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ARM 54- Test Questions and Answers
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ARM 54- Test Questions and Answers
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ARM 54- Test Questions and AnswersThe concept of correlation, in the context of why enterprise risk management works
Correct Ans-Is the proposition that correlation increases risk while uncorrelated risks can
reduce risk
Three main theoretical concepts explain how ERM works. One theoretical concept considers
not only the combination of individual risks but also their interactions. This theoretical
concept is Correct Ans-the portfolio theory
which one of the following best describes a result of an organization's adaptive strategy?
Correct Ans-Gaining and maintaining a competitive advantage
Which one of the following components of the COSO framework refers to the practices that
permit an org to continually and through all departments assess and respond to risk?
Correct Ans-Performance
A component that is a key feature of the COSO standard but not other risk management
standards Correct Ans-Control activities
COSO 2004 originated with a focus on Correct Ans-financial risk
Aspects of COSO framework's components that are particularly integral to an organization's
achievement of enhanced value are Correct Ans-governance, strategy, and performance
, ARM 54- Test Questions and Answers
In 1999, the Basel Committee issued a proposal for a revised Capital Adequacy Framework
which consisted of three pillars. One pillar is review of an institution's internal assessment
process and capital adequacy. This pillar is Correct Ans-Supervisory
Solvency II aims to achieve consistency for insurers across Europe. Solvency II includes
standards for which one of the following areas that was not addressed in Solvency I?
Correct Ans-Risk management
Based on Basel III principles, which one of the following groups should take the lead in
establishing a strong risk management culture? Correct Ans-Board of Directors
For property, which one of the following causes of loss will most likely result in a total loss?
Correct Ans-theft
This type of loss is considered an indirect loss Correct Ans-net income loss
Real vs. Personal Property Correct Ans-an item may be real or personal property
depending on the "attachment" criterion and other circumstances - trees in a yard = real &
earrings = personal
Driving carelessly or failing to lock an unattended building are examples of Correct Ans-
morale hazard
Every loss exposure has which one of the following elements?
, ARM 54- Test Questions and Answers
Choose one answer.
A. Property exposed to loss
B. Possibility of direct loss
C. Financial consequences of loss
D. Tangible asset exposed to loss Correct Ans-Financial consequences of loss
Of moral and morale hazards, which of the following is purposeful? Correct Ans-moral
hazard
Most general liability insurance policies include coverage for which one of the following?
Correct Ans-product liability
General Liability Insurance Correct Ans-covers the insured's legal defense costs when
defending against a claim of liability
Commercial Package Policy (CPP) Correct Ans-coverage for business property, liability, and
business income
Jordan is risk manager of Burroughs Mills, a textiles and clothing company. Jordan just
renewed the company's property insurance. The insurance that Jordan purchased on the
company's warehouse covers all losses except those losses that are excluded. If a loss occurs,
the insurer will take depreciation into consideration when determining the loss settlement.
Which one of the following descriptions applies to the property insurance that Jordan
purchased? Correct Ans-direct physical loss, actual cash value coverage
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