Associate in Risk Management Examination

1.Northline Storage wants to start a formal risk-management program. What is the first step of the risk-management process?

2.Harbor Mill installs automatic sprinklers so a fire that starts will damage less of the mill. Which risk-control technique is this?

3.Ridgeway Tours cancels all whitewater trips after several near drownings. Which technique did it use?

4.Which exposure is a pure risk?

5.How should a risk manager classify a stock price movement?

6.In risk analysis, what does frequency mean?

7.In risk analysis, what does severity mean?

8.A plant explosion is unlikely, but one event could cost $40 million. Which treatment is a common fit?

9.A shop expects about 200 glass-breakage losses a year, most under $150. Which treatment often fits?

10.How do maximum possible loss and probable maximum loss differ?

11.What does retention mean in risk financing?

12.Oak Street Clinic has a property policy with a $10,000 deductible. What is that deductible in risk-financing terms?

13.What is a captive insurer?

14.A contract says a subcontractor will indemnify Peak Builders for injury caused by the subcontractor's own work. What is this?

15.Which arrangement is a contractual transfer of risk?

16.How is insurance best described among risk-financing tools?

17.For which exposure is insurance the usual financing tool?

18.What does a risk register do?

19.Which set names four parts of enterprise risk?

20.Which example is hazard risk?

21.Which statement about strategic risk is sound?

22.Exposures have been identified and analyzed. Which choice lists the remaining steps in order?

23.Cedar Kitchen requires staff to clean grease traps every night so fires start less often. Which technique is this?

24.Lumen Parts stores half its finished goods in a second building across town. Which technique is this?

25.Harborlight Data keeps a second set of servers ready to take over if the first set fails. Which technique is this?

26.Orchard Lane Growers once grew only peaches. It adds pears and berries in other regions. Which technique is this?

27.Brook Tool expects four theft losses a year, each about $5,000. What is the expected annual loss?

28.Expected annual equipment losses are $20,000. Full insurance costs $28,000 a year and would pay those losses. On an expected-cost basis, which costs less?

29.Millpond Clinic selects sprinklers and a property policy for its laundry fire exposure, then installs the sprinklers and places the policy. Which step is that action?

30.Why does the risk-management process include monitoring?

31.A payroll system posts the wrong hours because of a software error, and employees are underpaid. Which enterprise-risk category fits best?

32.A lender's bond portfolio loses value when interest rates rise. Which enterprise-risk category fits best?

33.Brightpath Retail opens stores in a format customers reject, and the plan loses money. Which category fits best?

34.A risk register lists a chemical spill and names the plant manager beside it. What does that name usually mean?

35.Cinder Warehouse holds $12 million of goods. If the sprinklers fail, a fire could destroy all of them. What is the maximum possible loss on the goods?

36.Woven Thread Mill could lose $9 million in a fire if every control fails. With sprinklers and a fire wall working, the largest loss reasonably likely is $2 million. What is the probable maximum loss?

37.A bridge collapse is rare. One collapse would cost Stonebridge City $80 million, far above its cash. Which financing approach is a common candidate?

38.An office expects 50 lost-key incidents a year at about $40 each. A policy covering only those incidents costs $6,000. On an expected-cost basis, what is sensible?

39.Quarry Labs decides not to offer overnight animal boarding, so that nighttime injury exposure never begins. Which technique is this?

40.Red Lantern Hotel installs fire doors that close automatically so a fire spreads to fewer rooms. Which technique is this?

41.Which arrangement transfers risk by contract rather than by insurance?

42.Maple Health creates an insurer that it owns to cover its hospitals, then buys reinsurance above a set amount. What is the owned insurer?

43.Which loss is the kind of exposure insurance is used for?

44.A manager says the risk register will pay the next fire loss. What is wrong with that statement?

45.Cobalt Fleet expects two collision losses a year, each about $15,000. What is the expected annual collision loss?

46.Westbridge Schools expects many small vehicle-glass losses totaling $12,000 a year. Glass insurance costs $19,000 and would pay those losses. On an expected-cost basis, which cost is lower?

47.Finch Bakery keeps flour in three rooms with fire doors between them so one fire is unlikely to ruin all of it. Which technique is this?

48.Fieldstone Clinic keeps a backup generator that starts if utility power fails. Which technique is the generator?

49.Northwind Manufacturing once sold only to one automaker. It now sells to four automakers. Which technique is this?

50.Analysts walk a factory and list forklift injuries, roof leaks, and a single-source supplier. Which process step is this list?

51.After a list of exposures exists, analysts estimate how often each loss happens and how large it could be. Which step is this?

52.Yellowline Delivery requires drivers to complete a braking course so rear-end crashes happen less often. Which technique is the course?

53.Yellowline vans carry first-aid kits, and drivers are trained to limit injuries after a crash. Which technique is this post-crash effort?

54.A covered building loss is $50,000. The policy has a $5,000 deductible. How much of this loss is retained?

55.A covered machinery loss at Holm Machinery is $80,000. The policy has a $20,000 deductible and pays the covered remainder. How much does the insurer pay?

56.Why is frequency alone not enough to choose a treatment?

57.At Copperline Fabrication, controls normally limit a tank leak to $1 million. If all controls fail, the leak could cost $9 million. Which figure is the probable maximum loss?

58.At Paperwharf Printers, a press fire could cost $7 million if every control fails. With the fire wall working, the largest loss reasonably likely is $2 million. Which figure is the maximum possible loss?

59.Which pairing is correct?

60.Expected annual machine-breakdown loss is $8,000, in many small events the firm can pay. Breakdown insurance costs $11,000. On an expected-cost basis, what fits?

61.A flood could cost Riverbend Plant $6 million and is expected about once in 100 years. The plant cannot pay $6 million from cash. Annual flood insurance costs $70,000. Which treatment fits?

62.A safety program was meant to cut forklift injuries. A year later, the injury count is unchanged. What should the process do?

63.A hold-harmless clause shifts a jobsite injury risk from the project owner to the contractor. The job continues. Which statement is correct?

64.Which example is separation rather than duplication?

65.Which example is duplication rather than separation?

66.Which action is avoidance?

67.A plant adds machine guards and keeps running the same machines. The guards make injuries less frequent. Which statement is correct?

68.A supplier may fail and not repay a large trade receivable. Which enterprise-risk category is that credit loss?

69.Leaders worry that a new market entry will fail and waste $4 million. Which statement is sound?

70.Which item belongs in a risk register entry for a boiler explosion?

71.Sprinklers were already chosen for a fire exposure. The risk manager then signs a contract for their annual inspection. Which step is that contract?

72.Lantern Restaurant expects three spoilage events a year at $10,000 each. What is the expected annual loss?

73.Kindred Hospital faces a rare failure of a specialty scanner. One event would cost $900,000, which the hospital cannot pay from cash. Which treatment is a common candidate?

74.Glasshouse Office expects many small printer losses totaling $18,000 a year, and it can pay them. A policy for only those losses costs $27,000. On an expected-cost basis, what fits?

75.Which description matches pure risk?

76.Which description matches speculative risk?

77.A treasurer buys shares hoping the price will rise, knowing it may fall. How should the price movement be classified?

78.Marlow Stage hires a builder. The contract says the builder will hold Marlow harmless for injuries caused by the builder's rigging. What did Marlow do?

79.Why might an organization form a captive?

80.Which statement best places insurance inside risk management?

81.Stonebridge City requires electrical equipment in flood-prone buildings to be raised above the high-water mark so a flood damages less of it. Which technique is this?

82.Stonebridge City clears storm drains before the rainy season so fewer streets flood. Which technique is this?

83.A city both clears storm drains so floods happen less often and raises electrical equipment so a flood damages less. What is true?

84.A pier warehouse building is worth $4 million and its contents are worth $6 million. One fire could destroy both if controls fail. What is the maximum possible loss?

85.Keel Boatworks could lose $10 million in one fire if every control fails. Fire walls make a loss above $3 million unlikely. What is the probable maximum loss?

86.A register assigns a pier fire to the facilities director and records sprinklers plus insurance above $250,000. What does this entry accomplish?

87.Ironside Warehousing has a fire policy that pays covered losses above a $250,000 deductible. A covered fire costs $1,000,000. How much of this loss is retained?

88.A covered wind loss at Lowtide Fisheries costs $800,000. The policy has a $200,000 deductible and pays the covered remainder. How much does the insurer pay?

89.Pebble Bank lists a robbery, a failed core-system upgrade, a loan default, and a rejected expansion plan. Which mapping is best?

90.A bank faces both a robbery loss and a rejected expansion plan that wastes the entry budget. Which financing statement is sound?

91.Two exposures each have an expected annual loss of $100,000. One is many small losses. The other is a 1-in-20 chance of a $2,000,000 loss, and the firm cannot pay $2,000,000. Why might the treatments differ?

92.A loss of $2,000,000 is expected once every 20 years. What is the expected annual loss?

93.Drift Goods could lose $5 million in one quake, expected once in 25 years. It cannot pay $5 million. Quake insurance costs $260,000 a year. Which statement is sound?

94.A firm decides to retain machinery breakdowns and sets aside cash each month for them. What is this funding approach?

95.A lease says the tenant will indemnify Daisy Properties for fire damage the tenant causes. Which statement is correct?

96.A landlord has a tenant indemnity clause for tenant-caused fire and also buys a fire policy. How do the two tools differ?

97.Hearth Home Goods insured a warehouse, then moved the stock to a safer building and cut values by half. What should happen next in the process?

98.After a warehouse move, the new site has a forklift ramp that the old site did not have. What is the proper first response to the ramp?

99.Analysts estimate a loading ramp will cause about 10 minor injuries a year at $2,000 each. A serious injury is not expected. Which reading is right?

100.Bramble Market expects many small parking-lot scrapes totaling $20,000 a year, and it can pay them. Insurance for only those scrapes costs $35,000. On an expected-cost basis, what fits?

101.A cafeteria adds nonslip mats and a slower cart-speed rule so falls happen less often. Which technique is this?

102.Notch Rail requires protective boots so a platform fall injures the worker less. Which technique is the boot rule?

103.A night supervisor skips the lock-up checklist, and a door is left open. Which category fits this failure best?

104.Thieves enter a shop and steal goods. How should the theft loss itself be classified?

105.A retailer tightens its closing checklist so unlocked doors are less common, and it insures theft above a $10,000 deductible. What is that combination?

106.Before any hedge, a treasurer faces a grain price that can rise or fall. How should that price exposure be classed?

107.Which order matches the risk-management process?

108.Sable Charity faces a rare lawsuit that could cost $3 million, which it cannot pay. Small office thefts of about $500 are common. Which pairing fits?