ARM 401 Test Questions and
Answers59
strategic risk - ANSWERS--uncertainties associated with the organization's long-term goals and
management decisions
-may carry a greater risk dynamic, positive or negative, that the other categories
operational risk - ANSWERS-uncertainties associated with the organization's procedures,
systems, and policies
financial risk - ANSWERS-uncertainties associated with the organization's financial activities
today's conception of risk - ANSWERS-incorporates the idea that taking risks is fundamentally
necessary for growth
predictive modeling - ANSWERS-can empower decision making by uncovering previously
imperceptible risk factors
Internet of Things - ANSWERS-network of devices that sense their environment, process data,
and share it instantly
cloud computing - ANSWERS-enables orgs to store and share data through wireless internet and
networking services
blockchain technology - ANSWERS--facilitates secure transactions without the need for a third
party
-protects against cyber threats
,-eliminates the need to verify the accuracy of risk management data
-lets risk managers spend more time on forward-looking functions
holistic approach to managing risk - ANSWERS--broader in scope, managing all areas of the
business, not just hazard risks
-encompasses the analysis and predictability of business processes and organizational decisions
-mandates the collaboration of internal and external stakeholders to identify, assess, and treat
risks
-involves looking at what might be gained from decisions or actions
-can uncover inconsistencies in how a company managers loss retention
-can help orgs better absorb losses
what fuels the future of holistic risk management? - ANSWERS-the capture, storage, and
analysis of data
covariance - ANSWERS--the measure of how two random risk variables will change in relation to
each other
-calculates correlation between the variables
variance - ANSWERS--the spread of the data set, or how far apart the numbers are in relation to
the mean
team approaches to risk identification - ANSWERS-1. facilitated workshops
2. Delphi technique
3. scenario analysis
4. HAZOP
5. SWOT
,why is it important to take a team-oriented approach to identifying risks? - ANSWERS--provide
diverse perspectives on risks
-can reveal how risks are connected across an org, reducing the likelihood for risks to be
overlooked
facilitated workshops - ANSWERS--a neutral party, who has no stake in the outcome,
administers the risk workshop and propels the group to achieve its goal
-wise to include people from diverse groups
-can be used for a specific project or process, as well as to identify those risks that affect overall
org objectives
-if using to identify all org risks: facilitator must be skilled in risk ID and management as well as
group communication and be prepared for a long-term project
delphi technique - ANSWERS--uses the opinions of a select group of experts to identify risks
-typically they don't meet but respond to a survey or inquiry instead
-question-and-response cycle: answer question anonymously, see results, answer same
question until reach consensus
-benefits: cost-effective, eliminates group bias and encourages honesty by anonymity
-disadvantages: experts' opinions may be limited to their current thinking on a subject
scenario analysis - ANSWERS--identifies risks and predicts the potential consequences of those
specific risks
-can help identify a range of potential consequences and prioritize risks
-benefit is it brings all the concerns of different parts of the org together so they can be
addressed as a whole
-should assemble an internal cross-functional team to get a multidimensional view
-disadvantage: may be limited by the imagination and brainstorming capabilities of the team
selected
, HAZOP - ANSWERS--a comprehensive review of a process or system
-a team of subject matter experts and stakeholders identifies the risks associated with a given
process and recommends a solution
-primarily used to design complex, scientific systems
-used when virtually all risks must be eliminated
steps in HAZOP process - ANSWERS-1. subdivides the project or system design into small
components
2. reviews each component to identify risks
3. identifies the cause and potential outcomes for each risk
4. develops a solution for each risk
5. ensures that solutions work and reevaluates as necessary
SWOT Analysis - ANSWERS--team approach that's useful in analyzing a new project or product
-strengths and weaknesses are internal environmental factors
-opportunities and threats are external environmental factors
-a goal is necessary to keep the SOT analysis from becoming too general or failing to provide
actionable info
-concludes with a "go" or "no go" recommendation
assessing risks of an organization - ANSWERS--unique qualities of org
-industry it's in
-internal/external factors
-upstream and downstream external factors (upstream: suppliers and manufacturers;
downstream: distribution channels and consumer demands)
traditional risk assessment tools and techniques - ANSWERS-1. risk thresholds
Answers59
strategic risk - ANSWERS--uncertainties associated with the organization's long-term goals and
management decisions
-may carry a greater risk dynamic, positive or negative, that the other categories
operational risk - ANSWERS-uncertainties associated with the organization's procedures,
systems, and policies
financial risk - ANSWERS-uncertainties associated with the organization's financial activities
today's conception of risk - ANSWERS-incorporates the idea that taking risks is fundamentally
necessary for growth
predictive modeling - ANSWERS-can empower decision making by uncovering previously
imperceptible risk factors
Internet of Things - ANSWERS-network of devices that sense their environment, process data,
and share it instantly
cloud computing - ANSWERS-enables orgs to store and share data through wireless internet and
networking services
blockchain technology - ANSWERS--facilitates secure transactions without the need for a third
party
-protects against cyber threats
,-eliminates the need to verify the accuracy of risk management data
-lets risk managers spend more time on forward-looking functions
holistic approach to managing risk - ANSWERS--broader in scope, managing all areas of the
business, not just hazard risks
-encompasses the analysis and predictability of business processes and organizational decisions
-mandates the collaboration of internal and external stakeholders to identify, assess, and treat
risks
-involves looking at what might be gained from decisions or actions
-can uncover inconsistencies in how a company managers loss retention
-can help orgs better absorb losses
what fuels the future of holistic risk management? - ANSWERS-the capture, storage, and
analysis of data
covariance - ANSWERS--the measure of how two random risk variables will change in relation to
each other
-calculates correlation between the variables
variance - ANSWERS--the spread of the data set, or how far apart the numbers are in relation to
the mean
team approaches to risk identification - ANSWERS-1. facilitated workshops
2. Delphi technique
3. scenario analysis
4. HAZOP
5. SWOT
,why is it important to take a team-oriented approach to identifying risks? - ANSWERS--provide
diverse perspectives on risks
-can reveal how risks are connected across an org, reducing the likelihood for risks to be
overlooked
facilitated workshops - ANSWERS--a neutral party, who has no stake in the outcome,
administers the risk workshop and propels the group to achieve its goal
-wise to include people from diverse groups
-can be used for a specific project or process, as well as to identify those risks that affect overall
org objectives
-if using to identify all org risks: facilitator must be skilled in risk ID and management as well as
group communication and be prepared for a long-term project
delphi technique - ANSWERS--uses the opinions of a select group of experts to identify risks
-typically they don't meet but respond to a survey or inquiry instead
-question-and-response cycle: answer question anonymously, see results, answer same
question until reach consensus
-benefits: cost-effective, eliminates group bias and encourages honesty by anonymity
-disadvantages: experts' opinions may be limited to their current thinking on a subject
scenario analysis - ANSWERS--identifies risks and predicts the potential consequences of those
specific risks
-can help identify a range of potential consequences and prioritize risks
-benefit is it brings all the concerns of different parts of the org together so they can be
addressed as a whole
-should assemble an internal cross-functional team to get a multidimensional view
-disadvantage: may be limited by the imagination and brainstorming capabilities of the team
selected
, HAZOP - ANSWERS--a comprehensive review of a process or system
-a team of subject matter experts and stakeholders identifies the risks associated with a given
process and recommends a solution
-primarily used to design complex, scientific systems
-used when virtually all risks must be eliminated
steps in HAZOP process - ANSWERS-1. subdivides the project or system design into small
components
2. reviews each component to identify risks
3. identifies the cause and potential outcomes for each risk
4. develops a solution for each risk
5. ensures that solutions work and reevaluates as necessary
SWOT Analysis - ANSWERS--team approach that's useful in analyzing a new project or product
-strengths and weaknesses are internal environmental factors
-opportunities and threats are external environmental factors
-a goal is necessary to keep the SOT analysis from becoming too general or failing to provide
actionable info
-concludes with a "go" or "no go" recommendation
assessing risks of an organization - ANSWERS--unique qualities of org
-industry it's in
-internal/external factors
-upstream and downstream external factors (upstream: suppliers and manufacturers;
downstream: distribution channels and consumer demands)
traditional risk assessment tools and techniques - ANSWERS-1. risk thresholds
