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ARM III EXAM AND PRACTICE EXAM NEWEST 2024/2025 ACTUAL EXAM COMPLETE QUESTIONS AND 100%, Exams of Business Administration

ARM III EXAM AND PRACTICE EXAM NEWEST 2024/2025 ACTUAL EXAM COMPLETE QUESTIONS AND 100% CORRECT VERIFIED ANSWERS GRADED AARM III EXAM AND PRACTICE EXAM NEWEST 2024/2025 ACTUAL EXAM COMPLETE QUESTIONS AND 100% CORRECT VERIFIED ANSWERS GRADED AARM III EXAM AND PRACTICE EXAM NEWEST 2024/2025 ACTUAL EXAM COMPLETE QUESTIONS AND 100% CORRECT VERIFIED ANSWERS GRADED AARM III EXAM AND PRACTICE EXAM NEWEST 2024/2025 ACTUAL EXAM COMPLETE QUESTIONS AND 100% CORRECT VERIFIED ANSWERS GRADED AARM III EXAM AND PRACTICE EXAM NEWEST 2024/2025 ACTUAL EXAM COMPLETE QUESTIONS AND 100% CORRECT VERIFIED ANSWERS GRADED A

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2024/2025

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ARM III EXAM AND PRACTICE EXAM NEWEST 2024/ 2025

ACTUAL EXAM COMPLETE QUESTIONS AND 100%

CORRECT VERIFIED ANSWERS GRADED A

When communicating a decision up the organization's chain of command, consulting with outside experts can help a risk management professional do which one of the following? A. Seek feedback from stakeholders B. Stay focused on the organization's objectives C. Define the organization's risk appetite D. Enhance stakeholders' confidence in the process D Which of the following risk management program goals is an essential goal for all public entities? A. Earning stability B. Continuity of operations C. Growth D. Survival B The traditional definition of risk management reflects the traditional concept of risk as A. Both positive and negative. B. Negative. C. Uncontrollable. D. Strategic. B During the past year, International Toys has undertaken four capital projects. The company has renovated and refurbished one of its aging warehouse buildings. It has purchased the most recent version of its current order processing computer software. It has added two trucks to its fleet of delivery vehicles. Lastly, it has purchased a new production machine that will allow it to launch a new product line. Which one of the following company projects is the most speculative risk?

A. The two new trucks B. The warehouse refurbishment C. The software upgrade D. The new production machine D Which one of the following statements is true regarding the basic measures that apply to risk management? A. Consequences measure the degree to which an occurrence could positively or negatively affect an organization. B. Hedging is a risk management strategy that can reduce the risk of correlation. C. Risk increases as volatility decreases. D. Longer time horizons are generally less risky that shorter ones. A Which one of the following provides a measure of the maximum potential damage associated with an occurrence? A. Exposure B. Duration C. Underwriting risk D. Maximum probable loss A Samuel was recently hired as a risk management professional for Parker Property Management. He has been asked by senior management to review the organization's 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 one of the following through internal communication before he will be able to complete this task? A. Determine the organization's risk appetite B. Identify all of the risks that the organization faces C. Earn the confidence of the organization's board of directors D. Become familiar with industry regulations

A

Catastrophes such as recent earthquakes and the 2011 tsunami in Japan pointed out a need for many organizations to evaluate and manage their A. Supply-chain risk. B. Derivative risk. C. Compliance risk. D. Political risk. A Risk management professionals must collaborate with data analysts during which two steps of the risk management process? A. Treat risks and monitor risk treatments B. Scan the environment and analyze risks C. Analyze risks and monitor risk treatments D. Identify risks and treat risks C Asking a question such as "How do you think this will work out?" can help a speaker do which one of the following? A. Request feedback and determine if the message has been understood B. Gain the support of executives and decision makers C. Build trust among a diverse group of individuals D. Deliver a message that recipients don't want to hear A Carla, the risk manager, was asked by senior management to deliver a presentation on cyber risk at an all employees meeting. Even though she was only allotted 30 minutes for her presentation, Carla felt that cyber risk was a very real risk for the corporation and she wanted employees to leave with some fear of it. She wanted to provide employees with as much technical information as possible, and familiarize them with all of the important jargon. Less than 20 minutes into her presentation, Carla could tell that many of the employees were not paying any attention to her presentation. Which one of the following steps in the communication process had Carla failed to consider?

A. Pay attention to your body language B. Ask for feedback C. Analyze your audience D. Set a clear communication objective C Before speaking with a group or individual, the speaker should think about what he or she wants the other person(s) to do as a result of the conversation. Which one of the following steps in the communication process does the speaker complete by doing this? A. Deliver a message the recipient(s) want to hear B. Set aside judgement C. Set a clear communication objective D. Analyze your audience C Which one of the following risk management objectives is critical for a manufacturer seeking new capital from investors, stockholders, and creditors? A. Anticipate and recognize emerging risks B. Social responsibility C. Reduce the deterrent effects of hazard risks D. Eliminate downside risk C Which one of the following data capture tools has led to an explosion of risk management innovation by allowing smart products to transmit data to each other and to central hubs? A. Blockchain B. Cloud computing C. Internet of Things D. Artificial intelligence C Jean is the Risk Manager for a Fortune 1000 company. Her CFO has tasked her to analyze vulnerabilities in the firm's supply chain. The adequacy of suppliers to meet an organization's needs

would be an example of which one of the following types of risk? A. Financial risk B. Strategic risk C. Operating risk D. Operational risk D An organization must meet the standard of care that it owes to others in order to ensure that A. Legal obligations are satisfied. B. Post-loss goals are in place. C. Operations are efficient. D. Contracts are not breached. A According to the law of large numbers, as the number of exposure units insured increases, A. Fewer losses are expected to occur. B. The size of the average loss declines. C. The relative accuracy of predictions about future losses increases. D. The probability of an underwriting loss increases. C Risk can be classified as diversifiable or nondiversifiable. Which one of the following statements is true with respect to this type of risk classification? A. Diversifiable risks tend not to be correlated so they can be managed through diversification or spread of risk. B. Systemic risks are generally diversifiable. C. Private insurance tends to concentrate on nondiversifiable risks; government insurance is often suitable for diversifiable risks. D. Inflation, unemployment and natural disasters, such as hurricanes, are examples of diversifiable risk. A

The fundamental purpose of a risk management framework is to A. Maximize profits for all stakeholders. B. Integrate risk management throughout the organization. C. Define and eliminate potential losses. D. Reduce the cost of risk. B Which one of the following is one of the five steps of the risk management process? A. Align and integrate B. Establish accountability C. Scan environment D. Allocate resources C Which one of the following best explains how most smart products potentially improve risk management? A. They measure worker fatigue. B. They scan and inspect structures for unsafe conditions. C. They assess risks in dangerous areas. D. They generate big data to which advanced analytics can be applied. D Clear-Rite Company specializes in the clean-up of hazardous chemical spills. Workers performing clean- up operations must use safety suits to prevent exposure to the chemicals. The suits include pulse and respiration monitors, body temperature sensors, and chemical sensors. The monitors and sensors report data to a mobile operations center which is deployed to each clean-up site. The pulse and respiration monitors and the sensors that are part of the protective gear are called A. Magnetometers. B. Drone technologies. C. Wearable technologies. D. Accelerometers. C

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 A. Big data. B. Accelerometer technology. C. Predictive analytics. D. Ergonomics. D Which one of the following statements about the use of drones is true? A. The use of drones is limited to military applications. B. Space and weight limitations prevent drones from being equipped with sensors and cameras. C. Drones may be equipped with cameras that relay data in real-time. D. The reliance on humans to operate drones severely limits their application for commercial uses. C Many auto manufacturers have automated a portion of their assembly lines by introducing a smart product. The smart product performs repetitive tasks, such as making the same weld on each vehicle frame as it passes the smart product. These smart products, which can be fixed or mobile, reduce repetitive motion injuries that humans might suffer. They can also be used to perform dangerous tasks and in heavy-lifting jobs. These smart products are called A. Wearables. B. Automated sensors. C. Robots. D. Drones. C Take Your Order (TYO) is a company that specializes in taking product orders for vendors. The manufacturer of a product can run a television or internet ad for a product with a toll-free number.

Customer calls for the products are routed to TYO, where one hundred operators are available to receive the calls. Each operator is assigned a cubicle with a computer terminal, video display monitor, and a telephone. TYO experienced high workers compensation claims from its operators, claiming neck strain, eye strain, and wrist pain. In an effort to reduce such injuries, TYO evaluated each operator's work area. The height of chairs and video monitors were adjusted, curved computer keyboards and wrist-rests were provided, and the telephones were replaced with audio headsets. Workers compensation costs dropped significantly. The science of designing work spaces based on interaction between people and the equipment in the work s D A municipal water 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 A. Thermal sensors. B. Mechanical sensors. C. Biochemical sensors. D. Radiant sensors. B 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? A. Radiant sensors. B. Thermal sensors. C. Biochemical sensors. D. Mechanical sensors. C 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 A. Preventive analytics. B. Artificial intelligence. C. Sensor networks. D. Experience rating. A In an effort to reduce expenses, increase profitability, and reduce human errors; ABC Insurance Company decided to automate most of its personal lines underwriting function. The company now uses standardized application forms that are submitted electronically to one of the company's regional offices. At each regional office, a computer with a scanner reads the applications. The computer has been programmed with acceptable answers to the questions. If the answers on the application are all acceptable, the policy is automatically issued. Rejected applications are automatically forwarded to a human underwriter who reviews them. The use of this technology has reduced the company's expense ratio by two and a half percent, and reduced the time it takes to issue a policy. ABC Insurance Company's use of computers to evaluate applications electronically is an application of A. Radiant sensors. B. Actuator technology. C. Risk D Autonomous Vehicle Applications (AVA) is a start-up company that develops safety technologies that can be sold to companies that are producing autonomous vehicles. One technology AVA is developing allows an autonomous vehicle to detect, extract, and analyze images; and then to respond to the images. For example, the technology would detect a presence in a crosswalk, extract the image, and a computer would analyze the image. When the image was determined to be a human being, the vehicle would slow down or stop until the crosswalk was clear. This technology, which is designed to capture and analyze images, and to act on the recognition of the image; is called A. Visual acuity. B. Computer vision. C. Accelerometer technology. D. Transducer technology.

B

Which one of the following uses infrared light to detect nearby objects? A. Wearables B. Drones C. Robots D. Lidar D Last year, three Metro City firemen died responding to a fire at a chemical plant, when they were overcome by toxic fumes. In response, Metro City is purchasing advanced first responder gear. It includes special flame retardant suits with chemical and explosive fume sensors, air quality sensors, and heat sensors. Responders will also wear special watches that will track a responder's pulse, respiration, and blood pressure; and helmets that include video cameras. All of these sensors will feed data to a computer in real-time. The computer will analyze the data and issue threat levels and evacuation orders, if necessary. The protective gear Metro City will purchase and the data transmission and analysis capability illustrate the use of A. Insurtech. B. Smart products. C. Risk management information systems. D. Catastrophe modeling. B 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 A. Connected ecosystem. B. Risk management information system. C. Smart system. D. Risk management matrix. A 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 A. Sensitivity analysis. B. Computer-directed manufacturing. C. Web-based manufacturing. D. The Internet of Things. D It is necessary to assess the risk appetite of a business supplier prior to doing business because understanding the risk appetite allows the organization to A. Ascertain whether the relationship is a good fit. B. Negotiate better prices and delivery times. C. Better control its production. D. Leverage its payments to the supplier to the organization's advantage A An organization evaluates key stakeholders' attitude toward risk in order to A. Understand what risks are acceptable and to develop an effective enterprise-wide risk management program. B. Understand acceptable risks and gauge its ability to attract new shareholders. C. Understand acceptable risks and gauge its ability to raise capital. D. Understand the risk appetite in order to determine what information is disseminated. A A speaker imparts information in verbal communications by A. Using appropriate facial expressions and gestures while other parties express their opinions and concerns. B. Expressing facts and emotions quickly, inviting written questions for discussion at a future session.

C. Having good listening skills and expressing facts and emotions through words and sometimes visual displays. D. Listening and verbally responding with anecdotes of prior meetings, leveraging humor as opposed to facts for discussion. C Which one of the following should be part of an organization's standard operating procedures (SOPs) concerning external stakeholder communications? A. Instructions to always use written communication, rather than verbal or nonverbal communication B. Instructions regarding what types of information can and cannot be released C. Instructions requiring the use of formal, rather than informal communication D. Instructions to avoid the use of social media B North American Furnishings has been in business for 18 years. The organization's primary objectives are profitability and bottom-line results. It always sets aggressive goals. North American Furnishings values its customer bases. Which one of the following types of corporate culture exists at North American Furnishings? A. Hierarchy B. Clan C. Market D. Adhocracy C After opening its third store, Shoehorn Shoes decided to purchase new inventory tracking software for all of its stores. Which one of the following external or internal environments does this decision relate to? A. Operations environment B. Physical environment C. Economic environment D. Product environment A

Senior management of CAZ Company decides to cut its involvement with the local youth association and no longer allow its employees to work with kids during business hours. Additionally, they will no longer fund the Youth House. Which one of the following best describes how this action may affect its risk management profile? A. Corporation may increase its external social risk by negating any goodwill the community has for the company. B. Corporation may increase its financial exposure by not having tax credits to offset its profits or losses. C. Corporation may decrease its external political risk by removing itself from any community involvement. D. Corporation may decrease its operations environment as the staff will have more time to devote to the company. A Which one of the following organizational policies or practices is based on a code of ethics? A. An annual compliance audit of each field underwriting office that is conducted by the home office staff B. The designation of 2 workdays a year for employees to participate in local civic and volunteer activities C. A company policy that offers a 10 percent discount to teachers and members of the military D. A disclosure requirement regarding any potential conflict of interest an accountant might have in working with specific clients D Which one of the following statements is correct regarding an organization's code of ethics? A. The code of ethics should provide an organization with a set of parameters within which it should operate, with little room for interpretation. B. The code of ethics should provide a list of dos and don'ts that employees can use as a framework in making day-to-day decisions. C. The code of ethics should include principles and concepts that are dynamic enough to remain relevant in a rapidly changing business environment.

D. The code of ethics should primarily consider the social and ethical needs of its external stakeholders. C Green Corporation suffered severe losses due to tornados at its northern facility. The Board of Directors issued a statement that the current costs outweighed any sustainable profits in the near term. The risk manager can best assist the Board in its long term decision making by A. Following the directives of the board of directors preserving his/her position with the company. B. Offering a white paper on the merits of shutting down the facility, laying off the staff and shifting the work to other locations. C. Playing no role since the risk manger's focus is on preventing loss rather than reviewing senior management decisions. D. Providing data on the frequency of wind storms, and work with the risk center and risk owner at that location to find alternatives to protect the facility. D Parker International tends to communicate only the information that stakeholders need to complete their tasks and achieve goals. The management style at Parker International is A. Directive. B. Delegating. C. Responsive. D. Supportive. A A risk management professional is identifying the organization's key stakeholders as part of the enterprise risk management program. Which one of the following would be considered an internal stakeholder? A. Unions B. Suppliers C. General public D. Stockholders D

Which one of the following statements is correct regarding risk owners? A. Generally, external stakeholders should not be considered to be risk owners. B. Generally, the stakeholder who is most affected by or creates a risk should be its risk owner. C. The risk owner is usually a member of the senior management team. D. The risk owner should be given full authority to make decisions without management involvement. B Shelton Manufacturing recently signed a contract with a new customer which will require them to increase production by 20 percent. The organization has decided to form a risk center to identify and assess the risks involved with this new contract, and manage them efficiently. Which one of the following individuals should be the risk owner? A. Production manager B. Sales manager C. Senior manager D. New customer A One advantage that a national organization would derive from creating risk centers is that it A. May allow risks to be managed on a small scale thereby relieving the organization from focusing attention on it. B. Allows more independence for the risk centers so that they are not burdened with procedures. C. May segregate risks to protect the larger organization if the risk center fails. D. Allows for participation by operational managers who may contribute to the risk analysis. D A vehicle manufacturer found that the exhaust system in certain models was not working properly. Some exhaust gases were releasing into the vehicle body. Rather than recalling the vehicles, they were shipped to South American markets. The manufacturer A. Is socially responsible because it shipped the vehicles out of the country thereby avoiding any US casualties. B. Is socially responsible because it does not force any individual to buy the vehicle. C. Has ignored its social responsibility as well as the risks involved with these actions. D. Has decided to transfer the risk to South American markets avoiding financial penalties.

C

Lucy is a chef at a restaurant. She is growing tired of working such long hours and not reaping the financial benefits. Lucy has been saving money with the goal of opening her own restaurant. She recently talked to a financial advisor about the options market as a way to grow her savings quickly. The financial advisor explained that it is a risky choice, but could potentially allow her to reach her goal of owning a restaurant in the near future. Lucy has decided to invest her savings in the options market. Which one of the following types of risk attitude does Lucy exhibit? A. Risk optimizing B. Risk managed C. Risk obsessed D. Risk seeking D Which one of the following best explains how a risk-managed organization views a proposed new product line? A. It determines the rewards of a new alternative and may underemphasize the impacts, variances and negative effects. B. It weighs the risk-reward relationship while realistically evaluating potential outcomes and consequences. C. It attempts to join with another organization for a joint venture taking little of the actual risk on itself. D. It seeks methods of transferring the potential risks or avoids the risk totally. B The main advantage of a formal internal communication system is that A. Employees do not have direct access to each other. B. Formal internal communications takes time which may resolve issues. C. Individuals know to whom to report. D. It is easily accessed. C

BD Company has made widgets for over 79 years using the same production techniques for fear of the huge costs from potential consumer lawsuits if production is changed and product quality suffers. With respect to its risk attitude, this organization would be classified as A. Risk seeking. B. Risk naïve. C. Risk avoiding. D. Risk optimizing. C The service representatives for Tauton Insurance will be eligible for a bonus only if the customer retention rate is increased by 5%. This is an example of which one of the following standards? A. A critical success factor derived from a strategic objective B. A severe risk tolerance level C. A key performance indicator based on financial ratios D. A corrective measure linked with an identified tolerance level D Key risk indicators (KRIs) help organizations identify issues that can lead to losses. Effective KRIs are based on a company's A. Organizational structure. B. Product or industry. C. Strategic objectives. D. Sales volume. C An organization's goals and objectives are met by establishing and attaining measurable standards for the many activities it pursues. Which one of the following statements is correct with respect to those standards? A. A key performance indicator (KPI) answers the question, "What will make our organization a success?" B. Generally, an organization's risk tolerance has little impact on its critical success factors (CSFs) and key performance indicators (KPIs). C. Organizations with key performance indicators (KPIs) established for critical success factors (CSFs)

will typically achieve organizational goals. D. For each key performance indicator (KPI), there is a tolerance level for how much deviation from the standard established in the KPI will be acceptable. D Organizations use key risk indicators (KRIs) to plan for and respond to risk. Which one of the following statements is correct with respect to KRIs? A. A KRI can reveal an upward trend in the level of a risk that, if it continues, will exceed the designated risk threshold for that risk. B. KRIs are effective internal indicators of changes such as budget variances; however they are not effective external indicators. C. An organization's risk criteria, predefined tolerance ranges that measure variances from expected outcomes, are based on risk thresholds. D. Risk criteria relating to an organization's strategic risks generally do not serve as the bases for KRIs, which tend to be operational in focus. A Organizations use key risk indicators (KRIs) to plan for and respond to A. Failure. B. Risk. C. Questions. D. Emergencies. B Which one of the following statements is true regarding the business process management (BPM) life cycle model? A. The model is driven by the collaboration of human and technological input. B. The model is designed to review one business process at a time. C. The model is primarily used by organizations in the manufacturing sector. D. The model is ineffective unless all five steps are completed on a continuous basis. A

Carbon Manufacturing Company just hired a new chief risk officer (CRO) and one of his first tasks was to recommend updated key risk indicators (KRIs) to the chief executive officer (CEO). The CEO was especially interested in KRIs measuring the company's profitability. One area of measurement that the new CRO might want to use is A. Personnel changes. B. Customer invoices. C. Customer orders. D. Aged accounts receivable. D The business process management (BPM) life cycle incorporates five steps. Which one of the following best describes the first step in the BPM process? A. Critical processes that support achievement of the organization's goals are selected for analysis. B. Processes are modeled to identify the organization's response to what-if scenarios. C. Processes are designed or redesigned by considering workflows and affected personnel. D. Processes are tracked so that statistics on their performance can be gathered. C For an organization, a key performance indicator (KPI) measures the performance of a specific activity at a predetermined level or amount. Which one of the following is an example of a KPI based on a ratio? A. Customer-focused website B. High employee morale C. Safe transport of customer goods D. Inventory turnover D North American Furnishings is using business process management to help it identify risks that threaten its processes. Which one of the following risks would be considered an internal risk? A. The loss of available materials due to tornadoes B. The loss of skilled craftspeople due to retirement C. The drop in demand due to rising interest rates D. The rise in the cost of materials due to new forestry regulations

B

Which one of the following is an example of an internal key risk indicator (KRI) that a contractor might monitor? A. Cost of lumber B. Interest rates C. Availability of skilled labor D. Budget variances D One of the strategic objectives for Cromley Insurance Group is customer satisfaction. Which one of the following is a critical success factor (CSF) that would help refine this strategic objective? A. High profitability B. Increase retention ratio by 5% C. Reduce claim activity by 4 to 6% D. High customer retention D Which one of the following answers the question, "What shows we are a success?" A. Risk tolerance level B. Strategic objective C. Critical success factor D. Key performance indicator D Successful organizations have goals and objectives. A financial or nonfinancial measurement that defines how successfully an organization is progressing toward its long-term goals is referred to as A. An objective gauge (OG). B. A critical success factor (CSF). C. A key performance indicator (KPI). D. An operating standard (OS). C

An organization has established a key performance indicator to "reduce employee injuries by 6%." Which one of the following would indicate a low risk tolerance for this KPI? A. Reduce employee injuries by 2% B. Reduce employee injuries by 4% C. Reduce employee injuries by 5 to 6% D. Employee injury rate remains unchanged C Which one of the following is a main characteristic of effective key risk indicators (KRIs)? A. They define the boundaries of risk tolerance. B. They are lagging in nature. C. They are based on quantifiable information. D. They measure progress toward achieving objectives. C One of the strategic objectives for Cromley Insurance Group is customer satisfaction. Which one of the following is a critical success factor (CSF) that would help refine this strategic objective? A. High customer retention B. Reduce claim activity by 4 to 6% C. Increase retention ratio by 5% D. High profitability A Which one of the following terms refers to information used as a basis for measuring the significance of a risk? A. Risk criteria B. Risk tolerance C. Risk appetite D. Risk threshold A Which one of the following is an example of an external key risk indicator (KRI) that a manufacturer might monitor?

A. Amount of budget variances B. Number of employee injuries C. Age of accounts payable D. Cost of raw materials D Which one of the following measures the progress an organization has made toward attaining its goals within a specific amount of time? A. Key performance indicator B. Risk tolerance level C. Critical success factor D. Key risk indicator A Organizations use key risk indicators (KRIs) to plan for and respond to risk. Which one of the following statements is correct with respect to KRIs? A. To best manage risk, an organization should have as many KRIs as possible. B. To be effective, KRIs should be detailed and specific. C. KRIs are based on quantifiable information and support management decisions. D. KRIs are usually only established for the executive level within an organization. C Key risk indicators (KRIs) can be established for various levels within an organization. Which one of the following levels of an organization usually has the most detailed KRIs? A. Department level B. Board of director level C. Business-unit level D. Senior management level A Some best practices models call for the formation of a risk committee with a risk management focus at the organization's executive management level. Which one of the following statements best describes one of the responsibilities of an executive-level risk committee?

A. To monitor the organization's compliance with established risk limits and how noncompliance is addressed B. To oversee exposures of the organization's critical risks and advise the board on risk strategy. C. To approve the organization's risk management strategies, including their design and implementation. D. To assist the board in establishing the organization's risk appetite and risk tolerance levels C Which one of the following statements is true regarding separation of ownership and control in corporations? A. The incentive for managers and non-management board members to pursue their own interests at the expense of shareholders gives rise to agency costs. B. Corporate governance is not concerned with the separation of ownership and control. C. Shareholders retain decision-making authority while managers control business operations. D. Limited liability of shareholders impedes the separation of ownership and control in corporations. A Corporate governance is evolving towards the separation of oversight and control for boards of directors. This separation may be accomplished by A. Requiring a company executive to chair each board committee. B. Requiring the majority of the directors to be outside directors. C. Requiring the audit committee to be comprised of inside directors. D. Using company-appointed board members rather than shareholder-elected board members. B Rufus owns 1500 shares in the ARM Corporation. Recently, ARM has shouldered significant liabilities due to pollution problems. Generally, Rufus' liability as a shareholder would be limited to which one of the following? A. The value of their shares B. Treble damages C. The amount of assets they have D. The amount of insurance coverage they have

A

Karen Williams, a retired chief financial officer of a bank, was invited to join the board of directors of ABC Property and Liability Insurance Company. She was asked to serve on the Audit Committee and the Risk Committee of the ABC board. Which of the following statements is true regarding Karen's service on the ABC board of directors? A. The entire board retains oversight responsibility over risks that are assigned to Karen's Audit Committee. B. The work of Karen's Risk Committee is limited to a review of the insurance company's underwriting results and the company's investment portfolio. C. Karen's Audit Committee takes precedence over the board of directors with regard to oversight responsibility. D. As a board member, Karen is expected to be a disinterested party, only questioning the management team when new corporate initiatives fail. A Max is a new investor and the only stocks he owns are his 1,500 shares of Large Corporation. Large operates in a volatile high-tech sector. Max could readily trim his risk of owning shares by A. Concentrating his investments in one sector. B. Diversifying his insurance coverage. C. Diversifying his investment across many corporations. D. Concentrating his investments in one company. C One of the categories of agency costs associated with managing the relationship between management and shareholders is A. Implementation costs. B. Monitoring costs. C. Acquisition costs. D. Commission costs. B

Which one of the following statements is true regarding the roles of a risk champion and a chief risk officer? A. A chief risk officer usually has less influence on corporate decision making than a risk champion. B. A chief risk officer is more likely to have a dedicated staff to assist with the responsibilities of his or her job. C. A risk champion is a member of the board of directors who has been selected to concentrate his or her efforts on assessing the risks faced by an organization. D. A chief risk officer reports to a risk champion, who in turn interacts with the company executives and the board of directors. B The board of directors must use a thorough understanding of the organization's overall risk philosophy to determine the amount of risk the organization is willing to seek or accept in the pursuit of long- term objectives. This amount of risk is called the organization's A. Probable maximum loss. B. Retention level. C. Risk appetite. D. Maximum possible loss. C A corporate board of director's chair person is elected by A. The board of directors. B. The shareholders. C. Executive management. D. Proxies. A Which one of the following statements is correct with respect to the role of a board of directors in risk oversight? A. Increasing pressure on boards of directors to provide greater enterprise-wide risk oversight comes from sources such as investors, rating agencies, and regulators. B. A 2012 survey of executives revealed that practically all boards have formally assigned risk oversight responsibility to a board committee.