ARM 400 Segment A

Question 1

Which one of the following is one of the five steps of the risk management process?
A. Allocate resources
B. Scan environment
C. Establish accountability
D. Align and integrate

Answer 1

B Scan environment.

Question 2

Billy owns a beach front cottage which has become his primary residence. Billy’s primary concern is that his home will be hit by a hurricane and badly damaged or even destroyed. For Billy, this hurricane risk is a:

Answer 2

B Subjective Risk.

Question 3

Which of the following risk management program goals is an essential goal for all public entities?

A. Continuity of operations
B. Survival
C. Growth
D. Earning stability

Answer 3

A. Continuity of operations

Question 4

Before speaking with a group or individual, the speaker should think about what he or she wants the other person(s) to do as a result of the conversation. Which one of the following steps in the communication process does the speaker complete by doing this?
A. Set a clear communication objective
B. Analyze your audience
C. Set aside judgement
D. Deliver a message the recipient(s) want to hear

Answer 4

A. Set a clear communication objective.

Question 5

The relationship between which two basic measures is critical for risk management in assessing risk and deciding whether and how to manage it?

A. Volatility and time horizon
B. Exposure and time horizon
C. Correlation and likelihood
D. Likelihood and consequences

Answer 5

D. Likelihood and consequences.
The relationship between likelihood and consequences is critical for risk management in assessing risk and deciding whether and how to manage it.

Question 6

Which one of the following risk management program goals enhances an organization’s reputation?

A. Social responsibility
B. Survival
C. Economy of operations
D. Tolerable uncertainty

Answer 6

A. Social responsibility

Question 7

The traditional definition of risk management reflects the traditional concept of risk as

Select one:
A. Both positive and negative.
B. Strategic.
C. Negative.
D. Uncontrollable.

Answer 7

B. Negative

Question 8

Samuel was recently hired as a risk management professional for Parker Property Management. He has been asked by senior management to review the organization’s current insurance policies to make sure that the organization is adequately protected, and also see if there are any opportunities to save on the premiums. Samuel must do which one of the following through internal communication before he will be able to complete this task?

Select one:
A. Become familiar with industry regulations
B. Earn the confidence of the organization’s board of directors
C. Identify all of the risks that the organization faces
D. Determine the organization’s risk appetite

Answer 8

D. Determine the organization’s risk appetite

Question 9

Which one of the following statements is true regarding the evolution of risk and risk management?

Select one:
A. Risk management is increasingly being applied to the risks associated with accidental losses.
B. The definitions of risk and risk management have become considerably more focused over the years.
C. Risk management now involves only those areas where the organization has some degree of control over the outcome.
D. The definition of risk has evolved to include positive as well as negative attributes.

Answer 9

D. The definition of risk has evolved to include positive as well as negative attributes.

Question 10

The fundamental purpose of a risk management framework is to

Select one:
A. Maximize profits for all stakeholders.
B. Reduce the cost of risk.
C. Integrate risk management throughout the organization.
D. Define and eliminate potential losses.

Answer 10

C. Integrate risk management throughout the organization.

Question 11

Which one of the following is a tool that can be used by fraud investigators to compare documents and analyze notes?

Select one:
A. Root cause analysis
B. Telematics
C. Blockchain
D. Text mining

Answer 11

D. Text mining

Question 12

Fluctuations in the value of stocks or bonds due to interest rate changes is an example of

Select one:
A. Operational risk.
B. Strategic risk.
C. Hazard risk.
D. Financial risk.

Answer 12

D. Financial risk

Question 13

Asking a question such as “How do you think this will work out?” can help a speaker do which one of the following?

Select one:
A. Gain the support of executives and decision makers
B. Deliver a message that recipients don’t want to hear
C. Request feedback and determine if the message has been understood
D. Build trust among a diverse group of individuals

Answer 13

C. Request feedback and determine if the message has been understood

Question 14

Risk management professionals must collaborate with data analysts during which two steps of the risk management process?

Select one:
A. Treat risks and monitor risk treatments
B. Scan the environment and analyze risks
C. Analyze risks and monitor risk treatments
D. Identify risks and treat risks

Answer 14

C. Analyze risks and monitor risk treatments

Question 15

Julian was having a conversation with Tania, one of his employees. At one point, Julian said, “What I hear you say is that you would like to take on more responsibility. Is that correct?” Which one of the following elements of active listening was Julian illustrating?

Select one:
A. Response
B. Attention
C. Collaboration
D. Suspension of judgement

Answer 15

A. Response
Julian was illustrating the element of response by paraphrasing Tania’s comments and checking his understanding.

Question 16

According to the law of large numbers, as the number of exposure units insured increases,

Select one:
A. The size of the average loss declines.
B. Fewer losses are expected to occur.
C. The probability of an underwriting loss increases.
D. The relative accuracy of predictions about future losses increases.

Answer 16

D. The relative accuracy of predictions about future losses increases.

According to the law of large numbers, as the number of exposure units insured increases, the relative accuracy of predictions about future losses increases.

Question 17

Which one of the following is an internal source that can often provide information regarding risks that aren’t obvious?

Select one:
A. Human resources
B. Internal auditing
C. Production manager
D. Board of directors

Answer 17

B. Internal auditing
The internal audit function can often provide information regarding risks that aren’t obvious, such as employees creating a risk by not adhering to certain processes.

Question 18

Mid-State Packing Company, a meat processing company, is the largest private sector employer in Metro City. First National Bank of Metro City loans money to Mid-State Packing Company and to many of the employees of Mid-State. The problem with First National Bank of Metro City loaning money to both the business and many employees of the business is that

Select one:
A. The loan durations must be the same.
B. The interest rate charged on the loans must be equal.
C. There will be a mismatch between fixed-rate and variable-rate loans.
D. Loan defaults are likely to be highly correlated.

Answer 18

D. Loan defaults are likely to be highly correlated.

Question 19

An organization must meet the standard of care that it owes to others in order to ensure that

Select one:
A. Post-loss goals are in place.
B. Operations are efficient.
C. Contracts are not breached.
D. Legal obligations are satisfied.

Answer 19

D. Legal obligations are satisfied.
An organization must meet the standard of care that it owes to others in order to ensure that legal obligations are satisfied.

Question 20

Company G is a manufacturer of high profile golf equipment. The risk management professional for Company G is concerned about loss of business related to product design. Failing to respond to changing customer demand and preferences in the design of golf clubs could cost Company G significant market share. Categorized according to the quadrants of risk, this exposure to loss is classified as

Select one:
A. A financial risk.
B. An operational risk.
C. A strategic risk.
D. A hazard risk.

Answer 20

C. A strategic risk.

Question 21

Catastrophes such as recent earthquakes and the 2011 tsunami in Japan pointed out a need for many organizations to evaluate and manage their

Select one:
A. Compliance risk.
B. Political risk.
C. Supply-chain risk.
D. Derivative risk.

Answer 21

C. Supply-chain risk.

Question 22

Jean is the Risk Manager for a Fortune 1000 company. Her CFO has tasked her to analyze vulnerabilities in the firm’s supply chain. The adequacy of suppliers to meet an organization’s needs would be an example of which one of the following types of risk?

Select one:
A. Financial risk
B. Strategic risk
C. Operating risk
D. Operational risk

Answer 22

D. Operational risk

Question 23

Which one of the following provides a measure of the maximum potential damage associated with an occurrence?

Select one:
A. Exposure
B. Duration
C. Underwriting risk
D. Maximum probable loss

Answer 23

A. Exposure

Exposure provides a measure of the maximum potential damage associated with an occurrence.

Question 24

Classifying risk appropriately can help in managing risk. Which one of the following statements is correct with respect to the classifications of risk?

Select one:
A. Risk classifications are mutually exclusive, and only one can be applied to any given risk.
B. Insurance deals primarily with speculative risk, rather than with pure risk.
C. A pure risk is a chance of loss or no loss, but no chance of gain.
D. Usually, pure risks and speculative risks can be managed using the same techniques.

Answer 24

C. A pure risk is a chance of loss or no loss, but no chance of gain.

Question 25

Which one of the following statements is true regarding the basic measures that apply to risk management?

Select one:
A. Longer time horizons are generally less risky that shorter ones.
B. Hedging is a risk management strategy that can reduce the risk of correlation.
C. Risk increases as volatility decreases.
D. Consequences measure the degree to which an occurrence could positively or negatively affect an organization.

Answer 25

D. Consequences measure the degree to which an occurrence could positively or negatively affect an organization.

Question 26

Which one of the following risk management objectives is critical for a manufacturer seeking new capital from investors, stockholders, and creditors?

Select one:
A. Social responsibility
B. Anticipate and recognize emerging risks
C. Eliminate downside risk
D. Reduce the deterrent effects of hazard risks

Answer 26

D. Reduce the deterrent effects of hazard risks.

Those who would provide an organization with new capital seek assurances that the risk management program reduces the deterrent effects of hazard risks.

Question 27

The fundamental purpose of a risk management framework is to

Select one:
A. Maximize profits for all stakeholders.
B. Integrate risk management throughout the organization.
C. Reduce the cost of risk.
D. Define and eliminate potential losses.

Answer 27

B. Integrate risk management throughout the organization.

Question 28

Insurance deals primarily with

Select one:
A. Pure risks.
B. Strategic risks.
C. Subjective risks.
D. Speculative risks.

Answer 28

A. Pure risks.

Question 29

When communicating a decision up the organization’s chain of command, consulting with outside experts can help a risk management professional do which one of the following?

Select one:
A. Define the organization’s risk appetite
B. Enhance stakeholders’ confidence in the process
C. Stay focused on the organization’s objectives
D. Seek feedback from stakeholders

Answer 29

B. Enhance stakeholders’ confidence in the process

Question 30

William is a risk manager for Green Mountain Trucking. He has always analyzed auto loss frequency and severity rates for the fleet. William would like to collect data on vehicle speeds, braking patterns, and distance traveled and compare that with the loss history. Which one of the following would help William capture and analyze this data?

Select one:
A. Vehicle telematics
B. Text mining
C. Catastrophe modeling
D. Cloud computing

Answer 30

A. Vehicle telematics

Question 31

Which one of the following is one of the five steps of the risk management process?

Select one:
A. Align and integrate
B. Establish accountability
C. Scan environment
D. Allocate resources

Answer 31

C. Scan environment

Question 32

Aligning risks with the organization’s risk appetite defines
Select one:
A. Tolerable uncertainty.
B. Value at risk.
C. Compliance.
D. Social responsibility.

Answer 32

A. Tolerable uncertainty.

Question 33

Encouraging the expression of feelings as well as facts and following up with employees on the problems they report are two ways that managers and supervisors can

Select one:
A. Support diverse groups.
B. Cultivate two-way communication.
C. Maintain control of the conversation.
D. Facilitate active listening.

Answer 33

B. Cultivate two-way communication.

Question 34

Carla, the risk manager, was asked by senior management to deliver a presentation on cyber risk at an all employees meeting. Even though she was only allotted 30 minutes for her presentation, Carla felt that cyber risk was a very real risk for the corporation and she wanted employees to leave with some fear of it. She wanted to provide employees with as much technical information as possible, and familiarize them with all of the important jargon. Less than 20 minutes into her presentation, Carla could tell that many of the employees were not paying any attention to her presentation. Which one of the following steps in the communication process had Carla failed to consider?

Select one:
A. Analyze your audience
B. Set a clear communication objective
C. Pay attention to your body language
D. Ask for feedback

Answer 34

A. Analyze your audience.

Carla had failed to analyze her audience. She had lost their attention by including too technical detail and jargon.

Question 35

After being promoted to a supervisory position, Henry decided that he needed to work on becoming an active listener. All of the following are elements of active listening, EXCEPT:

Select one:
A. Response
B. Attention
C. Suspension of judgement
D. Introduction of new ideas

Answer 35

D. Introduction of new ideas

Question 36

Don is the Risk Manager for Rafferty Corporation. One of his peers, Sally, asks him one day, “How do you define risk?” When Don replies, which one of the following statements is accurate?

Select one:
A. Risk has different meanings within the risk management and insurance communities.
B. Risk has so many definitions that it has become an almost meaningless term.
C. Risk can also be used to refer to the insurance provider (the insurer).
D. Risk has consistent meanings within the insurance and risk management communities.

Answer 36

A. Risk has different meanings within the risk management and insurance communities.

Question 37

The difference between risk tech and insurtech is

Select one:
A. Insurtech is a broader concept and incorporates risk tech as one of its underlying tenets.
B. Insurtech applies to many different industries while risk tech is limited in focus to insurance, reinsurance, and nontraditional risk financing alternatives.
C. Risk tech goes beyond insurtech by expanding its focus to making risk financing more efficient and preventing and mitigating losses in a variety of industries.
D. Risk tech is applicable in personal risk management situations, which insurtech is designed for application in commercial business situations.

Answer 37

C. Risk tech goes beyond insurtech by expanding its focus to making risk financing more efficient and preventing and mitigating losses in a variety of industries.

Question 38

Take Your Order (TYO) is a company that specializes in taking product orders for vendors. The manufacturer of a product can run a television or internet ad for a product with a toll-free number. Customer calls for the products are routed to TYO, where one hundred operators are available to receive the calls. Each operator is assigned a cubicle with a computer terminal, video display monitor, and a telephone. TYO experienced high workers compensation claims from its operators, claiming neck strain, eye strain, and wrist pain. In an effort to reduce such injuries, TYO evaluated each operator’s work area. The height of chairs and video monitors were adjusted, curved computer keyboards and wrist-rests were provided, and the telephones were replaced with audio headsets. Workers compensation costs dropped significantly. The science of designing work spaces based on interaction between people and the equipment in the work space is called

Select one:
A. Ergonomics.
B. Artificial intelligence.
C. Data analytics.
D. Smart systems.

Answer 38

A. Ergonomics.

Question 39

Which one of the following statements about the use of drones is true?

Select one:
A. The use of drones is limited to military applications.
B. Drones may be equipped with cameras that relay data in real-time.
C. Space and weight limitations prevent drones from being equipped with sensors and cameras.
D. The reliance on humans to operate drones severely limits their application for commercial uses.

Answer 39

B. Drones may be equipped with cameras that relay data in real-time.

Question 40

AMRM Insurance Company sells insurance in Virginia, North Carolina, South Carolina, and Georgia. The company has compiled a policyowner data base that can be used to send text messages when hurricanes approach. The company provides early warnings, storm updates from the National Weather Service, and hurricane safety measures. The company credits the system with reduced hurricane claims. The use of the texting system is an example of

Select one:
A. Sensor networks.
B. Preventive analytics.
C. Artificial intelligence.
D. Experience rating.

Answer 40

B. Preventive analytics.

Question 41

Autonomous Vehicle Applications (AVA) is a start-up company that develops safety technologies that can be sold to companies that are producing autonomous vehicles. One technology AVA is developing allows an autonomous vehicle to detect, extract, and analyze images; and then to respond to the images. For example, the technology would detect a presence in a crosswalk, extract the image, and a computer would analyze the image. When the image was determined to be a human being, the vehicle would slow down or stop until the crosswalk was clear. This technology, which is designed to capture and analyze images, and to act on the recognition of the image; is called

Select one:
A. Computer vision.
B. Accelerometer technology.
C. Transducer technology.
D. Visual acuity.

Answer 41

A. Computer vision.

Question 42

Data Entry Company (DEC) offers customers data entry services. A customer can hire DEC to enter survey data to be analyzed. Many DEC employees spend long hours entering data on a computer. DEC has experienced neck strain and wrist pain complaints from their employees, increasing the company’s workers compensation costs. DEC investigated the complaints of its data-entry employees. DEC adopted curved keyboards for data entry, wrist-rests for those entering data, and uniform chair heights and display monitor heights to reduce neck strain claims. The science of designing work spaces based on the health concerns of those who will operate in the work space is called

Select one:
A. Ergonomics.
B. Accelerometer technology.
C. Big data.
D. Predictive analytics.

Answer 42

A. Ergonomics.

Question 43

Last year, three Metro City firemen died responding to a fire at a chemical plant, when they were overcome by toxic fumes. In response, Metro City is purchasing advanced first responder gear. It includes special flame retardant suits with chemical and explosive fume sensors, air quality sensors, and heat sensors. Responders will also wear special watches that will track a responder’s pulse, respiration, and blood pressure; and helmets that include video cameras. All of these sensors will feed data to a computer in real-time. The computer will analyze the data and issue threat levels and evacuation orders, if necessary. The protective gear Metro City will purchase and the data transmission and analysis capability illustrate the use of

Select one:
A. Smart products.
B. Insurtech.
C. Risk management information systems.
D. Catastrophe modeling.

Answer 43

A. Smart products

Question 44

Which one of the following statements is true with regard to preventive analytics?

Select one:
A. Preventive analytics involves data collection at discrete points in time, such as 10 AM or 4 PM each day, and comparison of these values at discrete points in time.
B. Preventative analytics uses human assets to analyze data collected by smart products.
C. Preventive analytics uses smart products and data analytics to identify root loss causes and their implications.
D. Preventive analytics is backward-looking, basing corrective prescriptions on the organization’s past loss history.

Answer 44

C. Preventive analytics uses smart products and data analytics to identify root loss causes and their implications.

Question 45

In an effort to reduce expenses, increase profitability, and reduce human errors; ABC Insurance Company decided to automate most of its personal lines underwriting function. The company now uses standardized application forms that are submitted electronically to one of the company’s regional offices. At each regional office, a computer with a scanner reads the applications. The computer has been programmed with acceptable answers to the questions. If the answers on the application are all acceptable, the policy is automatically issued. Rejected applications are automatically forwarded to a human underwriter who reviews them. The use of this technology has reduced the company’s expense ratio by two and a half percent, and reduced the time it takes to issue a policy. ABC Insurance Company’s use of computers to evaluate applications electronically is an application of

Select one:
A. Artificial intelligence.
B. Radiant sensors.
C. Actuator technology.
D. Risk management information systems.

Answer 45

A. Artificial intelligence.

Question 46

Clear-Rite Company specializes in the clean-up of hazardous chemical spills. Workers performing clean-up operations must use safety suits to prevent exposure to the chemicals. The suits include pulse and respiration monitors, body temperature sensors, and chemical sensors. The monitors and sensors report data to a mobile operations center which is deployed to each clean-up site. The pulse and respiration monitors and the sensors that are part of the protective gear are called

Select one:
A. Wearable technologies.
B. Accelerometers.
C. Magnetometers.
D. Drone technologies.

Answer 46

A. Wearable technologies.

Question 47

The emerging technologies applied to risk assessment and control link the physical domain to the virtual domain. Together, these domains linked by the emerging technologies create a

Select one:
A. Risk management information system.
B. Risk management matrix.
C. Connected ecosystem.
D. Smart system.

Answer 47

C. Connected ecosystem.

Question 48

Many auto manufacturers have automated a portion of their assembly lines by introducing a smart product. The smart product performs repetitive tasks, such as making the same weld on each vehicle frame as it passes the smart product. These smart products, which can be fixed or mobile, reduce repetitive motion injuries that humans might suffer. They can also be used to perform dangerous tasks and in heavy-lifting jobs. These smart products are called

Select one:
A. Wearables.
B. Drones.
C. Automated sensors.
D. Robots.

Answer 48

D. Robots

Question 49

Mutual Fund Company (MFC) offers a wide array of mutual fund options to investors. Each mutual fund has a different fund objective and set of investment guidelines that apply to the fund. While MFC gives considerable freedom to its fund portfolio managers, they are required to abide by the fund’s investment guidelines. To monitor compliance, MFC developed a computer algorithm. The computer algorithm continuously monitors each fund’s compliance with investment guidelines. If a fund manager violates the investment guidelines, the computer immediately notifies MFC’s internal control director, and corrective action is taken. MFC’s use of the computer algorithm to monitor investment compliance and to provide notification when corrective action is necessary illustrates use of

Select one:
A. Transducer technology.
B. Computer vision.
C. Artificial intelligence.
D. Mechanical sensors.

Answer 49

C. Artificial intelligence.

Question 50

Southwest Interstate Railroad (SIR) is concerned about the number derailments in recent years. It’s not cost effective to use human assets to inspect tracks, bridges, and trestles. Instead, SIR has started to use drones. A drone can fly low over tracks and above/below bridges and trestles. The drones record video that is transmitted to corporate headquarters where it is simultaneously scanned for derailment hazards. In the past six months, the drones detected a track blockage caused by a rock slide and damage to tracks in a remote area cause by an earthquake. SIR dispatched work crews to make the tracks once again passable, and no derailments occurred. SIR’s use of drones, video, real-term video scanning, and computer analysis illustrates which one of the following?

Select one:
A. Preventative analytics
B. Insurtech
C. Risk management information systems
D. Big data analytics

Answer 50

A. Preventative analytics

Question 51

In addition to metal detectors, many airports have installed a second type of scanning technology for checked baggage and cargo. The checked bags and cargo pass through a portal with scanners programmed to detect and test for explosive trace fumes. These scanners, which detect explosives based on air samples, are an example of what type of sensor used for risk assessment and control?

Select one:
A. Biochemical sensors.
B. Radiant sensors.
C. Mechanical sensors.
D. Thermal sensors.

Answer 51

A. Biochemical sensors.

Question 52

A municipal water plant installed water flow sensors and water pressure sensors on the water pipes leaving the plant. The sensors make sure water is flowing properly and that there are no leaks or clogs which could produce a loss. These types of sensors are

Select one:
A. Biochemical sensors.
B. Radiant sensors.
C. Thermal sensors.
D. Mechanical sensors.

Answer 52

D. Mechanical sensors.

Question 52

The National Oceanic and Atmospheric Administration (NOAA), a U.S. Government agency, monitors tsunami risk. Earthquakes under the sea often cause large waves which can have a disastrous impact on coastal communities. In addition to monitoring earthquake data and tides, NOAA recently added a new tool – tsunami detection buoys. The buoys are placed in the sea and they are equipped with sensors to detect high wave levels so that an early warning can be given to a coastal area if an evacuation is needed. This application of the use of smart products illustrates their use in

Select one:
A. Supply chain management.
B. Transportation management.
C. Workplace safety management.
D. Catastrophe management.

Answer 52

Catastrophe management.

Question 53

An organization evaluates key stakeholders’ attitude toward risk in order to

Select one:
A. Understand acceptable risks and gauge its ability to raise capital.
B. Understand what risks are acceptable and to develop an effective enterprise-wide risk management program.
C. Understand acceptable risks and gauge its ability to attract new shareholders.
D. Understand the risk appetite in order to determine what information is disseminated.

Answer 53

B. Understand what risks are acceptable and to develop an effective enterprise-wide risk management program.

Question 54

Which one of the following types of risk is best handled at the risk center level?

Select one:
A. Risks that involve multiple external stakeholders are best handled at the risk center level.
B. Significant risks that affect the entire organization are best managed at the risk center level.
C. Risks that do not involve any outside stakeholders are best handled at the risk center level.
D. Minor risks that do not have consequences outside the unit are best managed at the risk center level.

Answer 54

D. Minor risks that do not have consequences outside the unit are best managed at the risk center level.

Question 55

One advantage that a national organization would derive from creating risk centers is that it

Select one:
A. May segregate risks to protect the larger organization if the risk center fails.
B. Allows more independence for the risk centers so that they are not burdened with procedures.
C. May allow risks to be managed on a small scale thereby relieving the organization from focusing attention on it.
D. Allows for participation by operational managers who may contribute to the risk analysis.

Answer 55

D. Allows for participation by operational managers who may contribute to the risk analysis.

Question 56

A risk management professional is identifying the organization’s key stakeholders as part of the enterprise risk management program. Which one of the following would be considered an internal stakeholder?

Select one:
A. General public
B. Stockholders
C. Unions
D. Suppliers

Answer 56

B. Stockholders

Question 57

Shelton Manufacturing recently signed a contract with a new customer which will require them to increase production by 20 percent. The organization has decided to form a risk center to identify and assess the risks involved with this new contract, and manage them efficiently. Which one of the following individuals should be the risk owner?

Select one:
A. New customer
B. Senior manager
C. Production manager
D. Sales manager

Answer 57

C. Production manager

Question 58

Parker International tends to communicate only the information that stakeholders need to complete their tasks and achieve goals. The management style at Parker International is

Select one:
A. Directive.
B. Delegating.
C. Responsive.
D. Supportive.

Answer 58

A. Directive.

Question 59

A vehicle manufacturer found that the exhaust system in certain models was not working properly. Some exhaust gases were releasing into the vehicle body. Rather than recalling the vehicles, they were shipped to South American markets. The manufacturer

Select one:
A. Has ignored its social responsibility as well as the risks involved with these actions.
B. Is socially responsible because it does not force any individual to buy the vehicle.
C. Is socially responsible because it shipped the vehicles out of the country thereby avoiding any US casualties.
D. Has decided to transfer the risk to South American markets avoiding financial penalties.

Answer 59

A. Has ignored its social responsibility as well as the risks involved with these actions.

Question 60

BD Company has made widgets for over 79 years using the same production techniques for fear of the huge costs from potential consumer lawsuits if production is changed and product quality suffers. With respect to its risk attitude, this organization would be classified as

Select one:
A. Risk avoiding.
B. Risk optimizing.
C. Risk naïve.
D. Risk seeking.

Answer 60

A. Risk avoiding.

Question 61

Lucy is a chef at a restaurant. She is growing tired of working such long hours and not reaping the financial benefits. Lucy has been saving money with the goal of opening her own restaurant. She recently talked to a financial advisor about the options market as a way to grow her savings quickly. The financial advisor explained that it is a risky choice, but could potentially allow her to reach her goal of owning a restaurant in the near future. Lucy has decided to invest her savings in the options market. Which one of the following types of risk attitude does Lucy exhibit?

Select one:
A. Risk managed
B. Risk seeking
C. Risk optimizing
D. Risk obsessed

Answer 61

B. Risk seeking

Question 62

After opening its third store, Shoehorn Shoes decided to purchase new inventory tracking software for all of its stores. Which one of the following external or internal environments does this decision relate to?

Select one:
A. Operations environment
B. Physical environment
C. Economic environment
D. Product environment

Answer 62

A. Operations environment

The purchase of new inventory tracking software relates to the operations environment which is part of Shoehorn Shoes internal environment.

Question 63

Twice a year, Medford Factory gives employees a day off to work in the community where the factory is located. The employees prepare and serve a holiday meal for members of the community, and they clean the neighborhood park in the spring. This practice is based on Medford Factory’s

Select one:
A. Code of ethics.
B. External governance.
C. Internal governance.
D. Social responsibility.

Answer 63

D. Social responsibility.

Question 64

The main advantage of a formal internal communication system is that

Select one:
A. Individuals know to whom to report.
B. It is easily accessed.
C. Employees do not have direct access to each other.
D. Formal internal communications takes time which may resolve issues.

Answer 64

A. Individuals know to whom to report.

Question 65

Which one of the following statements is correct regarding an organization’s code of ethics?

Select one:
A. The code of ethics should provide a list of dos and don’ts that employees can use as a framework in making day-to-day decisions.
B. The code of ethics should primarily consider the social and ethical needs of its external stakeholders.
C. The code of ethics should include principles and concepts that are dynamic enough to remain relevant in a rapidly changing business environment.
D. The code of ethics should provide an organization with a set of parameters within which it should operate, with little room for interpretation.

Answer 65

C. The code of ethics should include principles and concepts that are dynamic enough to remain relevant in a rapidly changing business environment.

Question 66

Senior management of CAZ Company decides to cut its involvement with the local youth association and no longer allow its employees to work with kids during business hours. Additionally, they will no longer fund the Youth House. Which one of the following best describes how this action may affect its risk management profile?

Select one:
A. Corporation may increase its financial exposure by not having tax credits to offset its profits or losses.
B. Corporation may increase its external social risk by negating any goodwill the community has for the company.
C. Corporation may decrease its external political risk by removing itself from any community involvement.
D. Corporation may decrease its operations environment as the staff will have more time to devote to the company.

Answer 66

B. Corporation may increase its external social risk by negating any goodwill the community has for the company.

Question 67

Which one of the following organizational policies or practices is based on a code of ethics?

Select one:
A. An annual compliance audit of each field underwriting office that is conducted by the home office staff
B. The designation of 2 workdays a year for employees to participate in local civic and volunteer activities
C. A disclosure requirement regarding any potential conflict of interest an accountant might have in working with specific clients
D. A company policy that offers a 10 percent discount to teachers and members of the military

Answer 67

C. A disclosure requirement regarding any potential conflict of interest an accountant might have in working with specific clients

Question 68

Which one of the following best explains how a risk-managed organization views a proposed new product line?

Select one:
A. It seeks methods of transferring the potential risks or avoids the risk totally.
B. It attempts to join with another organization for a joint venture taking little of the actual risk on itself.
C. It determines the rewards of a new alternative and may underemphasize the impacts, variances and negative effects.
D. It weighs the risk-reward relationship while realistically evaluating potential outcomes and consequences.

Answer 68

D. It weighs the risk-reward relationship while realistically evaluating potential outcomes and consequences.

Question 69

A speaker imparts information in verbal communications by

Select one:
A. Listening and verbally responding with anecdotes of prior meetings, leveraging humor as opposed to facts for discussion.
B. Using appropriate facial expressions and gestures while other parties express their opinions and concerns.
C. Having good listening skills and expressing facts and emotions through words and sometimes visual displays.
D. Expressing facts and emotions quickly, inviting written questions for discussion at a future session.

Answer 69

C. Having good listening skills and expressing facts and emotions through words and sometimes visual displays.

Question 70

North American Furnishings has been in business for 18 years. The organization’s primary objectives are profitability and bottom-line results. It always sets aggressive goals. North American Furnishings values its customer bases. Which one of the following types of corporate culture exists at North American Furnishings?

Select one:
A. Clan
B. Market
C. Hierarchy
D. Adhocracy

Answer 70

B. Market

Question 71

Which one of the following should be part of an organization’s standard operating procedures (SOPs) concerning external stakeholder communications?

Select one:
A. Instructions requiring the use of formal, rather than informal communication
B. Instructions to always use written communication, rather than verbal or nonverbal communication
C. Instructions regarding what types of information can and cannot be released
D. Instructions to avoid the use of social media

Answer 71

C. Instructions regarding what types of information can and cannot be released

Question 72

When interviewing a risk owner, which one of the following questions should be asked?

Select one:
A. What written documentation is available for the interviewer to critique and disseminate to stakeholders?
B. What steps have been taken to ensure continuity of business in the event of a natural disaster?
C. What organizational directions are inhibiting increased production in the particular area reviewed?
D. How does the risk owner view the position from a time perspective and resources perspective?

Answer 72

B. What steps have been taken to ensure continuity of business in the event of a natural disaster?