ARM 401 Exam UPDATED ACTUAL Questions and CORRECT Answers
1. A risk map showing a large difference between in- C
herent and residual risk indicates which one of the
following?
A. The risk is within the organization's risk appetite
B. The current risk treatment is ineffective
C. The current risk treatment is effective
D. The risk does not need to be treated
2. Lucas, a risk professional for Jones Incorporated, re- B
cently met with experts from the utility industry to
discuss the potential loss of supply and risks to the in-
frastructure. Lucas must now decide which risks, and
proposed treatments, need to be communicated to
the board of Jones Incorporated. Lucas should make
this decision based on
A. The supply source involved.
B. The organization's risk appetite and tolerance lev-
els.
C. Whether the risk in natural or man-made.
D. Whether any government regulations are involved
or not.
3. SoCal Movie Company produces movies at a studio B
in Southern California. The risk manager decided to
identify the range of potential consequences associ-
ated with various risks that the company faces. For
example, if a severe earthquake occurred while the
company was filming a movie, there could be deaths
and injuries, destruction of movie sets, delays in pro-
duction, costs associated with filming at an alternative
location, and loss of reputation and good will. The
type of analysis performed by the risk manager is
, called
A. SWOT analysis.
B. Scenario analysis.
C. Sensitivity analysis.
D. HAZOP analysis.
4. Insurance Company (IC) sells its coverages through D
independent insurance agents. Independent agents
represent several insurance companies. Tom, the
president of IC, has learned that the independent
agent who is the highest producer for IC is consider-
ing selling his agency. IC is considering acquiring the
agency since Tom is concerned that if the agency is
sold, IC may lose a substantial amount of business.
Tom asked IC's risk manager to analyze the prospec-
tive purchase. The analysis revealed that the acquisi-
tion would likely secure most of IC's book of business
with the agency but also revealed local competitors
that would try to place the business as well. In addi-
tion, the analysis revealed the opportunity for IC to
move some accounts currently placed with other in-
surers over to IC. Also, it was learned that a competitor
expressed an interest in the agency acquisition. The
analysis performed by the risk manager is a form of
A. Decision tree analysis.
B. HAZOP analysis.
C. Risk map analysis.
D. SWOT analysis.
5. Murray Trucking is interested in evaluating which risk C
factors are most likely to lead to the most costly acci-
dents. They are evaluating risk factors such as speed,
, weather conditions, driver experience, distance trav-
eled, and gross vehicle weight. Which one of the fol-
lowing statistical measurements would be useful for
the risk manager when calculating the probability of
the different risk factors causing severe accidents?
A. Telematics
B. Inverse covariance
C. Variance
D. Monte Carlo simulation
6. Blithe Manufacturing has experienced a drop in mar- C
ket 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. HAZOP workshop
C. SWOT analysis
D. Scenario analysis
7. William is a project manager for Parker Internation- B
al. 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. Overload some individuals with more work than
, others
B. Try to enrich individuals' work rather than merely
expand it
C. Rely on the most senior individuals to take on addi-
tional duties
D. Focus on the individuals' personality rather than
results
8. Shelton Manufacturing executives are growing in- B
creasingly concerned about wildfires and the poten-
tial effects on supply chain management. As the risk
professional, Carla has been asked to meet with ex-
perts 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 speak with internal subject-matter ex-
perts in hopes that she can avoid needing the external
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 try to learn as much as possible about
wildfires, so she can impress the wildfire experts.
9. An organization practicing holistic risk management B
would assess the cost of raw materials and foreign
exchange risk under which one of the following quad-
rants of risk?
A. Strategic risk
B. Financial risk
1. A risk map showing a large difference between in- C
herent and residual risk indicates which one of the
following?
A. The risk is within the organization's risk appetite
B. The current risk treatment is ineffective
C. The current risk treatment is effective
D. The risk does not need to be treated
2. Lucas, a risk professional for Jones Incorporated, re- B
cently met with experts from the utility industry to
discuss the potential loss of supply and risks to the in-
frastructure. Lucas must now decide which risks, and
proposed treatments, need to be communicated to
the board of Jones Incorporated. Lucas should make
this decision based on
A. The supply source involved.
B. The organization's risk appetite and tolerance lev-
els.
C. Whether the risk in natural or man-made.
D. Whether any government regulations are involved
or not.
3. SoCal Movie Company produces movies at a studio B
in Southern California. The risk manager decided to
identify the range of potential consequences associ-
ated with various risks that the company faces. For
example, if a severe earthquake occurred while the
company was filming a movie, there could be deaths
and injuries, destruction of movie sets, delays in pro-
duction, costs associated with filming at an alternative
location, and loss of reputation and good will. The
type of analysis performed by the risk manager is
, called
A. SWOT analysis.
B. Scenario analysis.
C. Sensitivity analysis.
D. HAZOP analysis.
4. Insurance Company (IC) sells its coverages through D
independent insurance agents. Independent agents
represent several insurance companies. Tom, the
president of IC, has learned that the independent
agent who is the highest producer for IC is consider-
ing selling his agency. IC is considering acquiring the
agency since Tom is concerned that if the agency is
sold, IC may lose a substantial amount of business.
Tom asked IC's risk manager to analyze the prospec-
tive purchase. The analysis revealed that the acquisi-
tion would likely secure most of IC's book of business
with the agency but also revealed local competitors
that would try to place the business as well. In addi-
tion, the analysis revealed the opportunity for IC to
move some accounts currently placed with other in-
surers over to IC. Also, it was learned that a competitor
expressed an interest in the agency acquisition. The
analysis performed by the risk manager is a form of
A. Decision tree analysis.
B. HAZOP analysis.
C. Risk map analysis.
D. SWOT analysis.
5. Murray Trucking is interested in evaluating which risk C
factors are most likely to lead to the most costly acci-
dents. They are evaluating risk factors such as speed,
, weather conditions, driver experience, distance trav-
eled, and gross vehicle weight. Which one of the fol-
lowing statistical measurements would be useful for
the risk manager when calculating the probability of
the different risk factors causing severe accidents?
A. Telematics
B. Inverse covariance
C. Variance
D. Monte Carlo simulation
6. Blithe Manufacturing has experienced a drop in mar- C
ket 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. HAZOP workshop
C. SWOT analysis
D. Scenario analysis
7. William is a project manager for Parker Internation- B
al. 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. Overload some individuals with more work than
, others
B. Try to enrich individuals' work rather than merely
expand it
C. Rely on the most senior individuals to take on addi-
tional duties
D. Focus on the individuals' personality rather than
results
8. Shelton Manufacturing executives are growing in- B
creasingly concerned about wildfires and the poten-
tial effects on supply chain management. As the risk
professional, Carla has been asked to meet with ex-
perts 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 speak with internal subject-matter ex-
perts in hopes that she can avoid needing the external
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 try to learn as much as possible about
wildfires, so she can impress the wildfire experts.
9. An organization practicing holistic risk management B
would assess the cost of raw materials and foreign
exchange risk under which one of the following quad-
rants of risk?
A. Strategic risk
B. Financial risk
