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ARM 402 Exam – Questions & Correct Solutions (100%)
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ARM 402 Exam – Questions & Correct Solutions (100%)
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ARM 402 Exam – Questions & Correct Solutions(100%)
Telematics devices allow organizations to accurately identify patterns of risk
and predict risk for which one of the following types of loss exposures?
A. Automobile
B. Property
C. Workers compensation
D. Business income Right Ans - A
Which one of the following is a major benefit that smart insurance contracts
can provide to insurance customers?
A. Smart contracts can render a risk completely preventable.
B. Smart contracts can provide broader coverage at a lower cost.
C. Smart contracts can dramatically increase the speed of loss payments.
D. Smart contracts can significantly increase the speed of premium payments.
Right Ans - C
Maxwell Company has just invested a large sum in new, highly-sophisticated
computer equipment and building renovations. Maxwell arranged to lease
identical equipment at another location so that it could use the equipment in
the event of a disaster at its location. Maxwell's lease of identical equipment at
another location is an example of
A. Duplication.
B. Separation.
C. Loss reduction.
D. Diversification. Right Ans - A
Olivia is planning a meeting to explain a new cyber security procedure. She
expects that the meeting will be impeded by hidden agendas. Which one of the
following is the best way for Olivia to deal with potential hidden agendas?
A. Olivia should refuse to take questions during her meeting, and request that
any questions be forwarded to her in writing after the meeting.
B. Olivia should start the meeting by stating that she does not expect everyone
like the new procedure, but they must accept it.
C. Olivia should start the meeting by asking participants to state their
concerns or feeling about the procedure.
,D. Olivia should hold a separate meeting for those individuals who she
suspects have a hidden agenda. Right Ans - C
Which one of the following is a common problem with meetings that leaders
should try to avoid?
A. Trying to stick to an agenda and avoid interruptions
B. Committing to an end time, as well as a start time
C. Having the wrong people attend
D. Stating the objective in writing before the meeting Right Ans - C
Which one of the following statements about correlation and covariance is
true?
A. Covariance is a scaled version of correlation and ranges from -1 to +1.
B. The correlation between variables ranges from 0 to +1.
C. Covariance measures the extent to which variables move together or
independently.
D. Correlation measures causality. Right Ans - C
Once a holistic risk management program is created and put into effect, which
one of the following methods can be used to allow constant and consistent
monitoring of the process?
A. Bow-tie diagram
B. Feedback loop
C. Dashboard reporting
D. SWOT analysis Right Ans - B
A risk control technique that reduces the frequency of a particular loss is
A. Loss prevention.
B. Loss reduction.
C. Diversification.
D. Duplication. Right Ans - A
Ivanhoe Corporation purchases stock in a bank and in a pharmaceutical
manufacturer. Because these are unrelated industries, Ivanhoe hope that any
losses in one stock will be more than offset by profits in another. Ivanhoe is
using which one of the following risk management techniques?
A. Risk transfer
B. Duplication
C. Diversification
,D. Separation Right Ans - C
Pacific Bar and Grill was having a problem with employees slipping and falling
in the kitchen and bar areas. Rather than incur the cost to replace the floors
with a new non-slip surface, the owners decided to require employees to wear
slip-resistant shoes and monitor the floors for spills on a regular schedule.
They are also keeping track of the number of employee slips and falls and the
associated costs, as well as, the expenses involved with this risk management
program. Which one of the following methods is Pacific Bar and Grill using to
measure the effectiveness of this risk management process?
A. Dashboard reporting
B. Feedback loop
C. Scorecard
D. Bow-tie diagram Right Ans - B
Ed is investment manager of the Nellor Foundation, a charitable trust.
Recently, Ed met with the president of the Foundation. Up until now, assets
have been invested in financial assets. Ed told the president that after
performing a simulation, he would like to add a high-yielding, higher risk real
estate investment to the portfolio. When the president asked if it would be too
risky, Ed replied, "It will actually increase expected returns while reducing
risk." The purported reduction in risk occurs because
A. The real estate investment will not be large enough to significantly impact
on the portfolio.
B. Rental income generated by the real estate investment is not taxable.
C. Taxes on real estate investments may be deferred.
D. The real estate investment returns are negatively correlated with the other
assets. Right Ans - D
Which one of the following risk control techniques is generally used to reduce
the frequency of a particular loss?
A. Separation
B. Loss reduction
C. Avoidance
D. Loss prevention Right Ans - D
Which one of the following statements regarding correlation analysis is true?
, A. Because it incorporates so much data, a risk professional can rely on
correlation analysis only when making a major decision.
B. Abnormal observations and inaccurate data may skew correlation analysis.
C. The range of correlation coefficients is from 0 to +1.
D. Correlation analysis can indicate causality between variables. Right Ans
-B
When organizations invest their assets among a mix of stocks and bonds from
companies in different industry sectors they are using the risk management
technique of
A. Diversification.
B. Duplication.
C. Risk transfer.
D. Separation. Right Ans - A
Diversification is a risk control technique that
A. Spreads loss exposures over numerous projects, products, markets, or
regions.
B. Views the cause of accidents to be a result of business concentration and
vertical integration.
C. Produces a copy or backup and keeps it in reserve.
D. Divides an asset or operation into two or more separate units. Right Ans
-A
Victor is the risk manager for Jones Incorporated. He decided that a bow-tie
diagram would be the best method to convey a potential risk to the executive
team. Victor will use the bow-tie diagram to do which one of the following?
A. To provide the team with all of the information it needs to know about the
risk within a very brief period of time
B. To identify the risk and list its possible causes and possible consequences
on either side
C. To depict the likeliness that the risk will occur
D. To consistently monitor risk exposures and the controls in place Right
Ans - B
A risk control technique that reduces the severity of a particular loss is
A. Loss reduction.
B. Loss prevention.
C. Duplication.
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