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ARM 401 Exam (Associate in Risk Management) 2025 | Study
Guide, Practice Questions, and Certification Prep
ARM 401 exam 2025
Associate in Risk Management 401 study guide
ARM 401 practice test free
ARM 401 exam questions and answers
How to pass ARM 401 exam
ARM 401 risk management certification prep
ARM 401 exam study material PDF
ARM 401 exam cost and requirements
As part of its assessment of its cyber risk, an organization should consider whether there are any
intangible property exposures. Which one of the following would best be classified as an intangible
property loss? - ANSWER-The computer system is hacked and data including credit card numbers are
stolen.
Directors and officers of a corporation have fiduciary duties, which include the duty of being -
ANSWER-loyal
ABC is a small, regional brewery that has recently revised its entire operation following a devastating
fire at its plant. In restoring the plant to its full operating capacity, ABC's management installed a
computer-control system that centralizes and automates many of the business and manufacturing
functions that were once done by employees. The new computer system monitors the temperature of
the beer brewing in the vats, orders additional barley from the agricultural supplier when inventory is
depleted, receives shipments, and invoices customer product orders. As a result of the new system,
ABC expects to cut costs by more than 40% this year, primarily by reducing the number of employees
from 200 to 70. However, in addition to cutting costs, the innovative new system has created new loss
exposures for ABC as well. Which one of the following statements best describes a cyber risk-related
net income loss for ABC? - ANSWER-If the computer system goes down, ABC will not be able to
manufacture and sell its product
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The leadership of a political party in the state where Henry lives believes Henry would be a formidable
candidate for governor. Henry's campaign was short-lived. Three weeks after announcing his
candidacy, a hacker broke into the computer system used by State University's registrar. The hacker
found Henry's grade records and released them to the public. Henry failed every course one semester,
including receiving a grade of "F" in a political science course. Henry was so embarrassed that he
dropped out of the campaign. Henry filed a lawsuit against Stat University alleging the school failed to
prevent unauthorized access to his academic records. Henry's lawsuit it based on - ANSWER-Invasion
of privacy
Which one of the following is a managerial control measure to protect against the frequency of fraud
losses? - ANSWER-Stay informed of new varieties of fraud
Regional Airline Company's computer network was hacked. As a result of the cyber attack, the system
was down for 20 hours. Passengers and customers were unable to access the company's website.
When the website came back on-line, those who visited the site received an e-mail titled, "Sorry for
Interruption, Let Us Make it Up to You." The hacker had arranged to send the e-mail apology. Those
who opened the e-mail had a virus downloaded to their computer. For those passengers and
customers who experience a loss due to the virus, the third-party cyber liability claim would be based
on - ANSWER-Network security liability.
The extent of an organization's product of human intelligence that has economic value refers to which
one of the following? - ANSWER-Intellectual property
Global Reinsurance Company (GRC) is a European reinsurer that accepts risks from insurers around the
world. Financial managers at GRC would like to estimate profitability for next year for their five primary
risk areas: flood risk in Europe, earthquake risk in Japan, hurricane risk for the Gulf Coast of the United
States, California earthquake risk, and typhoon risk in Indian Ocean nations. The financial managers
entered event probabilities, loss payment estimates, retained loss levels, premiums to be received, and
other data into a computer. Then the computer was programmed to select values for each variable and
based on the data, to calculate net income. The computer was programmed to repeat the calculation
500,000 times. The output from the analysis was a distribution showing the probability of obtaining
various profit levels. The procedure GRC used is called - ANSWER-Computer simulation
In a normal distribution, fewer than 5% of outcomes are - ANSWER-Outside two standard deviations
above or below the mean.
Magruder Company would like to estimate the number of workers compensation claims to expect next
year. Magruder's risk manager ran a regression analysis in which the number of workers compensation
, 3|Page
claims was the dependent variable and the number of payroll hours worked (in thousands) was the
independent variable. The y-intercept from the regression was 3.8. The slope coefficient was 1.4. The
risk manager believes that next year Magruder workers will work 80,000 payroll hours. Based on this
information, approximately how many workers compensation claims should the risk manager expect
next year? - ANSWER-116 (y = mx + b, payroll is the independent x axis and claims is the dependent y
axis. y = 1.4 (80) + 3.8 = 115.8, rounded to 116 claims next year)
A main difference between decision trees and event trees is - ANSWER-That event trees analyze the
consequences of accidental events rather than decisions
The theoretical probability of a head on a coin toss is 50%. Based on the law of large numbers, which one
of the following is the number of coin tosses most likely to result in an empirical frequency of 50%
receiving a head on a coin toss? - ANSWER-100 (As the number of samples increase, the empirical
frequency of a head on a coin toss will move closer and closer to 50%. Of the choices provided, the
number of coin tosses most likely to result in an empirical frequency of 50% receiving a head on a coin
toss is 100.)
Which one of the following statements is true if earnings at risk are $200,000 with 90% confidence? -
ANSWER-Earnings at risk are projected to be less than $200,000 10% of the time.
If 95.44% of all outcomes are within two standard deviations above and below the mean and 2.15% of all
outcomes are between two and three standard deviations above and 2.15% of all outcomes are between
two and three standard below the mean, the percentage of all outcomes that lie beyond three standard
deviations from (above and below) the mean is - ANSWER-26 (100% - 95.44% - 2.15% - 2.15% =.26%;
.26% of all outcomes lie outside three standard deviations above and below the mean.)
Which one of the following is considered the most effective loss control method against potential losses
from computer hackers? - ANSWER-Computer passwords
Mike is the new risk manager for ABC Web Hosting, LLC. ABC develops and hosts Web sites for many
different organizations. Mike took over the risk manager position from Tom, who was let go for poor
performance.
XYZ Retailer was one customer for whom ABC built a Web site. Recently, XYZ Retailer accused ABC of not
building a secure site. As a result of the site not being secure, XYZ Retailer claims that its sales have
decreased dramatically. XYZ also contends that the personal information of many of its customers was
ARM 401 Exam (Associate in Risk Management) 2025 | Study
Guide, Practice Questions, and Certification Prep
ARM 401 exam 2025
Associate in Risk Management 401 study guide
ARM 401 practice test free
ARM 401 exam questions and answers
How to pass ARM 401 exam
ARM 401 risk management certification prep
ARM 401 exam study material PDF
ARM 401 exam cost and requirements
As part of its assessment of its cyber risk, an organization should consider whether there are any
intangible property exposures. Which one of the following would best be classified as an intangible
property loss? - ANSWER-The computer system is hacked and data including credit card numbers are
stolen.
Directors and officers of a corporation have fiduciary duties, which include the duty of being -
ANSWER-loyal
ABC is a small, regional brewery that has recently revised its entire operation following a devastating
fire at its plant. In restoring the plant to its full operating capacity, ABC's management installed a
computer-control system that centralizes and automates many of the business and manufacturing
functions that were once done by employees. The new computer system monitors the temperature of
the beer brewing in the vats, orders additional barley from the agricultural supplier when inventory is
depleted, receives shipments, and invoices customer product orders. As a result of the new system,
ABC expects to cut costs by more than 40% this year, primarily by reducing the number of employees
from 200 to 70. However, in addition to cutting costs, the innovative new system has created new loss
exposures for ABC as well. Which one of the following statements best describes a cyber risk-related
net income loss for ABC? - ANSWER-If the computer system goes down, ABC will not be able to
manufacture and sell its product
,2|Page
The leadership of a political party in the state where Henry lives believes Henry would be a formidable
candidate for governor. Henry's campaign was short-lived. Three weeks after announcing his
candidacy, a hacker broke into the computer system used by State University's registrar. The hacker
found Henry's grade records and released them to the public. Henry failed every course one semester,
including receiving a grade of "F" in a political science course. Henry was so embarrassed that he
dropped out of the campaign. Henry filed a lawsuit against Stat University alleging the school failed to
prevent unauthorized access to his academic records. Henry's lawsuit it based on - ANSWER-Invasion
of privacy
Which one of the following is a managerial control measure to protect against the frequency of fraud
losses? - ANSWER-Stay informed of new varieties of fraud
Regional Airline Company's computer network was hacked. As a result of the cyber attack, the system
was down for 20 hours. Passengers and customers were unable to access the company's website.
When the website came back on-line, those who visited the site received an e-mail titled, "Sorry for
Interruption, Let Us Make it Up to You." The hacker had arranged to send the e-mail apology. Those
who opened the e-mail had a virus downloaded to their computer. For those passengers and
customers who experience a loss due to the virus, the third-party cyber liability claim would be based
on - ANSWER-Network security liability.
The extent of an organization's product of human intelligence that has economic value refers to which
one of the following? - ANSWER-Intellectual property
Global Reinsurance Company (GRC) is a European reinsurer that accepts risks from insurers around the
world. Financial managers at GRC would like to estimate profitability for next year for their five primary
risk areas: flood risk in Europe, earthquake risk in Japan, hurricane risk for the Gulf Coast of the United
States, California earthquake risk, and typhoon risk in Indian Ocean nations. The financial managers
entered event probabilities, loss payment estimates, retained loss levels, premiums to be received, and
other data into a computer. Then the computer was programmed to select values for each variable and
based on the data, to calculate net income. The computer was programmed to repeat the calculation
500,000 times. The output from the analysis was a distribution showing the probability of obtaining
various profit levels. The procedure GRC used is called - ANSWER-Computer simulation
In a normal distribution, fewer than 5% of outcomes are - ANSWER-Outside two standard deviations
above or below the mean.
Magruder Company would like to estimate the number of workers compensation claims to expect next
year. Magruder's risk manager ran a regression analysis in which the number of workers compensation
, 3|Page
claims was the dependent variable and the number of payroll hours worked (in thousands) was the
independent variable. The y-intercept from the regression was 3.8. The slope coefficient was 1.4. The
risk manager believes that next year Magruder workers will work 80,000 payroll hours. Based on this
information, approximately how many workers compensation claims should the risk manager expect
next year? - ANSWER-116 (y = mx + b, payroll is the independent x axis and claims is the dependent y
axis. y = 1.4 (80) + 3.8 = 115.8, rounded to 116 claims next year)
A main difference between decision trees and event trees is - ANSWER-That event trees analyze the
consequences of accidental events rather than decisions
The theoretical probability of a head on a coin toss is 50%. Based on the law of large numbers, which one
of the following is the number of coin tosses most likely to result in an empirical frequency of 50%
receiving a head on a coin toss? - ANSWER-100 (As the number of samples increase, the empirical
frequency of a head on a coin toss will move closer and closer to 50%. Of the choices provided, the
number of coin tosses most likely to result in an empirical frequency of 50% receiving a head on a coin
toss is 100.)
Which one of the following statements is true if earnings at risk are $200,000 with 90% confidence? -
ANSWER-Earnings at risk are projected to be less than $200,000 10% of the time.
If 95.44% of all outcomes are within two standard deviations above and below the mean and 2.15% of all
outcomes are between two and three standard deviations above and 2.15% of all outcomes are between
two and three standard below the mean, the percentage of all outcomes that lie beyond three standard
deviations from (above and below) the mean is - ANSWER-26 (100% - 95.44% - 2.15% - 2.15% =.26%;
.26% of all outcomes lie outside three standard deviations above and below the mean.)
Which one of the following is considered the most effective loss control method against potential losses
from computer hackers? - ANSWER-Computer passwords
Mike is the new risk manager for ABC Web Hosting, LLC. ABC develops and hosts Web sites for many
different organizations. Mike took over the risk manager position from Tom, who was let go for poor
performance.
XYZ Retailer was one customer for whom ABC built a Web site. Recently, XYZ Retailer accused ABC of not
building a secure site. As a result of the site not being secure, XYZ Retailer claims that its sales have
decreased dramatically. XYZ also contends that the personal information of many of its customers was
