ARM 401 Practice Exams UPDATED ACTUAL Questions and CORRECT
Answers
1. Murray Trucking is interested in evaluating which risk B) Variance
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) Monte Carlo Simulation
B) Variance
C) Telematics
D) Inverse Covariance
2. The risk management department at Computer Hard- B) The risk treatment op-
ware Company uses risk maps to graph and analyze portunity to further reduce
the risks faced by the company. One area of special risk
concern to the risk management team is the difference
between residual risk and optimum risk. This differ-
ence 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 avoid-
ance
D) The risk that cannot be altered and is retained by
the firm
3. Shelton Manufacturing executives are growing in-
creasingly concerned about wildfires and the potential
, effects on supply chain management. As the risk pro- B) Carla should research
fessional, Carla has been asked to meet with experts the field and get a working
on the subject and report back to the executive team. understanding of wildfires
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 ex-
perts in hopes that she can avoid needing the external
wildfire experts
4. Cotton Products Company manufactures cotton cloth- A) Fault tree analysis
ing, towels, sheets, and other cotton products. All pro-
duction 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 fore-
man, the plant safety engineer, and the head of oper-
ations. 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
5. Northeast Urban Properties owns and operates office Risk register with scenario
buildings in New York, Boston, and Philadelphia. The model
risk manager decided to examine the impact of poten-
tial 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 infor-
mation 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
6. William is a project manager for Parker Internation- A) Try to enrich individuals'
al. He has been assigned a key project with a short work rather than merely
deadline. William realizes that this project is going to expand it
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 addi-
tional duties
C) Overload some individuals with more work than
others
D) Focus on the individuals' personalities rather than
results
7. Blithe Manufacturing has experienced a drop in mar- B) SWOT analysis
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 func-
tions to analyze both internal and external factors of
the new product and decide whether or not it is fea-
sible. 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
8. Risk management professionals can use risk mapping B) The effectiveness of the
to identify inherent risk and residual (current) level of current risk treatment
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
Answers
1. Murray Trucking is interested in evaluating which risk B) Variance
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) Monte Carlo Simulation
B) Variance
C) Telematics
D) Inverse Covariance
2. The risk management department at Computer Hard- B) The risk treatment op-
ware Company uses risk maps to graph and analyze portunity to further reduce
the risks faced by the company. One area of special risk
concern to the risk management team is the difference
between residual risk and optimum risk. This differ-
ence 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 avoid-
ance
D) The risk that cannot be altered and is retained by
the firm
3. Shelton Manufacturing executives are growing in-
creasingly concerned about wildfires and the potential
, effects on supply chain management. As the risk pro- B) Carla should research
fessional, Carla has been asked to meet with experts the field and get a working
on the subject and report back to the executive team. understanding of wildfires
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 ex-
perts in hopes that she can avoid needing the external
wildfire experts
4. Cotton Products Company manufactures cotton cloth- A) Fault tree analysis
ing, towels, sheets, and other cotton products. All pro-
duction 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 fore-
man, the plant safety engineer, and the head of oper-
ations. 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
5. Northeast Urban Properties owns and operates office Risk register with scenario
buildings in New York, Boston, and Philadelphia. The model
risk manager decided to examine the impact of poten-
tial 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 infor-
mation 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
6. William is a project manager for Parker Internation- A) Try to enrich individuals'
al. He has been assigned a key project with a short work rather than merely
deadline. William realizes that this project is going to expand it
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 addi-
tional duties
C) Overload some individuals with more work than
others
D) Focus on the individuals' personalities rather than
results
7. Blithe Manufacturing has experienced a drop in mar- B) SWOT analysis
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 func-
tions to analyze both internal and external factors of
the new product and decide whether or not it is fea-
sible. 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
8. Risk management professionals can use risk mapping B) The effectiveness of the
to identify inherent risk and residual (current) level of current risk treatment
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
