CPCU 500 Top Latest Questions and Correct Answers

For public entities such as cities, counties and public utilities, which one of the following is normally the most important post-loss risk management goal? Choose one answer. A. Growth B. Profitability C. Continuity of operations D. Earnings stability - C. Continuity of operations Which one of the following is the goal of enterprise-wide risk management (ERM)? Choose one answer. A. Coordinate loss reduction efforts B. Reduce risk management costs C. Decentralize control of business decisions D. Maximize the organization's value - D. Maximize the organization's value A risk management program must be monitored and periodically revised, and that revision involves four steps. Which one of the following is one of those four steps? Choose one answer. A. Establish results-based rather than activity-based standards of acceptable performance. B. Compare actual results with the established performance standards. C. Reduce any performance standards that have not been achieved by the actual results. D. Return to the first step in the risk management process to identify new loss exposures. - B. Compare actual results with the established performance standards. Risk can be classified as subjective or objective. Which one of the following statements is correct with respect to these risk classifications? Choose one answer. A. Subjective risk is risk associated with individuals; objective risk is risk associated with objects or things. B. Risk managers focus on objective risk and attempt to avoid allowing subjective risk to affect their decisions. C. Subjective risk can exist even where objective risk does not. D. Individuals' subjective perception of risk in a given set of circumstances is typically much higher than the objective risk. - C. Subjective risk can exist even where objective risk does not. JNL Construction is a general contractor. As the risk management professional for JNL, Marie should be aware of the company's contractual obligations, as well as the contractual obligations that others owe JNL. This knowledge is necessary for Marie to meet which one of the following pre-loss risk management goals? Choose one answer. A. Legality B. Social responsibility C. Tolerable uncertainty D. Continuity of operations - A. Legality Residual uncertainty is the level of risk that remains after organizations implement their risk management plans. Which one of the following statements is correct with respect to residual uncertainty? Choose one answer. A. Residual uncertainty is an objective measure, independent of an organization's subjective view of the risks to which it is exposed. B. The cost of residual uncertainty is relatively easy to calculate and comprises an important part of any cost of risk study. C. Residual uncertainty can be minimized, but doing so is costly because more has to be spent on attempts to control or finance the risks involved. D. Cost of residual uncertainty is a factor only in the case of speculative risk; it is not a consideration where pure risk is concerned. - C. Residual uncertainty can be minimized, but doing so is costly because more has to be spent on attempts to control or finance the risks involved. Tania has been unemployed for six months, and her unpaid bills are mounting. She recently damaged the front fender of her vehicle after running off the road. When seeking repairs to the vehicle, she convinced the auto body shop to include damages from previous incidents in the estimate. This would allow her to collect extra money from her insurer. From an insurance and risk management perspective, Tania's behavior is indicative of a Choose one answer. A. Legal hazard. B. Moral hazard. C. Morale hazard. D. Physical hazard. - B. Moral hazard. Which one of the following describes how an effective risk management program should support an organization's pre-loss operational goals? Choose one answer. A. It should ensure that risk management costs are kept to a minimum. B. It should eliminate uncertainty by identifying and managing loss exposures. C. It should help ensure that the organization's legal obligations are satisfied. D. It should ensure that no conflicts exist among the pre-loss goals. - C. It should help ensure that the organization's legal obligations are satisfied. Which one of the following statements is true regarding risk management techniques? Choose one answer. A. Data based on objective risk factors are usually the only criteria considered in determining appropriate risk management techniques. B. The risk management techniques selected by for-profit organizations should be both effective in meeting the organizations' goals and economical. C. In support of the goal of economy of operations, the risk management techniques selected by most for-profit organizations should be the least expensive ones. D. Nonfinancial considerations are usually disregarded in selecting risk management techniques because they cannot be factored into a cost/benefit analysis. - B. The risk management techniques selected by for-profit organizations should be both effective in meeting the organizations' goals and economical.