ARM 401 RISK MANAGEMENT PRINCIPLES (PDF) | 2026
EXAM QUESTIONS AND ANSWERS + RATIONALES | STUDY
GUIDE | 100% CORRECT
1. Which one of the following is a major benefit that block chain technology provides to holistic
risk management?
A) Because of their security, blockchains can eliminate the need to verify the accuracy of risk
management data
B) Block chain technology allows organizations to share data through wireless internet and
networking services
C) Blockchains can monitor things such as heat, moisture, noise, and air quality
D) Block chain technology can monitor driving habits by measuring acceleration, speed, braking,
and distance traveled
Correct Answer: A) Because of their security, blockchains can eliminate the need to verify the
accuracy of risk management data
Rationale: Blockchain technology provides immutable, secure records that reduce the need for
verification of data accuracy . This enhances risk management by ensuring data integrity across
the organization and with external partners.
2. Which one of the following statements is true regarding the use of risk registers with scenario
models?
A) The risk manager should complete a risk register for each location of the organization
B) An interactive computer system should be used for risk registers so they can be updated once
a year
C) A risk register should record the likelihood of a scenario along with the consequences of
associated risks
D) The likelihood of a risk register's scenario should not vary significantly among locations of
the organization
Correct Answer: C) A risk register should record the likelihood of a scenario along with the
consequences of associated risks
Rationale: Risk registers document the likelihood and consequences of scenarios, linking specific
activities and processes to identified risks . This allows organizations to consolidate risk
information at the enterprise level.
3. 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 effectiveness of the current risk treatment
B) The necessity of risk financing
, C) Speculative risk
D) Volatility
Correct Answer: A) The effectiveness of the current risk treatment
Rationale: The gap between inherent and residual risk measures how effective current risk
treatments are. A large gap indicates effective controls, while a small gap suggests treatments
may need improvement .
4. Brenda is the new risk manager at Telecom Company. She did a preliminary analysis to identify
organizational risks. Brenda then scheduled a meeting of the organization's leaders, key
employees, and other stakeholders. Brenda asked her assistant, Brian, to moderate the session
since he is skilled in risk identification, and he is a skilled communicator as well. Brian
encouraged brainstorming, and asked follow-up questions. After the session, Brenda and her risk
management colleagues had a much deeper understanding of Telecom's risks. The technique that
Brenda applied is called a:
A) SWOT analysis
B) Group-think
C) Delphi technique session
D) Facilitated workshop
Correct Answer: D) Facilitated workshop
Rationale: A facilitated workshop involves structured meetings with stakeholders to identify
risks through brainstorming and guided discussion . This collaborative approach leverages
diverse expertise to gain a holistic view of organizational risks.
5. 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 all team members. When revising job duties,
William should do which one of the following?
A) Overload some individuals with more work than others
B) Rely on the most senior individuals to take on additional duties
C) Focus on the individuals' personality rather than results
D) Try to enrich individuals' work rather than merely expand it
Correct Answer: D) Try to enrich individuals' work rather than merely expand it
Rationale: Enriching work by adding meaningful responsibilities and variety is more effective
than simply increasing workload . This approach enhances engagement and reduces the risk of
burnout and error.
6. Emma is a risk management professional at a chemical engineering organization. A new process
is being designed and Emma has been told that all risks must be identified and eliminated during
the design stage. Emma is a risk management professional, but not a chemical engineering
, expert. She has assembled a team of engineering experts and stakeholders to identify the risk
associated with the process by subdividing the process into components and reviewing each
component and then recommend solutions. Which one of the following team approaches to risk
identification has Emma chosen?
A) Scenario analysis
B) SWOT analysis
C) HAZOP approach
D) Delphi technique
Correct Answer: C) HAZOP approach
Rationale: A Hazard and Operability (HAZOP) study involves dividing a process into
components, reviewing each to identify risks, and recommending solutions . This technique is
commonly used in chemical engineering and process safety.
7. Which one of the following risk assessment tools has the potential to identify both negative risks
and opportunity risks?
A) Risk maps
B) Cause and effect analysis
C) Failure mode and effects analysis
D) Audits
Correct Answer: D) Audits
Rationale: Audits can identify both negative risks (compliance gaps, deficiencies) and
opportunity risks (improvements, efficiencies) . Other tools like FMEA primarily focus on
failure modes and negative consequences.
8. After a month in which three employees were seriously injured at company paper mills, Ashley,
the risk manager of Bright White Paper Company, wanted some answers about the causes of
employee injuries. Ashley independently contacted the plant manager and foreman at each of the
company's plants. She asked each person to complete a confidential questionnaire regarding
safety procedures. After receiving the responses to the questionnaire, Ashley summarized the
results and asked the same questions again instructing each person to consider revising their
responses based on the initial questionnaire results. The analysis revealed that new workers were
not being properly trained and that a lax attitude toward safety was present at the majority of the
plants. The team approach to risk identification Ashley employed is called:
A) HAZOP analysis
B) Scenario analysis
C) SWOT analysis
D) The Delphi technique
Correct Answer: D) The Delphi technique
EXAM QUESTIONS AND ANSWERS + RATIONALES | STUDY
GUIDE | 100% CORRECT
1. Which one of the following is a major benefit that block chain technology provides to holistic
risk management?
A) Because of their security, blockchains can eliminate the need to verify the accuracy of risk
management data
B) Block chain technology allows organizations to share data through wireless internet and
networking services
C) Blockchains can monitor things such as heat, moisture, noise, and air quality
D) Block chain technology can monitor driving habits by measuring acceleration, speed, braking,
and distance traveled
Correct Answer: A) Because of their security, blockchains can eliminate the need to verify the
accuracy of risk management data
Rationale: Blockchain technology provides immutable, secure records that reduce the need for
verification of data accuracy . This enhances risk management by ensuring data integrity across
the organization and with external partners.
2. Which one of the following statements is true regarding the use of risk registers with scenario
models?
A) The risk manager should complete a risk register for each location of the organization
B) An interactive computer system should be used for risk registers so they can be updated once
a year
C) A risk register should record the likelihood of a scenario along with the consequences of
associated risks
D) The likelihood of a risk register's scenario should not vary significantly among locations of
the organization
Correct Answer: C) A risk register should record the likelihood of a scenario along with the
consequences of associated risks
Rationale: Risk registers document the likelihood and consequences of scenarios, linking specific
activities and processes to identified risks . This allows organizations to consolidate risk
information at the enterprise level.
3. 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 effectiveness of the current risk treatment
B) The necessity of risk financing
, C) Speculative risk
D) Volatility
Correct Answer: A) The effectiveness of the current risk treatment
Rationale: The gap between inherent and residual risk measures how effective current risk
treatments are. A large gap indicates effective controls, while a small gap suggests treatments
may need improvement .
4. Brenda is the new risk manager at Telecom Company. She did a preliminary analysis to identify
organizational risks. Brenda then scheduled a meeting of the organization's leaders, key
employees, and other stakeholders. Brenda asked her assistant, Brian, to moderate the session
since he is skilled in risk identification, and he is a skilled communicator as well. Brian
encouraged brainstorming, and asked follow-up questions. After the session, Brenda and her risk
management colleagues had a much deeper understanding of Telecom's risks. The technique that
Brenda applied is called a:
A) SWOT analysis
B) Group-think
C) Delphi technique session
D) Facilitated workshop
Correct Answer: D) Facilitated workshop
Rationale: A facilitated workshop involves structured meetings with stakeholders to identify
risks through brainstorming and guided discussion . This collaborative approach leverages
diverse expertise to gain a holistic view of organizational risks.
5. 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 all team members. When revising job duties,
William should do which one of the following?
A) Overload some individuals with more work than others
B) Rely on the most senior individuals to take on additional duties
C) Focus on the individuals' personality rather than results
D) Try to enrich individuals' work rather than merely expand it
Correct Answer: D) Try to enrich individuals' work rather than merely expand it
Rationale: Enriching work by adding meaningful responsibilities and variety is more effective
than simply increasing workload . This approach enhances engagement and reduces the risk of
burnout and error.
6. Emma is a risk management professional at a chemical engineering organization. A new process
is being designed and Emma has been told that all risks must be identified and eliminated during
the design stage. Emma is a risk management professional, but not a chemical engineering
, expert. She has assembled a team of engineering experts and stakeholders to identify the risk
associated with the process by subdividing the process into components and reviewing each
component and then recommend solutions. Which one of the following team approaches to risk
identification has Emma chosen?
A) Scenario analysis
B) SWOT analysis
C) HAZOP approach
D) Delphi technique
Correct Answer: C) HAZOP approach
Rationale: A Hazard and Operability (HAZOP) study involves dividing a process into
components, reviewing each to identify risks, and recommending solutions . This technique is
commonly used in chemical engineering and process safety.
7. Which one of the following risk assessment tools has the potential to identify both negative risks
and opportunity risks?
A) Risk maps
B) Cause and effect analysis
C) Failure mode and effects analysis
D) Audits
Correct Answer: D) Audits
Rationale: Audits can identify both negative risks (compliance gaps, deficiencies) and
opportunity risks (improvements, efficiencies) . Other tools like FMEA primarily focus on
failure modes and negative consequences.
8. After a month in which three employees were seriously injured at company paper mills, Ashley,
the risk manager of Bright White Paper Company, wanted some answers about the causes of
employee injuries. Ashley independently contacted the plant manager and foreman at each of the
company's plants. She asked each person to complete a confidential questionnaire regarding
safety procedures. After receiving the responses to the questionnaire, Ashley summarized the
results and asked the same questions again instructing each person to consider revising their
responses based on the initial questionnaire results. The analysis revealed that new workers were
not being properly trained and that a lax attitude toward safety was present at the majority of the
plants. The team approach to risk identification Ashley employed is called:
A) HAZOP analysis
B) Scenario analysis
C) SWOT analysis
D) The Delphi technique
Correct Answer: D) The Delphi technique
