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ARM 54 UPDATED Actual Exam Questions and CORRECT Answers

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ARM 54 UPDATED Actual Exam Questions and CORRECT Answers Autumn Assurance Group has assets at fair value of $100 million. The present value of Autumn's liabilities is $85 million. The market value margin is $5 million. Using probability models, Autumn determines that its VaR is $8 million bec...

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  • September 16, 2024
  • 26
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers
  • ARM 54
  • ARM 54
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ARM 54 Practice UPDATED Actual Exam
Questions and CORRECT Answers
Risks from accidental loss, including the possibility of loss or no loss defines - CORRECT
ANSWER✔✔- Hazard risk


The traditional definition of risk management reflects the traditional concept of risk as -
CORRECT ANSWER✔✔- Negative


Which one of the following statements is true regarding the evolution of risk and risk
management? - CORRECT ANSWER✔✔- The definition of risk has evolved to include
positive as well as negative attributes


The Dodd-Frank Act, Solvency II, and Basel III all have the purpose of reducing -
CORRECT ANSWER✔✔- Systemic risk


Which one of the following is a common risk management benefit the entire economy would
realize as a consequence of a risk management program? - CORRECT ANSWER✔✔-
Reduced waste of resources-Risk management reduces waste of resources. Allocating
resources for potential losses is a cost because the resources cannot be used for other
purposes that could promote growth.


To an insured organization, which one of the following is an example of a cost of risk
associated with an asset or activity? - CORRECT ANSWER✔✔- Cost of sprinkler systems


One benefit of risk management to the economy is the reduction of the potential for a major
disruption in the functioning of financial markets and the financial system. This risk that is
reduced is called - CORRECT ANSWER✔✔- Systemic risk


Which one of the following risk management program goals enhances an organization's
reputation? - CORRECT ANSWER✔✔- Social responsibility-Social responsibility is the
risk management program goal that will most likely enhance an organization's reputation.

,An organization must meet the standard of care that it owes to others in order to ensure that -
CORRECT ANSWER✔✔- 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.


Risk management programs should - CORRECT ANSWER✔✔- Operate economically and
efficiently


Which one of the following is essential to an effective risk management program? -
CORRECT ANSWER✔✔- Support of the organization's senior management-Support of the
organization's senior management is essential to an effective risk management program.


Which one of the following provides a measure of the maximum potential damage associated
with an occurrence? - CORRECT ANSWER✔✔- Exposure


In an effort to grow its 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? - CORRECT ANSWER✔✔- Correlation-The insurer's risk correlation
will most likely increase as a result of this marketing decision.


According to the law of large numbers, as the number of exposure units insured increases, -
CORRECT ANSWER✔✔- 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.


The relationship between which two basic measures is critical for risk management in
assessing risk and deciding whether and how to manage it? - CORRECT ANSWER✔✔-
Likelihood and consequences


Risk can be classified as diversifiable or nondiversifiable. Which one of the following
statements is true with respect to this type of risk classification? - CORRECT ANSWER✔✔-
Diversifiable risks tend not to be correlated so they can be managed through diversification or
spread of risk-Diversifiable risks tend not to be correlated so they can be managed through
diversification or spread of risk.


George works for a large company and part of his job is to monitor assets according to their
liquidity. George is particularly concerned that the company fleet cars are affecting its

, liquidity and rising fuel prices are having an adverse effect during tight economic markets. If
George's concerns were categorized as causes of loss according to the quadrants of risk, his
concern most directly relates to which one of the following types of risks? - CORRECT
ANSWER✔✔- Financial risks


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 - CORRECT ANSWER✔✔- Subjective risk


Carol has worked as a payroll clerk for a small organization for 20 years. Over the years she
received only two small salary increases and began to embezzle funds from the company
since she felt she was not adequately compensated for her job efforts. In terms of the
quadrants of risk, Carol's theft risk can be classified as - CORRECT ANSWER✔✔- Both a
hazard risk and an operational risk-Carol's theft risk can be classified as both a hazard risk
and an operational risk.


Three main theoretical concepts explain how enterprise risk management (ERM) works. One
theoretical concept considers not only the combination of individual risks but also their
interactions. This theoretical concept is - CORRECT ANSWER✔✔- The portfolio theory


The concept of correlation, in the context of why enterprise risk management works, -
CORRECT ANSWER✔✔- Is the proposition that correlation increases risk while
uncorrelated risks can reduce risk-The concept of correlation, in the context of why enterprise
risk management works, is the proposition that correlation increases risk while uncorrelated
risks can reduce risk.


Major Corporation delivers its products nationally using its own fleet of vehicles that are
specially designed to encapsulate and protect the cargo they are carrying. What risk
management technique is being used? - CORRECT ANSWER✔✔- Loss reduction


Which one of the following statements is true regarding enterprise risk management (ERM)?
- CORRECT ANSWER✔✔- The ERM framework encompasses all stakeholders in the
organization


Which one of the following is an objective and consistent measurement tool that can be used
by organizations to conduct periodic self-assessments? - CORRECT ANSWER✔✔- The
Risk Maturity Model (RMM)

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