ARM 400 Practice Exam: Graded Questions with
Answers from Certified Sources Worldwide
Which one of the following is a main characteristic of effective key risk indicators (KRIs)?
A. They define the boundaries of risk tolerance.
B. They are lagging in nature.
C. They are based on quantifiable information.
D. They measure progress toward achieving objectives. - -correct ans- -C
One of the strategic objectives for Cromley Insurance Group is customer satisfaction. Which one
of the following is a critical success factor (CSF) that would help refine this strategic objective?
A. High customer retention
B. Reduce claim activity by 4 to 6%
C. Increase retention ratio by 5%
D. High profitability - -correct ans- -A
Which one of the following terms refers to information used as a basis for measuring the
significance of a risk?
A. Risk criteria
B. Risk tolerance
C. Risk appetite
D. Risk threshold - -correct ans- -A
,Which one of the following is an example of an external key risk indicator (KRI) that a
manufacturer might monitor?
A. Amount of budget variances
B. Number of employee injuries
C. Age of accounts payable
D. Cost of raw materials - -correct ans- -D
Which one of the following measures the progress an organization has made toward attaining its
goals within a specific amount of time?
A. Key performance indicator
B. Risk tolerance level
C. Critical success factor
D. Key risk indicator - -correct ans- -A
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. To best manage risk, an organization should have as many KRIs as possible.
B. To be effective, KRIs should be detailed and specific.
C. KRIs are based on quantifiable information and support management decisions.
D. KRIs are usually only established for the executive level within an organization. - -correct ans- C
, Key risk indicators (KRIs) can be established for various levels within an organization. Which one
of the following levels of an organization usually has the most detailed KRIs?
A. Department level
B. Board of director level
C. Business-unit level
D. Senior management level - -correct ans- -A
Some best practices models call for the formation of a risk committee with a risk management
focus at the organization's executive management level. Which one of the following statements
best describes one of the responsibilities of an executive-level risk committee?
A. To monitor the organization's compliance with established risk limits and how noncompliance
is addressed
B. To oversee exposures of the organization's critical risks and advise the board on risk strategy.
C. To approve the organization's risk management strategies, including their design and
implementation.
D. To assist the board in establishing the organization's risk appetite and risk tolerance levels - -
correct ans- -C
Which one of the following is an example of an internal key risk indicator (KRI) that a contractor
might monitor?
A. Cost of lumber
B. Interest rates
Answers from Certified Sources Worldwide
Which one of the following is a main characteristic of effective key risk indicators (KRIs)?
A. They define the boundaries of risk tolerance.
B. They are lagging in nature.
C. They are based on quantifiable information.
D. They measure progress toward achieving objectives. - -correct ans- -C
One of the strategic objectives for Cromley Insurance Group is customer satisfaction. Which one
of the following is a critical success factor (CSF) that would help refine this strategic objective?
A. High customer retention
B. Reduce claim activity by 4 to 6%
C. Increase retention ratio by 5%
D. High profitability - -correct ans- -A
Which one of the following terms refers to information used as a basis for measuring the
significance of a risk?
A. Risk criteria
B. Risk tolerance
C. Risk appetite
D. Risk threshold - -correct ans- -A
,Which one of the following is an example of an external key risk indicator (KRI) that a
manufacturer might monitor?
A. Amount of budget variances
B. Number of employee injuries
C. Age of accounts payable
D. Cost of raw materials - -correct ans- -D
Which one of the following measures the progress an organization has made toward attaining its
goals within a specific amount of time?
A. Key performance indicator
B. Risk tolerance level
C. Critical success factor
D. Key risk indicator - -correct ans- -A
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. To best manage risk, an organization should have as many KRIs as possible.
B. To be effective, KRIs should be detailed and specific.
C. KRIs are based on quantifiable information and support management decisions.
D. KRIs are usually only established for the executive level within an organization. - -correct ans- C
, Key risk indicators (KRIs) can be established for various levels within an organization. Which one
of the following levels of an organization usually has the most detailed KRIs?
A. Department level
B. Board of director level
C. Business-unit level
D. Senior management level - -correct ans- -A
Some best practices models call for the formation of a risk committee with a risk management
focus at the organization's executive management level. Which one of the following statements
best describes one of the responsibilities of an executive-level risk committee?
A. To monitor the organization's compliance with established risk limits and how noncompliance
is addressed
B. To oversee exposures of the organization's critical risks and advise the board on risk strategy.
C. To approve the organization's risk management strategies, including their design and
implementation.
D. To assist the board in establishing the organization's risk appetite and risk tolerance levels - -
correct ans- -C
Which one of the following is an example of an internal key risk indicator (KRI) that a contractor
might monitor?
A. Cost of lumber
B. Interest rates
