ARM 400: Risk in an Evolving World Exam Prep |Guide with Questions and Verified Answers| 100% Correct| Grade A (Latest 2023/ 2024 Update)

ARM 400: Risk in an Evolving World Exam

Prep |Guide with Questions and Verified

Answers| 100% Correct| Grade A (Latest

2023/ 2024 Update)

Q: tolerable uncertainty components

Answer:

reduce downside risk, earnings stability, anticipate and recognize emerging risks, business

continuity

Q: continuity of operations

Answer:

essential goal for all public entities

Q: holistic risk management goals

Answer:

tolerable uncertainty, profitability and growth, legal and regulatory compliance, social

responsibility, reduced cost of risk, reduced deterrent effects of hazard risks

Q: reduced deterrent effects of hazard risks

Answer:

-alleviates management's fears about potential losses

-increases profit potential by greater participation in investment or production activities

-makes org a safer investment and more attractive

Q: basic risk measures

Answer:

exposure, volatility, likelihood, consequences, time horizon, correlation

Q: exposure

Answer:

any conditions that presents a possibility of gain or loss, whether or not an actual loss occurs

Q: volatility

Answer:

frequent fluctuations, such as in the price of an asset

Q: likelihood

Answer:

a qualitative estimate of the certainty with which the outcome of a specific event can be

predicted

Q: consequences

Answer:

the effects, positive or negative, of an occurrence; big relationship with likelihood

Q: time horizon

Answer:

estimated duration

Q: correlation

Answer:

relationship between variables

Q: risk classifications

Answer:

pure/speculative, subjective/objective, diversifiable/nondiversifiable, quadrants of risk

Q: pure risk

Answer:

a chance of loss or no lose, but no chance of gain; building fire

Q: speculative risk

Answer:

involves a chance of gain; highly affected price risk and credit risk

Q: subjective risk

Answer:

the perceived amount of risk based on an individual's or org's opinion; may be quite different

from actual risk; can exist even where objective risk does not

Q: objective risk

Answer:

measurable variation in uncertain outcomes based on facts and data

Q: ways subjective and objective risk can differ

Answer:

-familiarity and control: cars are actually more dangerous that planes

-consequences over likelihood

-risk awareness

Q: diversifiable risk

Answer:

-risk that affects only some individuals, businesses, or small groups

-can be managed through diversification

-fire

-not correlated

Q: nondiversifiable risk

Answer:

-inflation, unemployment, and natural disasters

-can't diversify

-highly correlated

Q: systemic risks

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