ARM 402 FINAL EXAM BANK | ACCURATE ALL CURRENTLY
TESTING QUESTIONS AND ANSWERS WITH RATIONALES |
EXPERT VERIFIED FOR GUARANTEED PASS | LATEST
UPDATE
A risk control technique that reduces the frequency of a particular loss is
A. Loss prevention.
B. Loss reduction.
C. Diversification.
D. Duplication.
A
Ivanhoe Corporation purchases stock in a bank and in a pharmaceutical manufacturer. Because
these are unrelated industries, Ivanhoe hope that any losses in one stock will be more than offset
by profits in another. Ivanhoe is using which one of the following risk management techniques?
A. Risk transfer
B. Duplication
C. Diversification
D. Separation
C
Pacific Bar and Grill was having a problem with employees slipping and falling in the kitchen
and bar areas. Rather than incur the cost to replace the floors with a new non-slip surface, the
owners decided to require employees to wear slip-resistant shoes and monitor the floors for spills
on a regular schedule. They are also keeping track of the number of employee slips and falls and
the associated costs, as well as, the expenses involved with this risk management program.
Which one of the following methods is Pacific Bar and Grill using to measure the effectiveness
of this risk management process?
A. Dashboard reporting
,B. Feedback loop
C. Scorecard
D. Bow-tie diagram
B
Ed is investment manager of the Nellor Foundation, a charitable trust. Recently, Ed met with the
president of the Foundation. Up until now, assets have been invested in financial assets. Ed told
the president that after performing a simulation, he would like to add a high-yielding, higher risk
real estate investment to the portfolio. When the president asked if it would be too risky, Ed
replied, "It will actually increase expected returns while reducing risk." The purported reduction
in risk occurs because
A. The real estate investment will not be large enough to significantly impact on the portfolio.
B. Rental income generated by the real estate investment is not taxable.
C. Taxes on real estate investments may be deferred.
D. The real estate investment returns are negatively correlated with the other assets.
D
Which one of the following risk control techniques is generally used to reduce the frequency of a
particular loss?
A. Separation
B. Loss reduction
C. Avoidance
D. Loss prevention
D
Which one of the following statements regarding correlation analysis is true?
A. Because it incorporates so much data, a risk professional can rely on correlation analysis only
when making a major decision.
B. Abnormal observations and inaccurate data may skew correlation analysis.
C. The range of correlation coefficients is from 0 to +1.
D. Correlation analysis can indicate causality between variables.
,B
When organizations invest their assets among a mix of stocks and bonds from companies in
different industry sectors they are using the risk management technique of
A. Diversification.
B. Duplication.
C. Risk transfer.
D. Separation.
A
Diversification is a risk control technique that
A. Spreads loss exposures over numerous projects, products, markets, or regions.
B. Views the cause of accidents to be a result of business concentration and vertical integration.
C. Produces a copy or backup and keeps it in reserve.
D. Divides an asset or operation into two or more separate units.
A
Victor is the risk manager for Jones Incorporated. He decided that a bow-tie diagram would be
the best method to convey a potential risk to the executive team. Victor will use the bow-tie
diagram to do which one of the following?
A. To provide the team with all of the information it needs to know about the risk within a very
brief period of time
B. To identify the risk and list its possible causes and possible consequences on either side
C. To depict the likeliness that the risk will occur
D. To consistently monitor risk exposures and the controls in place
B
A risk control technique that reduces the severity of a particular loss is
A. Loss reduction.
B. Loss prevention.
C. Duplication.
D. Diversification.
, A
Advancements in machine learning and artificial intelligence (AI) have helped insurers do all of
the following, EXCEPT:
A. Price insurance policies more precisely
B. Completely prevent customers' risk
C. Customize policies to more closely align with customers' actual risk
D. Deliver policy information and payment options to a mobile device
B
A local shopping center reduced its net income loss after a fire by incurring additional expenses
to shorten the time it takes to repair the damage and reopen the shopping center. Bob, the owner
of the center, hired a contractor to work around the clock until repairs were completed. This
reduced Bob's net income loss because he was able to repair the shops sooner. Bob's action is an
example of which one of the following risk management techniques?
A. Loss prevention
B. Avoidance
C. Diversification
D. Loss reduction
D
Conor needs to deliver an important message to his staff. He has scheduled a meeting in a
conference room with his staff of 10 individuals. Which one of the following is the best way for
Conor to use his body language to convey confidence in his message and interest in his staff?
A. Conor should walk around the room standing over different individuals as he speaks.
B. Conor should sit up and lean slightly toward the audience.
C. Conor should keep his hands folded on the table to avoid distracting motions.
D. Conor should sit at the end of the table leaning back in his chair.
B
Jepson Manufacturing Company is a U.S.-based company with operations in Mexico, Canada,
Brazil, and the Netherlands. Jepson purchases a nonadmitted policy in the U.S. and policies from
TESTING QUESTIONS AND ANSWERS WITH RATIONALES |
EXPERT VERIFIED FOR GUARANTEED PASS | LATEST
UPDATE
A risk control technique that reduces the frequency of a particular loss is
A. Loss prevention.
B. Loss reduction.
C. Diversification.
D. Duplication.
A
Ivanhoe Corporation purchases stock in a bank and in a pharmaceutical manufacturer. Because
these are unrelated industries, Ivanhoe hope that any losses in one stock will be more than offset
by profits in another. Ivanhoe is using which one of the following risk management techniques?
A. Risk transfer
B. Duplication
C. Diversification
D. Separation
C
Pacific Bar and Grill was having a problem with employees slipping and falling in the kitchen
and bar areas. Rather than incur the cost to replace the floors with a new non-slip surface, the
owners decided to require employees to wear slip-resistant shoes and monitor the floors for spills
on a regular schedule. They are also keeping track of the number of employee slips and falls and
the associated costs, as well as, the expenses involved with this risk management program.
Which one of the following methods is Pacific Bar and Grill using to measure the effectiveness
of this risk management process?
A. Dashboard reporting
,B. Feedback loop
C. Scorecard
D. Bow-tie diagram
B
Ed is investment manager of the Nellor Foundation, a charitable trust. Recently, Ed met with the
president of the Foundation. Up until now, assets have been invested in financial assets. Ed told
the president that after performing a simulation, he would like to add a high-yielding, higher risk
real estate investment to the portfolio. When the president asked if it would be too risky, Ed
replied, "It will actually increase expected returns while reducing risk." The purported reduction
in risk occurs because
A. The real estate investment will not be large enough to significantly impact on the portfolio.
B. Rental income generated by the real estate investment is not taxable.
C. Taxes on real estate investments may be deferred.
D. The real estate investment returns are negatively correlated with the other assets.
D
Which one of the following risk control techniques is generally used to reduce the frequency of a
particular loss?
A. Separation
B. Loss reduction
C. Avoidance
D. Loss prevention
D
Which one of the following statements regarding correlation analysis is true?
A. Because it incorporates so much data, a risk professional can rely on correlation analysis only
when making a major decision.
B. Abnormal observations and inaccurate data may skew correlation analysis.
C. The range of correlation coefficients is from 0 to +1.
D. Correlation analysis can indicate causality between variables.
,B
When organizations invest their assets among a mix of stocks and bonds from companies in
different industry sectors they are using the risk management technique of
A. Diversification.
B. Duplication.
C. Risk transfer.
D. Separation.
A
Diversification is a risk control technique that
A. Spreads loss exposures over numerous projects, products, markets, or regions.
B. Views the cause of accidents to be a result of business concentration and vertical integration.
C. Produces a copy or backup and keeps it in reserve.
D. Divides an asset or operation into two or more separate units.
A
Victor is the risk manager for Jones Incorporated. He decided that a bow-tie diagram would be
the best method to convey a potential risk to the executive team. Victor will use the bow-tie
diagram to do which one of the following?
A. To provide the team with all of the information it needs to know about the risk within a very
brief period of time
B. To identify the risk and list its possible causes and possible consequences on either side
C. To depict the likeliness that the risk will occur
D. To consistently monitor risk exposures and the controls in place
B
A risk control technique that reduces the severity of a particular loss is
A. Loss reduction.
B. Loss prevention.
C. Duplication.
D. Diversification.
, A
Advancements in machine learning and artificial intelligence (AI) have helped insurers do all of
the following, EXCEPT:
A. Price insurance policies more precisely
B. Completely prevent customers' risk
C. Customize policies to more closely align with customers' actual risk
D. Deliver policy information and payment options to a mobile device
B
A local shopping center reduced its net income loss after a fire by incurring additional expenses
to shorten the time it takes to repair the damage and reopen the shopping center. Bob, the owner
of the center, hired a contractor to work around the clock until repairs were completed. This
reduced Bob's net income loss because he was able to repair the shops sooner. Bob's action is an
example of which one of the following risk management techniques?
A. Loss prevention
B. Avoidance
C. Diversification
D. Loss reduction
D
Conor needs to deliver an important message to his staff. He has scheduled a meeting in a
conference room with his staff of 10 individuals. Which one of the following is the best way for
Conor to use his body language to convey confidence in his message and interest in his staff?
A. Conor should walk around the room standing over different individuals as he speaks.
B. Conor should sit up and lean slightly toward the audience.
C. Conor should keep his hands folded on the table to avoid distracting motions.
D. Conor should sit at the end of the table leaning back in his chair.
B
Jepson Manufacturing Company is a U.S.-based company with operations in Mexico, Canada,
Brazil, and the Netherlands. Jepson purchases a nonadmitted policy in the U.S. and policies from
