ARM 402 Exam Practice
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1. Telematics devices allow organizations to accurately A
identify patterns of risk and predict risk for which one
of the following types of loss exposures?
A. Automobile
B. Property
C. Workers compensation
D. Business income
2. Which one of the following is a major benefit that C
smart insurance contracts can provide to insurance
customers?
A. Smart contracts can render a risk completely pre-
ventable.
B. Smart contracts can provide broader coverage at a
lower cost.
C. Smart contracts can dramatically increase the
speed of loss payments.
D. Smart contracts can significantly increase the speed
of premium payments.
3. Maxwell Company has just invested a large sum in A
new, highly-sophisticated computer equipment and
building renovations. Maxwell arranged to lease iden-
tical equipment at another location so that it could use
the equipment in the event of a disaster at its location.
Maxwell's lease of identical equipment at another lo-
cation is an example of
A. Duplication.
B. Separation.
C. Loss reduction.
D. Diversification.
, ARM 402 Exam Practice
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4. Olivia is planning a meeting to explain a new cyber C
security procedure. She expects that the meeting will
be impeded by hidden agendas. Which one of the fol-
lowing is the best way for Olivia to deal with potential
hidden agendas?
A. Olivia should refuse to take questions during her
meeting, and request that any questions be forward-
ed to her in writing after the meeting.
B. Olivia should start the meeting by stating that she
does not expect everyone like the new procedure, but
they must accept it.
C. Olivia should start the meeting by asking partic-
ipants to state their concerns or feeling about the
procedure.
D. Olivia should hold a separate meeting for those
individuals who she suspects have a hidden agenda.
5. Which one of the following is a common problem with C
meetings that leaders should try to avoid?
A. Trying to stick to an agenda and avoid interrup-
tions
B. Committing to an end time, as well as a start time
C. Having the wrong people attend
D. Stating the objective in writing before the meeting
6. Which one of the following statements about correla- C
tion and covariance is true?
A. Covariance is a scaled version of correlation and
ranges from -1 to +1.
B. The correlation between variables ranges from 0 to
+1.
C. Covariance measures the extent to which variables
, ARM 402 Exam Practice
Study online at https://quizlet.com/_949xd9
move together or independently.
D. Correlation measures causality.
7. Once a holistic risk management program is creat- B
ed and put into effect, which one of the following
methods can be used to allow constant and consistent
monitoring of the process?
A. Bow-tie diagram
B. Feedback loop
C. Dashboard reporting
D. SWOT analysis
8. A risk control technique that reduces the frequency of A
a particular loss is
A. Loss prevention.
B. Loss reduction.
C. Diversification.
D. Duplication.
9. Ivanhoe Corporation purchases stock in a bank and C
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
10. Pacific Bar and Grill was having a problem with em- B
ployees slipping and falling in the kitchen and bar
areas. Rather than incur the cost to replace the floors
, ARM 402 Exam Practice
Study online at https://quizlet.com/_949xd9
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 employ-
ee slips and falls and the associated costs, as well as,
the expenses involved with this risk management pro-
gram. 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
11. Ed is investment manager of the Nellor Foundation, a D
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 invest-
ment 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.
Study online at https://quizlet.com/_949xd9
1. Telematics devices allow organizations to accurately A
identify patterns of risk and predict risk for which one
of the following types of loss exposures?
A. Automobile
B. Property
C. Workers compensation
D. Business income
2. Which one of the following is a major benefit that C
smart insurance contracts can provide to insurance
customers?
A. Smart contracts can render a risk completely pre-
ventable.
B. Smart contracts can provide broader coverage at a
lower cost.
C. Smart contracts can dramatically increase the
speed of loss payments.
D. Smart contracts can significantly increase the speed
of premium payments.
3. Maxwell Company has just invested a large sum in A
new, highly-sophisticated computer equipment and
building renovations. Maxwell arranged to lease iden-
tical equipment at another location so that it could use
the equipment in the event of a disaster at its location.
Maxwell's lease of identical equipment at another lo-
cation is an example of
A. Duplication.
B. Separation.
C. Loss reduction.
D. Diversification.
, ARM 402 Exam Practice
Study online at https://quizlet.com/_949xd9
4. Olivia is planning a meeting to explain a new cyber C
security procedure. She expects that the meeting will
be impeded by hidden agendas. Which one of the fol-
lowing is the best way for Olivia to deal with potential
hidden agendas?
A. Olivia should refuse to take questions during her
meeting, and request that any questions be forward-
ed to her in writing after the meeting.
B. Olivia should start the meeting by stating that she
does not expect everyone like the new procedure, but
they must accept it.
C. Olivia should start the meeting by asking partic-
ipants to state their concerns or feeling about the
procedure.
D. Olivia should hold a separate meeting for those
individuals who she suspects have a hidden agenda.
5. Which one of the following is a common problem with C
meetings that leaders should try to avoid?
A. Trying to stick to an agenda and avoid interrup-
tions
B. Committing to an end time, as well as a start time
C. Having the wrong people attend
D. Stating the objective in writing before the meeting
6. Which one of the following statements about correla- C
tion and covariance is true?
A. Covariance is a scaled version of correlation and
ranges from -1 to +1.
B. The correlation between variables ranges from 0 to
+1.
C. Covariance measures the extent to which variables
, ARM 402 Exam Practice
Study online at https://quizlet.com/_949xd9
move together or independently.
D. Correlation measures causality.
7. Once a holistic risk management program is creat- B
ed and put into effect, which one of the following
methods can be used to allow constant and consistent
monitoring of the process?
A. Bow-tie diagram
B. Feedback loop
C. Dashboard reporting
D. SWOT analysis
8. A risk control technique that reduces the frequency of A
a particular loss is
A. Loss prevention.
B. Loss reduction.
C. Diversification.
D. Duplication.
9. Ivanhoe Corporation purchases stock in a bank and C
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
10. Pacific Bar and Grill was having a problem with em- B
ployees slipping and falling in the kitchen and bar
areas. Rather than incur the cost to replace the floors
, ARM 402 Exam Practice
Study online at https://quizlet.com/_949xd9
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 employ-
ee slips and falls and the associated costs, as well as,
the expenses involved with this risk management pro-
gram. 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
11. Ed is investment manager of the Nellor Foundation, a D
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 invest-
ment 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.
