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ARM 401 – Questions & Verified Answers (Graded A+)
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ARM 401 – Questions & Verified Answers (Graded A+)
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ARM 401 – Questions & Verified Answers (Graded A+)Holistic approach to managing risk Right Ans - -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
Strategic risk Right Ans - -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 Right Ans - uncertainties associated with the
organization's procedures, systems, and policies
Financial risk Right Ans - uncertainties associated with the organization's
financial activities
Today’s conception of risk Right Ans - incorporates the idea that taking
risks is fundamentally necessary for growth
Predictive modeling Right Ans - can empower decision making by
uncovering previously imperceptible risk factors
Internet of Things Right Ans - network of devices that sense their
environment, process data, and share it instantly
Cloud computing Right Ans - enables orgs to store and share data through
wireless internet and networking services
Blockchain technology Right Ans - -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
What fuels the future of holistic risk management? Right Ans - the capture,
storage, and analysis of data
Covariance Right Ans - -the measure of how two random risk variables will
change in relation to each other
-calculates correlation between the variables
Variance Right Ans - -the spread of the data set, or how far apart the
numbers are in relation to the mean
Team approaches to risk identification Right Ans - 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?
Right Ans - -provide diverse perspectives on risks
-can reveal how risks are connected across an org, reducing the likelihood for
risks to be overlooked
Facilitated workshops Right Ans - -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 Right Ans - -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 Right Ans - -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 Right Ans - -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 Right Ans - 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 Right Ans - -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 Right Ans - -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 Right Ans - 1. risk
thresholds
2. checklists
3. workshops
4. risk registers and risk maps
5. process flow analysis
6. audits
7. cause and effect analysis
8. fault tree analysis
9. failure mode and effects analysis
Risk thresholds Right Ans - -when an org must decide what it's willing to
sacrifice or accept in exchange for achieving its goals
Checklists Right Ans - -easy to use and communicate known risks to
employees with little efforts
-don't help identify unknown risks
Workshops Right Ans - -allows attendees to brainstorm and assess risks in
an open, collaborative forum
-gives more perspectives
-downside is the potential for senior management to influence the flow of
ideas from stakeholders; some people conform
Risk registers and risk maps Right Ans - -used to sort and rank a large
number of risks
-risk register: a ledger of identified risks that're recorded in a table in a
document; data in this is specific to the org
-risk map: a graphic diagram showing the components of a the register;
identify, prioritize, and quantify risks in a two dimensional pictorial that
illustrates frequency and severity on vertical and horizontal axes
Process flow analysis Right Ans - -dissects processes within the org from
input to output for the purpose of improving them
Audits Right Ans - -can identify both negative risks and opportunity risks
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