ARM 400 EXAM 241 COMPREHENSIVE STUDY
QUESTIONS AND
ANSWERS
◉ A vehicle manufacturer found that the exhaust system in certain
models was not working properly. Some exhaust gases were
releasing into the vehicle body. Rather than recalling the vehicles,
they were shipped to South American markets. The manufacturer
A. Is socially responsible because it shipped the vehicles out of the
country thereby avoiding any US casualties.
B. Is socially responsible because it does not force any individual to
buy the vehicle.
C. Has ignored its social responsibility as well as the risks involved
with these actions.
D. Has decided to transfer the risk to South American markets
avoiding financial penalties. Answer: C
◉ 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?
A. Risk optimizing
B. Risk managed
C. Risk obsessed
D. Risk seeking. Answer: D
◉ Which one of the following best explains how a risk-managed
organization views a proposed new product line?
A. It determines the rewards of a new alternative and may
underemphasize the impacts, variances and negative effects.
B. It weighs the risk-reward relationship while realistically
evaluating potential outcomes and consequences.
C. It attempts to join with another organization for a joint venture
taking little of the actual risk on itself.
D. It seeks methods of transferring the potential risks or avoids the
risk totally.. Answer: B
◉ The main advantage of a formal internal communication system is
that
A. Employees do not have direct access to each other.
B. Formal internal communications takes time which may resolve
issues.
C. Individuals know to whom to report.
,D. It is easily accessed.. Answer: C
◉ 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
A. Risk seeking.
B. Risk naïve.
C. Risk avoiding.
D. Risk optimizing.. Answer: C
◉ The service representatives for Tauton Insurance will be eligible
for a bonus only if the customer retention rate is increased by 5%.
This is an example of which one of the following standards?
A. A critical success factor derived from a strategic objective
B. A severe risk tolerance level
C. A key performance indicator based on financial ratios
D. A corrective measure linked with an identified tolerance level.
Answer: D
◉ Key risk indicators (KRIs) help organizations identify issues that
can lead to losses. Effective KRIs are based on a company's
A. Organizational structure.
, B. Product or industry.
C. Strategic objectives.
D. Sales volume.. Answer: C
◉ An organization's goals and objectives are met by establishing and
attaining measurable standards for the many activities it pursues.
Which one of the following statements is correct with respect to
those standards?
A. A key performance indicator (KPI) answers the question, "What
will make our organization a success?"
B. Generally, an organization's risk tolerance has little impact on its
critical success factors (CSFs) and key performance indicators
(KPIs).
C. Organizations with key performance indicators (KPIs) established
for critical success factors (CSFs) will typically achieve
organizational goals.
D. For each key performance indicator (KPI), there is a tolerance
level for how much deviation from the standard established in the
KPI will be acceptable.. Answer: D
◉ Organizations use key risk indicators (KRIs) to plan for and
respond to risk. Which one of the following statements is correct
with respect to KRIs?
A. A KRI can reveal an upward trend in the level of a risk that, if it
continues, will exceed the designated risk threshold for that risk.
QUESTIONS AND
ANSWERS
◉ A vehicle manufacturer found that the exhaust system in certain
models was not working properly. Some exhaust gases were
releasing into the vehicle body. Rather than recalling the vehicles,
they were shipped to South American markets. The manufacturer
A. Is socially responsible because it shipped the vehicles out of the
country thereby avoiding any US casualties.
B. Is socially responsible because it does not force any individual to
buy the vehicle.
C. Has ignored its social responsibility as well as the risks involved
with these actions.
D. Has decided to transfer the risk to South American markets
avoiding financial penalties. Answer: C
◉ 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?
A. Risk optimizing
B. Risk managed
C. Risk obsessed
D. Risk seeking. Answer: D
◉ Which one of the following best explains how a risk-managed
organization views a proposed new product line?
A. It determines the rewards of a new alternative and may
underemphasize the impacts, variances and negative effects.
B. It weighs the risk-reward relationship while realistically
evaluating potential outcomes and consequences.
C. It attempts to join with another organization for a joint venture
taking little of the actual risk on itself.
D. It seeks methods of transferring the potential risks or avoids the
risk totally.. Answer: B
◉ The main advantage of a formal internal communication system is
that
A. Employees do not have direct access to each other.
B. Formal internal communications takes time which may resolve
issues.
C. Individuals know to whom to report.
,D. It is easily accessed.. Answer: C
◉ 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
A. Risk seeking.
B. Risk naïve.
C. Risk avoiding.
D. Risk optimizing.. Answer: C
◉ The service representatives for Tauton Insurance will be eligible
for a bonus only if the customer retention rate is increased by 5%.
This is an example of which one of the following standards?
A. A critical success factor derived from a strategic objective
B. A severe risk tolerance level
C. A key performance indicator based on financial ratios
D. A corrective measure linked with an identified tolerance level.
Answer: D
◉ Key risk indicators (KRIs) help organizations identify issues that
can lead to losses. Effective KRIs are based on a company's
A. Organizational structure.
, B. Product or industry.
C. Strategic objectives.
D. Sales volume.. Answer: C
◉ An organization's goals and objectives are met by establishing and
attaining measurable standards for the many activities it pursues.
Which one of the following statements is correct with respect to
those standards?
A. A key performance indicator (KPI) answers the question, "What
will make our organization a success?"
B. Generally, an organization's risk tolerance has little impact on its
critical success factors (CSFs) and key performance indicators
(KPIs).
C. Organizations with key performance indicators (KPIs) established
for critical success factors (CSFs) will typically achieve
organizational goals.
D. For each key performance indicator (KPI), there is a tolerance
level for how much deviation from the standard established in the
KPI will be acceptable.. Answer: D
◉ Organizations use key risk indicators (KRIs) to plan for and
respond to risk. Which one of the following statements is correct
with respect to KRIs?
A. A KRI can reveal an upward trend in the level of a risk that, if it
continues, will exceed the designated risk threshold for that risk.
