Download Risk Management: Concepts, Classifications, and Process and more Exams Nursing in PDF only on Docsity!
ARM 400 - Segment A - Chapters 1, 2, &
3 correctly answered 2023
Sets of data that are too large to be gathered and analyzed by traditional methods - correct answer Big Data An innovative item that uses sensors; wireless sensor networks; and data collection, transmission, and analysis to further enable the item to be faster, more useful, or otherwise improved - correct answer Smart Product A network of objects that transmit data to and from each other without human interaction - correct answer Internet of Things (IoT) Information, technology, and storage services contractually provided from remote locations, through the internet or another network, without a direct server connection. - correct answer Cloud Computing A distributed digital ledger that facilitates secure transactions without the need for a third party - correct answer Blockchain Text Mining - correct answer Obtaining information through language recognition The use of technological devices in vehicles with wireless communication and GPS tracking that transmit data to businesses or government agencies; some return information for the driver - correct answer Telematics Amount of risk an organization is willing to take on in order to achieve an anticipated result or return - correct answer Risk Appetite A technique to quantify financial risk by measuring the likelihood of losing more than a specific dollar amount over a specific period of time - correct answer Value at risk (VaR) the total cost incurred by an organization because of the possibility of accidental loss - correct answer cost of risk any condition that presents a possibility of gain or loss, whether or not an actual loss occurs - correct answer Exposure Frequent fluctuations, such as in the price of an asset - correct answer Volatility A qualitative estimate of the certainty with which the outcome of a specific event can be predicted - correct answer Likelihood
the effects, positive or negative, of an occurrence - correct answer consequences Estimated duration - correct answer Time Horizon A relationship between variables - correct answer correlation a chance of loss or no loss, but no chance of gain - correct answer pure risk a chance of loss, no loss, or gain - correct answer Speculative risk The risk that customers or other creditors will fail to make promised payments as they come due - correct answer Credit Risk the perceived amount of risk based on an individual's or organization's opinion - correct answer Subjective risk the measurable variation in uncertain outcomes base on facts and data - correct answer Objective risk A risk that affects only some individuals, businesses or small groups Not highly correlated - gains and losses tend to occur randomly - correct answer Diversifiable Risk The potential for a major disruption in the function of an entire market or financial system - correct answer Systemic Risk Uncertainty about an investment's future value because of potential changes in the market for that type of investment - correct answer Market Risk The risk that an asset cannot be sold on short notice without incurring a loss - correct answer Liquidity Risk What are the basic risk measures? - correct answer 1. exposure
- volatility
- Likelihood
- Consequences
- Time Horizon
- Correlation Name the classifications of risk - correct answer Pure vs. Speculative Subjective vs. Objective Diversifiable vs. Nondiversifiable Quadrants of risk (hazard, operational, financial, and strategic)
What risk criteria factors should be considered to align objectives, resources, and risk management policy? - correct answer -Causes of risk -Effects of risk -Metrics used to measure effects of risk -Time frame of potential effects -Methods to determine level of risk -Approach to combinations of risk Identifying risks relies on the risk professional's ability to performa or facilitate what key tasks involving communication? - correct answer This process relies on the risk professional's ability to perform or facilitate several key tasks involving communication, including these:
- Asking the right questions of departmental stakeholders to understand their perspectives on the most pressing risks they face
- Finding external experts who can shed light on emerging risks that the organization may not have anticipated previously and knowing how to speak their language to get the most from interactions with them
- Collaborating with senior management and the board to ensure that risk associated with the organization's strategy are identified Involves applying the defined risk criteria to determine the source, cause, likelihood, and potential consequences of each of the identified risks Can be quantitative, qualitative, or BOTH - correct answer Analyze Risk (Risk Management Process) Effective risk management processes include ongoing monitoring with periodic review of results. What are they key purposes of monitoring? - correct answer -Determine the effectiveness of controls -Obtain information to improve risk assessment -Analyze events and their consequences to understand trends, successes, and failures -Observe changes in internal and external environments -Identify emerging risks Catastrophes such as recent earthquakes and the 2011 tsunami in Japan pointed out a need for many organizations to evaluate and manage their Select one:
A. Derivative risk. B. Political risk. C. Compliance risk. D. Supply-chain risk. - correct answer D. Supply-Chain Risk Encouraging the expression of feelings as well as facts and following up with employees on the problems they report are two ways that managers and supervisors can Select one: A. Cultivate two-way communication. B. Support diverse groups. C. Facilitate active listening D. Maintain control of the conversation. - correct answer A. Cultivate two-way communication. Which one of the following is one of the five steps of the risk management process? Select one: A. Allocate resources B. Establish accountability C. Scan environment D. Align and integrate - correct answer C. Scan environment 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? Select one: A. Earn the confidence of the organization's board of directors B. Identify all of the risks that the organization faces C. Become familiar with industry regulations D. Determine the organization's risk appetite - correct answer D. Determine the organization's risk appetite Asking a question such as "How do you think this will work out?" can help a speaker do which one of the following? Select one: A. Build trust among a diverse group of individuals B. Gain the support of executives and decision makers C. Request feedback and determine if the message has been understood D. Deliver a message that recipients don't want to hear - correct answer C. Request feedback and determine if the message has been understood
A. Telematics B. Text mining C. Root cause analysis D. Blockchain - correct answer B. Text mining The fundamental purpose of a risk management framework is to Select one: A. Reduce the cost of risk. B. Maximize profits for all stakeholders. C. Integrate risk management throughout the organization. D. Define and eliminate potential losses. - correct answer C. Integrate risk management throughout the organization. According to the law of large numbers, as the number of exposure units insured increases, Select one: A. The relative accuracy of predictions about future losses increases. B. The probability of an underwriting loss increases. C. The size of the average loss declines. D. Fewer losses are expected to occur. - correct answer A. The relative accuracy of predictions about future losses increases. Aligning risks with the organization's risk appetite defines Select one: A. Value at risk. B. Compliance. C. Tolerable uncertainty. D. Social responsibility. - correct answer C. Tolerable uncertainty. An organization must meet the standard of care that it owes to others in order to ensure that Select one: A. Legal obligations are satisfied. B. Operations are efficient. C. Contracts are not breached. D. Post-loss goals are in place. - correct answer A. Legal obligations are satisfied. 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
Select one: A. A financial risk. B. Both a hazard risk and an operational risk. C. Both a hazard risk and a financial risk. D. A strategic risk. - correct answer B. Both a hazard risk and an operational risk. Which one of the following is an internal source that can often provide information regarding risks that aren't obvious? Select one: A. Human resources B. Internal auditing C. Production manager D. Board of directors - correct answer B. Internal auditing Which one of the following provides a measure of the maximum potential damage associated with an occurrence? Select one: A. Exposure B. Duration C. Underwriting risk D. Maximum probable loss - correct answer A. Exposure A new computer chip that could position a company for explosive growth is an example of Select one: A. Strategic planning. B. Operational risk. C. Strategic risk. D. Tactical risk. - correct answer C. Strategic risk. 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? Select one: A. Set a clear communication objective B. Pay attention to your body language C. Analyze your audience D. Ask for feedback - correct answer C. Analyze your audience
changed and product quality suffers. With respect to its risk attitude, this organization would be classified as Select one: A. Risk seeking. B. Risk optimizing. C. Risk naïve. D. Risk avoiding. - correct answer D. Risk avoiding. One advantage that a national organization would derive from creating risk centers is that it Select one: A. Allows more independence for the risk centers so that they are not burdened with procedures. B. May allow risks to be managed on a small scale thereby relieving the organization from focusing attention on it. C. Allows for participation by operational managers who may contribute to the risk analysis. D. May segregate risks to protect the larger organization if the risk center fails. - correct answer C. Allows for participation by operational managers who may contribute to the risk analysis. 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? Select one: A. Product environment B. Physical environment C. Economic environment D. Operations environment - correct answer D. Operations environment An organization evaluates key stakeholders' attitude toward risk in order to Select one: A. Understand what risks are acceptable and to develop an effective enterprise-wide risk management program. B. Understand the risk appetite in order to determine what information is disseminated. C. Understand acceptable risks and gauge its ability to attract new shareholders. D. Understand acceptable risks and gauge its ability to raise capital. - correct answer A. Understand what risks are acceptable and to develop an effective enterprise-wide risk management program. Which one of the following should be part of an organization's standard operating procedures (SOPs) concerning external stakeholder communications?
Select one: A. Instructions regarding what types of information can and cannot be released B. Instructions to avoid the use of social media C. Instructions to always use written communication, rather than verbal or nonverbal communication D. Instructions requiring the use of formal, rather than informal communication - correct answer A. Instructions regarding what types of information can and cannot be released 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 Select one: 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. - correct answer 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. The main advantage of a formal internal communication system is that Select one: A. Employees do not have direct access to each other. B. It is easily accessed. C. Formal internal communications takes time which may resolve issues. D. Individuals know to whom to report. - correct answer D. Individuals know to whom to report. 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? Select one: A. Adhocracy B. Market C. Hierarchy D. Clan - correct answer B. Market A speaker imparts information in verbal communications by
D. Has decided to transfer the risk to South American markets avoiding financial penalties. - correct answer C. Has ignored its social responsibility as well as the risks involved with these actions. 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? Select one: A. Sales manager B. New customer C. Production manager D. Senior manager - correct answer C. Production manager 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? Select one: A. General public B. Stockholders C. Suppliers D. Unions - correct answer B. Stockholders Which one of the following statements is correct regarding an organization's code of ethics? Select one: A. 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. B. The code of ethics should provide an organization with a set of parameters within which it should operate, with little room for interpretation. C. The code of ethics should primarily consider the social and ethical needs of its external stakeholders. D. The code of ethics should include principles and concepts that are dynamic enough to remain relevant in a rapidly changing business environment. - correct answer D. The code of ethics should include principles and concepts that are dynamic enough to remain relevant in a rapidly changing business environment. Twice a year, Medford Factory gives employees a day off to work in the community where the factory is located. The employees prepare and serve a holiday meal for members of the community, and they clean the neighborhood park in the spring. This practice is based on Medford Factory's Select one:
A. Code of ethics. B. External governance. C. Social responsibility. D. Internal governance. - correct answer C. Social responsibility. Which one of the following best explains how a risk-managed organization views a proposed new product line? Select one: A. It attempts to join with another organization for a joint venture taking little of the actual risk on itself. B. It seeks methods of transferring the potential risks or avoids the risk totally. C. It determines the rewards of a new alternative and may underemphasize the impacts, variances and negative effects. D. It weighs the risk-reward relationship while realistically evaluating potential outcomes and consequences. - correct answer D. It weighs the risk-reward relationship while realistically evaluating potential outcomes and consequences. Any individual or organization that is directly or indirectly involved with or affected by organizational decisions or activities - correct answer Stakeholder List External Environments - correct answer Physical Social Legal Economic List Internal Environments - correct answer Product Operations Cognitive Tech and Info Systems A discrete unit within an organization, having a leader and specific objectives, at which level a particular risk (or group of risks) is most appropriately and effectively managed - correct answer Risk Center An individual accountable for the identification, assessment, treatment, and monitoring of risks in a specific environment - correct answer Risk Owner Advantages of Risk Centers - correct answer 1. It allows for the involvement of operational managers, who have valuable knowledge and perspective to contribute to the risk analysis process
- It helps focus the analysis on the organization's strategic goals and operational objectives and the threats and opportunities that can directly affect those goals and objectives
Management provides broad, strategic direction, but lets stakeholders create their own methods of attaining goals - correct answer Delegating (Management style) Managers make most decisions and tell other exactly what to do to achieve goals. Management limits the flow of info in the interest of efficiency - correct answer Directive (Management style) Management explains the rationale for goals and decisions and encourages stakeholders to pursue related endeavors. Management is open to feedback from others, and stakeholders may establish their own communication networks - correct answer Supportive (management style) Name three ways to communicate formally - correct answer Verbal Communication (clear expression of facts, emotions, and suggestions or instructions) Nonverbal Communication (Gestures, facial expressions, body language) Written Communication (Reports, memos, and emails) The minimum standards of expected behavior for those to whom the code applies - correct answer Code of ethics An organization's responsibility to its stakeholders and society to consider the consequences of its actions on all stakeholders and to protect the welfare of society overall - correct answer Social Responsibility Examples of Internal Stakeholders - correct answer Shareholders/Owners Board of Directors Executives/Officers Managers Employees Examples of External Stakeholders - correct answer Customers/Consumers Suppliers Competition Governments Unions Trade Associations Nongovernmental Organizations Wholesalers Retailers/Brokers Society/General Public
