ARM 401 PRACTICE EXAMS QUESTIONS & ANSWERS
Murray Trucking is interested in evaluating which risk factors are most likely to lead to
the most costly accidents. They are evaluating risk factors such as speed, weather
conditions, driver experience, distance traveled, and gross vehicle weight. Which one of
the following statistical measurements would be useful for the risk manager when
calculating the probability of the different risk factors causing severe accidents?
A) Monte Carlo Simulation
B) Variance
C) Telematics
D) Inverse Covariance - Answers -B) Variance
The risk management department at Computer Hardware Company uses risk maps to
graph and analyze the risks faced by the company. One area of special concern to the
risk management team is the difference between residual risk and optimum risk. This
difference represents
A) The potential risk that the organization does not currently face, but could face if
conditions change
B) The risk treatment opportunity to further reduce risk
C) The risk that is handled, by default, through avoidance
D) The risk that cannot be altered and is retained by the firm - Answers -B) The risk
treatment opportunity to further reduce risk
Shelton Manufacturing executives are growing increasingly concerned about wildfires
and the potential effects on supply chain management. As the risk professional, Carla
has been asked to meet with experts on the subject and report back to the executive
team. Which one of the following should Carla do before meeting with external wildfire
experts?
A) Carla should try to learn as much as possible about wildfires so she can impress the
wildfire experts
B) Carla should research the field and get a working understanding of wildfires
C) Carla should solicit questions from internal experts and submit them to the external
wildfire experts
D) Carla should speak with internal subject-matter experts in hopes that she can avoid
needing the external wildfire experts - Answers -B) Carla should research the field and
get a working understanding of wildfires
Cotton Products Company manufactures cotton clothing, towels, sheets, and other
cotton products. All production takes place at one large multi-acre production facility.
The risk manager of Cotton Products Company called a meeting attended by her staff,
the plant foreman, the plant safety engineer, and the head of operations. She told the
group that she wanted to analyze one problem-the top event-a catastrophic fire at the
,production facility. The group discussed all the causes of failure and factors that could
contribute to the top event. The causes of the -top event- were listed, and methods of
reducing the likelihood and consequences of the event were examined. The technique
the risk manager employed is called
A) Fault tree analysis
B) SWOT analysis
C) Failure mode and effects analysis
D) Scenario analysis - Answers -A) Fault tree analysis
Northeast Urban Properties owns and operates office buildings in New York, Boston,
and Philadelphia. The risk manager decided to examine the impact of potential terrorist
attacks on each building. For example, for the Philadelphia building, the risk manager
examined attacks at three levels: scare (e.g. suspicious package), minor explosion or
gas attack, and large-scale attack. For each level, the risk manager listed the risk
owners, the risk quadrants impacted, the likelihood of attack, the consequence, the risk
level, and the risk control measures that needed to be implemented. This information
was summarized in a one-page chart. The chart the risk manager prepared is a
A) Risk report with warning color code
B) Risk matrix with value at risk
C) Risk register with scenario model
D) Risk map with simulation - Answers -Risk register with scenario model
William is a project manager for Parker International. He has been assigned a key
project with a short deadline. William realizes that this project is going to require revising
the job duties of some individuals and a collaborative effort from of all team members.
When revising job duties, William should do which one of the following?
A) Try to enrich individuals' work rather than merely expand it
B) Rely on the most senior individuals to take on additional duties
C) Overload some individuals with more work than others
D) Focus on the individuals' personalities rather than results - Answers -A) Try to enrich
individuals' work rather than merely expand it
Blithe Manufacturing has experienced a drop in market share. The marketing
department has come up with a way to differentiate their product in order to regain
market share. Blithe has assembled a team of individuals representing different
organizational functions to analyze both internal and external factors of the new product
and decide whether or not it is feasible. Which one of the following team approaches to
risk identification is Blithe using?
A) Delphi technique
B) SWOT analysis
C) Scenario analysis
D) HAZOP workshop - Answers -B) SWOT analysis
, Risk management professionals can use risk mapping to identify inherent risk and
residual (current) level of risk. Inherent risk is important because the difference between
inherent and residual risk provides a measure of
A) The necessity of risk financing
B) The effectiveness of the current risk treatment
C) Volatility
D) Speculative risk - Answers -B) The effectiveness of the current risk treatment
James is the risk manager for a large manufacturing organization with six locations.
Each location has a plant manager who is responsible for the operation of that location.
James feels that the plant managers are in the best position to identify and measure risk
at their locations. He wants them to own the risk. However, he is looking for a tool that
will allow him to prioritize risk according to the potential effect on the organization.
James wants an interactive tool that will adequately identify the organization's risks, and
allow them to be measured based on likelihood and the level of risk to the organization.
Which one of the following is the most appropriate tool for James?
A) SWOT analysis
B) Risk map
C) Organizational risk register
D) Facilitated workshop - Answers -C) Organizational risk register
SE Industries has identified windstorm as a risk. The risk manager has assembled a
team to project the potential consequences of windstorm. The team includes individuals
from various functions within the organization. Which one of the following team
approaches to risk identification is SE Industries using?
A) Scenario analysis
B) Delphi technique
C) HAZOP
D) SWOT analysis - Answers -A) Scenario analysis
Gaining a holistic perspective requires
A) Encouraging individuals to resolve issues within their own work units
B) Becoming an expert on the work that every stakeholder performs
C) Developing a thorough understanding of each unit's role and how it supports or
depends on other units and stakeholders
D) Designating on individual to be responsible for initiating meetings and dominating
conversations - Answers -C) Developing a thorough understanding of each unit's role
and how it supports or depends on other units and stakeholders
Risk maps differ from other risk assessment tools and techniques in which one of the
following ways?
Murray Trucking is interested in evaluating which risk factors are most likely to lead to
the most costly accidents. They are evaluating risk factors such as speed, weather
conditions, driver experience, distance traveled, and gross vehicle weight. Which one of
the following statistical measurements would be useful for the risk manager when
calculating the probability of the different risk factors causing severe accidents?
A) Monte Carlo Simulation
B) Variance
C) Telematics
D) Inverse Covariance - Answers -B) Variance
The risk management department at Computer Hardware Company uses risk maps to
graph and analyze the risks faced by the company. One area of special concern to the
risk management team is the difference between residual risk and optimum risk. This
difference represents
A) The potential risk that the organization does not currently face, but could face if
conditions change
B) The risk treatment opportunity to further reduce risk
C) The risk that is handled, by default, through avoidance
D) The risk that cannot be altered and is retained by the firm - Answers -B) The risk
treatment opportunity to further reduce risk
Shelton Manufacturing executives are growing increasingly concerned about wildfires
and the potential effects on supply chain management. As the risk professional, Carla
has been asked to meet with experts on the subject and report back to the executive
team. Which one of the following should Carla do before meeting with external wildfire
experts?
A) Carla should try to learn as much as possible about wildfires so she can impress the
wildfire experts
B) Carla should research the field and get a working understanding of wildfires
C) Carla should solicit questions from internal experts and submit them to the external
wildfire experts
D) Carla should speak with internal subject-matter experts in hopes that she can avoid
needing the external wildfire experts - Answers -B) Carla should research the field and
get a working understanding of wildfires
Cotton Products Company manufactures cotton clothing, towels, sheets, and other
cotton products. All production takes place at one large multi-acre production facility.
The risk manager of Cotton Products Company called a meeting attended by her staff,
the plant foreman, the plant safety engineer, and the head of operations. She told the
group that she wanted to analyze one problem-the top event-a catastrophic fire at the
,production facility. The group discussed all the causes of failure and factors that could
contribute to the top event. The causes of the -top event- were listed, and methods of
reducing the likelihood and consequences of the event were examined. The technique
the risk manager employed is called
A) Fault tree analysis
B) SWOT analysis
C) Failure mode and effects analysis
D) Scenario analysis - Answers -A) Fault tree analysis
Northeast Urban Properties owns and operates office buildings in New York, Boston,
and Philadelphia. The risk manager decided to examine the impact of potential terrorist
attacks on each building. For example, for the Philadelphia building, the risk manager
examined attacks at three levels: scare (e.g. suspicious package), minor explosion or
gas attack, and large-scale attack. For each level, the risk manager listed the risk
owners, the risk quadrants impacted, the likelihood of attack, the consequence, the risk
level, and the risk control measures that needed to be implemented. This information
was summarized in a one-page chart. The chart the risk manager prepared is a
A) Risk report with warning color code
B) Risk matrix with value at risk
C) Risk register with scenario model
D) Risk map with simulation - Answers -Risk register with scenario model
William is a project manager for Parker International. He has been assigned a key
project with a short deadline. William realizes that this project is going to require revising
the job duties of some individuals and a collaborative effort from of all team members.
When revising job duties, William should do which one of the following?
A) Try to enrich individuals' work rather than merely expand it
B) Rely on the most senior individuals to take on additional duties
C) Overload some individuals with more work than others
D) Focus on the individuals' personalities rather than results - Answers -A) Try to enrich
individuals' work rather than merely expand it
Blithe Manufacturing has experienced a drop in market share. The marketing
department has come up with a way to differentiate their product in order to regain
market share. Blithe has assembled a team of individuals representing different
organizational functions to analyze both internal and external factors of the new product
and decide whether or not it is feasible. Which one of the following team approaches to
risk identification is Blithe using?
A) Delphi technique
B) SWOT analysis
C) Scenario analysis
D) HAZOP workshop - Answers -B) SWOT analysis
, Risk management professionals can use risk mapping to identify inherent risk and
residual (current) level of risk. Inherent risk is important because the difference between
inherent and residual risk provides a measure of
A) The necessity of risk financing
B) The effectiveness of the current risk treatment
C) Volatility
D) Speculative risk - Answers -B) The effectiveness of the current risk treatment
James is the risk manager for a large manufacturing organization with six locations.
Each location has a plant manager who is responsible for the operation of that location.
James feels that the plant managers are in the best position to identify and measure risk
at their locations. He wants them to own the risk. However, he is looking for a tool that
will allow him to prioritize risk according to the potential effect on the organization.
James wants an interactive tool that will adequately identify the organization's risks, and
allow them to be measured based on likelihood and the level of risk to the organization.
Which one of the following is the most appropriate tool for James?
A) SWOT analysis
B) Risk map
C) Organizational risk register
D) Facilitated workshop - Answers -C) Organizational risk register
SE Industries has identified windstorm as a risk. The risk manager has assembled a
team to project the potential consequences of windstorm. The team includes individuals
from various functions within the organization. Which one of the following team
approaches to risk identification is SE Industries using?
A) Scenario analysis
B) Delphi technique
C) HAZOP
D) SWOT analysis - Answers -A) Scenario analysis
Gaining a holistic perspective requires
A) Encouraging individuals to resolve issues within their own work units
B) Becoming an expert on the work that every stakeholder performs
C) Developing a thorough understanding of each unit's role and how it supports or
depends on other units and stakeholders
D) Designating on individual to be responsible for initiating meetings and dominating
conversations - Answers -C) Developing a thorough understanding of each unit's role
and how it supports or depends on other units and stakeholders
Risk maps differ from other risk assessment tools and techniques in which one of the
following ways?
