ARM Exam Questions with Correct Answers

ARM Exam Questions with Correct Answers Key performance indicator (KPI) - Answer-A measurement that defines how successfully an organization is progressing toward its long-term goals. Critical success factor (CSF) - Answer-An element, necessary for an organization's success, that is derived from a strategic objective. Risk tolerance - Answer-The amount of uncertainty an organization is prepared to accept in total or more narrowly within a certain business unit, a particular risk category or for a specific initiative. (Used with permission of RIMS.) True or false: KPIs and CSFs are two different acronyms that describe essentially the same performance measure. In other words, they are interchangeable. - Answer-False. KPIs and CSF aren't the same, but they are interrelated. KPIs measure activity tied to a CSF. What are some examples of KPIs - Answer-Financial indicators Operating margin: operating income divided by net sales Net margin: net income divided by net sales Return on assets: net income divided by average assets Staffing indicators Revenue productivity index: income divided by staffing head count Employee retention: percentage change in base period head count after employee turnover Operations indicators Inventory turnover: cost of goods sold divided by average inventory Capacity utilization: actual unit output divided by potential unit output What is a KPI - Answer-is a quantifiable measure of a specific activity. Ideally, it's an attainable standard an organization wants to achieve. It can also provide direction for an activity to take. KPIs help gauge the results of activities critical to the success of an organization. What is a KPI linked to - Answer-A upper management objectives What is a CSF linked to - Answer-A KPI What is a CSF - Answer-A CSF is an activity an organization must perform to achieve a goal. A CSF is derived from an organization's strategic objective or mission. It is not the same as a KPI, but the two are interrelated—a KPI measures the activity tied to a CSF. What is a Key risk indicator (KRI)? - Answer-A tool used by an organization to measure the uncertainty of meeting a strategic business objective. What is Economic capital? - Answer-The amount of capital required by an organization to ensure solvency at a given probability level, such as 99 percent, based on the fair value of its assets minus the fair value of its liabilities.