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ARM 400 risk in an evolving world study guide
Provides a measure of the maximum potential damage associated with an occurrence - The correct answer is exposure ________________ is an essential goal for all public entities - The correct answer is continuity of operations An organization must meet the standard of care that it owes to others in order to ensure that... - The correct answer is legal obligations are satisfied What are the five steps of the risk management process? - The correct answer is - scan environment
- identify risk
- analyze risk
- treat risk
- monitor and review Which one of the following statements is true regarding the evolution of risk and risk management? - The correct answer is the definition of risk has evolved to include positive as well as negative attributes Risk management professionals must collaborate with data analysts during which two steps of the risk management process? - The correct answer is analyze risk and monitor risk treatments Jane always drives to visit her children who live 1,000 miles away. She enjoys driving and feels safer in a vehicle than on an airplane because she feels she has more control of her fate. The driving versus flying decision is an example of: - The correct answer is subjective risk _______________ enhances an organizations reputation - The correct answer is social responsibility
Samuel was recently hired as a risk management professional for Parker Property Management. He has been asked by senior management to review the organizations 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 of the following through internal communication before he will be able to complete the task? - The correct answer is determine the organizations risk appetite 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... - The correct answer is subjective risk Risk can be classified as subjective or objective. Which one of the following statements is correct with respect to these risk classifications? - The correct answer is subjective risk can exist even where objective risk does not Asking a question such as "How do you think this will work out?" can help a speaker do which of the following? - The correct answer is request feedback and determine if the message has been understood Which one of the following is an internal source that can often provide information regarding risks that aren't obvious? - The correct answer is internal auditing (the internal audit function can often provide information regarding risk that aren't obvious, such as employees creating a risk by not adhering to certain processes) The fundamental purpose of a risk management framework is to... - The correct answer is integrate risk management throughout the organization In an effort to grow personal lines book, an insurer decides to offer discounts on homeowners and personal auto insurance to the employees of its largest business lines account. Which one of the following risk measures is most likely to increase as a result of this marketing decision? - The correct answer is Correlation
Obtaining information through language recognition. - The correct answer is text mining Amount of risk an organization is willing to take on in order to achieve an anticipated result or return. - The correct answer is risk appetite A technique to quantify financial risk by measuring the likelihood of losing more than a specific dollar amount over a specific period of time. - The correct answer is value at risk The total cost incurred by an organization because of the possibility of accidental loss. - The correct answer is cost of risk Any condition that presents a possibility of gain or loss, whether or not an actual loss occurs. - The correct answer is exposure Frequent fluctuations, such as in the price of an asset. - The correct answer is volatility A qualitative estimate of the certainty with which the outcome of a specific even can be predicted. - The correct answer is likelihood The effects, positive or negative, of an occurrence - The correct answer is consequences Estimated duration. - The correct answer is time horizon A relationship between variables. - The correct answer is correlation A chance of loss or no loss, but no chance of gain. - The correct answer is pure risk
A chance of loss, no loss, or gain. - The correct answer is speculative risk The risk that customers or other creditors will fail to make promised payments as they come due. - The correct answer is credit risk The perceived amount of risk based on an individual's or organization's opinion. - The correct answer is subjective risk The measurable variation in uncertain outcomes based on facts and data. - The correct answer is objective risk A risk that affects only some individuals, businesses, or small groups. - The correct answer is diversifiable risk The potential for a major disruption in the function of an entire market or financial system. - The correct answer is systemic risk Uncertainty about investments future value because of potential changes in the market for that type of investment. - The correct answer is market risk The risk that an asset cannot be sold on short notice without incurring loss. - The correct answer is liquidity risk A foundation for applying the risk management process throughout the organization. - The correct answer is risk management framework Information used as a basis for measuring the significance of a risk. - The correct answer is risk criteria
The national oceanic and atmospheric administration (NOAA), a US 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... - The correct answer is catastrophe management The science of designing work spaces based on interaction between people and the equipment in the work space is called.... - The correct answer is ergonomics 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? - The correct answer is biochemical sensors Which on of the following statements about the use of drones is true? - The correct answer is drones may e equipped with cameras that relay data in real time 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? - The correct answer is preventative analytics The difference between risk tech and insurtech is... - The correct answer is 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
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 - The correct answer is preventative analytics 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.... - The correct answer is connected ecosystem 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 - The correct answer is ergonomics A municipal waster 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 .... - The correct answer is mechanical sensors Precision Electronic Components manufactures circuit boards, microchips, and other electronic products. Given the precision necessary for their products, the manufacturing environment must be controlled. Temperature, humidity, static electricity and other factors must be monitored. After losing several batches of products due to human monitoring failures and imprecise adjustments, the company moved to a system of sensors. The sensors monitor and regulate temperature, humidity, static electricity, and other factors. The sensors transmit data to and from each other, and the manufacturing environment is continuously adjusted to assure production is successful. The network of sensors transmitting data and the autonomous corrective actions without human interaction is called - The correct answer is internet of things 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
The amount of uncertainty and organization is prepared to accept is total or more narrowly withing a certain business unit, a particular risk category or for a specific initiative (used with permission of RIMS) - The correct answer is risk tollerance A tool used by an organization to measure the uncertainty of meeting a strategic business objective - The correct answer is key risk indicator (KRI) A measurement that defines how successfully an organization is progressing towards its long term goals
- The correct answer is key performance indicators (KPI) Amount of risk an organization is willing to take on in order to achieve an anticipated result or return - The correct answer is risk appetite Information used as a basis for measuring the significance of a risk - The correct answer is risk criteria The amount of capital required by an organization to ensure solvency at a given probability level, such as 99 percent, based on the fair value of its assets minus the fair value of its liabilities - The correct answer is economic capital A systematic, iterative plan to analyze and improve business processes through life cycle phases to achieve long term goals and client satisfaction - The correct answer is business process management (BPM) A tool used by an organization to measure the level of uncertainty in an activity, project, or process. - The correct answer is risk indicator
