severe accidents?
,A. Telematics
B. Inverse covariance
C. Variance
D. Monte Carlo simulation
Answer: C
●● Blithe Manufacturing has experienced a drop in market share. The
marketing department has come up with a way to differentiate their
product in order to regain market share. Blithe has assembled a team of
individuals representing different organizational functions to analyze
both internal and external factors of the new product and decide whether
or not it is feasible. Which one of the following team approaches to risk
identification is Blithe using?
A. Delphi technique
B. HAZOP workshop
C. SWOT analysis
D. Scenario analysis
Answer: C
●● William is a project manager for Parker International. He has been
assigned a key project with a short deadline. William realizes that this
project is going to require revising the job duties of some individuals
and a collaborative effort from of all team members. When revising job
duties, William should do which one of the following?
A. Overload some individuals with more work than others
, B. Try to enrich individuals' work rather than merely expand it
C. Rely on the most senior individuals to take on additional duties
D. Focus on the individuals' personality rather than results
Answer: B
●● Shelton Manufacturing executives are growing increasingly
concerned about wildfires and the potential effects on supply chain
management. As the risk professional, Carla has been asked to meet with
experts on the subject and report back to the executive team. Which one
of the following should Carla do before meeting with external wildfire
experts?
A. Carla should speak with internal subject-matter experts in hopes that
she can avoid needing the external wildfire experts.
B. Carla should research the field and get a working understanding of
wildfires.
C. Carla should solicit questions from internal experts and submit them
to the external wildfire experts.
D. Carla should try to learn as much as possible about wildfires, so she
can impress the wildfire experts.
Answer: B
●● An organization practicing holistic risk management would assess
the cost of raw materials and foreign exchange risk under which one of
the following quadrants of risk?
A. Strategic risk
TEST PAPER COMPLETE QUESTIONS AND
SOLUTIONS
●● Lucas, a risk professional for Jones Incorporated, recently met with
experts from the utility industry to discuss the potential loss of supply
and risks to the infrastructure. Lucas must now decide which risks, and
proposed treatments, need to be communicated to the board of Jones
Incorporated. Lucas should make this decision based on
A. The supply source involved.
B. The organization's risk appetite and tolerance levels.
C. Whether the risk in natural or man-made.
D. Whether any government regulations are involved or not.
Answer: B
●● SoCal Movie Company produces movies at a studio in Southern
California. The risk manager decided to identify the range of potential
consequences associated with various risks that the company faces. For
example, if a severe earthquake occurred while the company was filming
a movie, there could be deaths and injuries, destruction of movie sets,
delays in production, costs associated with filming at an alternative
location, and loss of reputation and good will. The type of analysis
performed by the risk manager is called
A. SWOT analysis.
,B. Scenario analysis.
C. Sensitivity analysis.
D. HAZOP analysis.
Answer: B
●● Insurance Company (IC) sells its coverages through independent
insurance agents. Independent agents represent several insurance
companies. Tom, the president of IC, has learned that the independent
agent who is the highest producer for IC is considering selling his
agency. IC is considering acquiring the agency since Tom is concerned
that if the agency is sold, IC may lose a substantial amount of business.
Tom asked IC's risk manager to analyze the prospective purchase. The
analysis revealed that the acquisition would likely secure most of IC's
book of business with the agency but also revealed local competitors that
would try to place the business as well. In addition, the analysis revealed
the opportunity for IC to move some accounts currently placed with
other insurers over to IC. Also, it was learned that a competitor
expressed an interest in the agency acquisition. The analysis performed
by the risk manager is a
Answer: D
●● Murray Trucking is interested in evaluating which risk factors are
most likely to lead to the most costly accidents. They are evaluating risk
factors such as speed, weather conditions, driver experience, distance
traveled, and gross vehicle weight. Which one of the following statistical
measurements would be useful for the risk manager when calculating the
probability of the different risk factors causing severe accidents?
,A. Telematics
B. Inverse covariance
C. Variance
D. Monte Carlo simulation
Answer: C
●● Blithe Manufacturing has experienced a drop in market share. The
marketing department has come up with a way to differentiate their
product in order to regain market share. Blithe has assembled a team of
individuals representing different organizational functions to analyze
both internal and external factors of the new product and decide whether
or not it is feasible. Which one of the following team approaches to risk
identification is Blithe using?
A. Delphi technique
B. HAZOP workshop
C. SWOT analysis
D. Scenario analysis
Answer: C
●● William is a project manager for Parker International. He has been
assigned a key project with a short deadline. William realizes that this
project is going to require revising the job duties of some individuals
and a collaborative effort from of all team members. When revising job
duties, William should do which one of the following?
A. Overload some individuals with more work than others
, B. Try to enrich individuals' work rather than merely expand it
C. Rely on the most senior individuals to take on additional duties
D. Focus on the individuals' personality rather than results
Answer: B
●● Shelton Manufacturing executives are growing increasingly
concerned about wildfires and the potential effects on supply chain
management. As the risk professional, Carla has been asked to meet with
experts on the subject and report back to the executive team. Which one
of the following should Carla do before meeting with external wildfire
experts?
A. Carla should speak with internal subject-matter experts in hopes that
she can avoid needing the external wildfire experts.
B. Carla should research the field and get a working understanding of
wildfires.
C. Carla should solicit questions from internal experts and submit them
to the external wildfire experts.
D. Carla should try to learn as much as possible about wildfires, so she
can impress the wildfire experts.
Answer: B
●● An organization practicing holistic risk management would assess
the cost of raw materials and foreign exchange risk under which one of
the following quadrants of risk?
A. Strategic risk
