Which one of the following statements is true regarding the nature of probability?
A. Probabilities deduced solely from historical data may change as new data are discovered or the environment changes.
B. The type of probability most commonly used by risk
A. Probabilities deduced solely from historical data may change as new data are discovered or the environment changes.
Creative Catering has a 15 year old vehicle that was originally built to prepare and serve sandwiches and drinks at various outdoor functions such as car shows, sporting events, etc. The vehicle is of low value but it generates approximately $100,000 a ye
Economic value
Jane always drives to visit her children who live one thousand miles away. She enjoys driving and feels safer in a vehicle than on an airplane because she feels she has more control of her fate. This driving versus flying decision is an example of:
A. Non
D. Subjective risk.
An excess liability insurance policy that covers a claim in excess of the underlying limits only if the loss is covered by the underlying policy is called
A. A true excess policy.
B. A following-form excess policy.
C. A layered policy.
D. An umbrella poli
B. A following-form excess policy.
Which one of the following is a specific duty of a fiduciary supported by the Employee Retirement Income Security Act?
A. Be a beneficiary of plan
B. Carry out duties with the diligence of a prudent person
C. Administer the investment plan assets
D. Obtai
B. Carry out duties with the diligence of a prudent person
If an insurer wants to determine the numerical value for a known target variable, it is most likely to use
A. A classification tree.
B. Regression.
C. Association rule learning.
D. Cluster analysis.
B. Regression
One category of operational risk includes procedures and practices organizations use to conduct their business activities. This category is
A. Business complexity risk.
B. Technological risk.
C. Systems risk
D. Process risk.
D. Process risk.
Which one of the following statements is true regarding sources of risk affecting property exposures?
A. Physical risks to property can generally be broken into two categories: natural and mechanical.
B. Risk control techniques can usually manage the like
B. Risk control techniques can usually manage the likelihood and consequences of human risk sources to some extent.
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. Exposure
Julian was having a conversation with Tania, one of his employees. At one point, Julian said, "What I hear you say is that you would like to take on more responsibility. Is that correct?" Which one of the following elements of active listening was Julian
D. Response
Commercial general liability insurance policies written on an occurrence basis apply to bodily injury and property damage that occurs during the policy period. This provision supports the principle that insurable loss exposures must ideally be:
Definite
Assume that the expected safe life of a heating element for a particular type of furnace is 4,000 hours with a standard deviation of 200 hours, and that the expected safe life conforms to a normal distribution. If the maintenance schedule requires that th
C. 50% because 50% of the normal distribution is below the 4,000 hour mean
An organization can use securitization to exchange:
Income-producing assets for cash.
Which one of the following statements about the balance sheet is correct?
A. The balance sheet must always balance, but an exception is that the balance sheet will not balance if net worth is a negative number.
B. The balance sheet contains important fina
C. Net worth is positive whenever the value of assets exceeds the value of liabilities and negative if the value of liabilities exceeds the value of assets.
The level of confidence an organization places in the organization's risk management culture, practices, and procedures is called
D. Risk assurance.
Insurance Company monitors key indicators of underwriting effectiveness. Some indicators they monitor include: percentage of business quoted that was written, application processing time, premium volume handled by underwriters, skill level of underwriters
D. Control indicators.
Directors and officers are considered to have met their duty of care if they have met two different standards. Which one of the following is one of these standards?
A. Maintaining and enforcing the corporate charter and bylaws
B. Approve important financi
D. Act in a manner believed to be in the corporation's best interests
Murray Trucking is interested in evaluating which risk factors are most likely to lead to the most costly accidents. They are evaluating risk factors such as speed, weather conditions, driver experience, distance traveled, and gross vehicle weight. Which
C. Variance
Leasing is a useful noninsurance risk control transfer because:
Certain loss exposures accompany property ownership but do not accompany its use or occupancy.
Which one of the following statements is true with regard to preventive analytics?
A. Preventative analytics uses human assets to analyze data collected by smart products.
B. Preventive analytics involves data collection at discrete points in time, such a
C. Preventive analytics uses smart products and data analytics to identify root loss causes and their implications.
Statutory limitations on hold-harmless agreements vary in the
A. Cost or compensation associated with the agreement.
B. Allowable complexity of the agreement.
C. Length of time that such transfers can be effective.
D. Types of noninsurance transfers to wh
D. Types of noninsurance transfers to which the statutes apply.
The descriptive approach is applied
A. Repeatedly to provide information for data-driven decision making.
B. When an insurer or risk manager has a specific problem.
C. When an insurer or risk manager is deciding what type of computer technology to purchas
B. When an insurer or risk manager has a specific problem.
The board of directors of Insurance Company wants assurance that the company's recently-instituted "commitment to risk management" has been communicated to and accepted by all company employees. Which one of the following would be the best method to deter
B. Ask the internal audit department to administer a risk management questionnaire to employees.
Risk management professionals must collaborate with data analysts during which two steps of the risk management process?
C. Analyze risks and monitor risk treatments
Magruder Company would like to estimate the number of workers compensation claims to expect next year. Magruder's risk manager ran a regression analysis in which the number of workers compensation claims was the dependent variable and the number of payrol
116
y = 1.4 (80) + 3.8
An important liquidity measure for a business is its working capital. Working capital is equal to:
D. Current assets minus current liabilities.
This earthquake-resistant construction relies on the resilience of steel or specially designed reinforced concrete to absorb energy, undergo considerable distortion, and return to its original shape. Which one of the following describes this type of desig
A. Frame action design
Regarding diversifiable and nondiversifiable risk, which one of the following statements is accurate?
A. An example of a diversifiable risk is inflation.
B. Systemic risks are generally nondiversifiable.
C. An example of a nondiversifiable risk is a fire.
B. Systemic risks are generally nondiversifiable.
Predictive technique
Brendan has decided to use a structured process that incorporates expert opinions into the probability estimations
Which one of the following is an example of exploratory data analysis?
A. Correlation matrix
B. Association rule learning
C. Classification trees
D. Clustering
A. Correlation matrix
Which one of the following statements is true regarding operational risk?
A. Operational risk is integrated in every activity of an organization.
B. Financial institutions and their regulators typically define operational risk to include market risk and c
A. Operational risk is integrated in every activity of an organization.
An insurer is beginning to write business in a new state. The claim manager, Carla, wants to know how many new claim representatives to hire to accommodate the additional volume of claims. Based on the marketing department's estimate and industry data, Ca
Carla's 80 percent certainty will fit within one standard deviation above the mean since 84.13% of all outcomes fall below one standard deviation above the mean. The number of new claims will then be 3,000, and since one claim manager can adjust 600 claim
Management of LMN Insurance Company is considering investing in the Stability-Growth Mutual Fund; however they are concerned about the volatility of the investment. The fund's manager said that on any given day, there is a 5% probability of losing more th
B. Value-at-risk.
Owners' equity represents the capital contributed by an organization's owners plus the organization's:
C. Retained earnings.
A company's management team is preparing to conduct a SWOT analysis as part of its strategic management process. Which one of the following questions can the management team expect to answer as a result of the SWOT analysis?
A. Will this organization's current business strategies still allow it to achieve its goals, or is a change required?
VaR is typically used to:
determine the probability of loss on an investment portfolio over a certain, usually short, time period.
VaR measures the probability of incurring a loss in value that exceeds a threshold level. It is typically characterized by measuring over a short time
EaR is mainly used to:
determine the amount by which the net income (or earnings) of an investment may shift as a result of changes in market conditions, such as interest rates going up or down.
Determining EaR entails modeling the influence of factors such as changes in intere
Root cause analysis (RCA) encompasses a variety of tools, philosophies, and processes. There are several broadly defined RCA approaches, according to their basic approach or field of origin. Which one of the following approaches to RCA evolved from qualit
C. Production-based RCA
An organization must meet the standard of care that it owes to others in order to ensure that:
Legal obligations are satisfied.
Employers face a number of potential loss exposures due to federal legislation and state laws. Of the various types of Employment Practices Liability (EPL) claims, which one of the following is a major type of EPL claim?
A. An exempt employment claim
B. A
D. A retaliation claim
Which one of the following statements regarding probability is correct?
A. Risk management professionals use theoretical probabilities because they are generally available for and applicable to claim analysis.
B. The probability of an event that is absolu
C. Probabilities associated with events such as coin tosses can be developed from theoretical considerations and are unchanging.
Which one of the following statements is true if earnings at risk are $200,000 with 90% confidence?
A. Earnings at risk are projected to be $180,000.
B. Earnings at risk are projected to be less than $200,000 10% of the time.
C. Earnings at risk are proje
B. Earnings at risk are projected to be less than $200,000 10% of the time.
Under a large deductible plan, the amount that the insurer incurs to adjust losses
A. Is prorated between the insured and the insurer based on the size of the loss.
B. Is outside the deductible.
C. Can be inside or outside the deductible.
D. Is inside, or
C. Can be inside or outside the deductible.
One example of a noninsurance risk financing transfer is a
A. Waiver.
B. Guaranty agreement.
C. Hold-harmless agreement.
D. Disclaimer of warranties.
C. Hold-harmless agreement.
Hank has determined the expected number of workers compensations claims in a given year. Hank next calculates the standard deviation of potential outcomes. Calculating the standard deviation
A. Allows Hank to estimate accurate claim reserves for future wo
C. Provides a measure of how sure Hank can be in his estimate of claims.
Which one of the following statements is correct regarding characteristics of ideally insurable loss exposures?
A. A common function that insurance provides is a spreading of risk across a large number of similar exposure units within the same period.
B.
A. A common function that insurance provides is a spreading of risk across a large number of similar exposure units within the same period.
The physical stress on joints, bones, muscles, and nerves and the stress created by such factors as lighting, glare, and noise constitute:
B. Ergonomic stress.
Which one of the following risk control techniques might actually increase loss frequency?
A. Loss prevention
B. Diversification
C. Separation
D. Loss reduction
C. Separation
Geneva Trucking installed telematics devices in all of its trucks. The sensors in two trucks indicate a frequency of hard braking. Which one of the following types of indicator does this information provide for Geneva Trucking?
A. Leading indicator
In order to be useful, data should be
Structured or unstructured.
Which balance sheet ratio would best assist Jones, Inc. in determining if Snack Cracker can pay for the grain within 30 days of the sale?
D. Current ratio
HVAC Supply Company will be exposed to which one of the following types of strategic risk?
Marketing risk
Which one of the following is the term used to refer to the amount of uncertainty an organization is prepared to accept in total or more narrowly within a certain business unit, a particular risk category, or for a specific initiative?
D. Risk tolerance
The strategic management process includes five interdependent stages. Which one of the following stages requires all parts of the organization to play a role?
B. Implementing the strategies
What percentage of diamond points are likely to wear out before 80 days?
C. 15.87%
In today's business environment, holistic risk management needs to be a collaborative effort. Which one of the following types of risk is the best example of why collaboration is needed?
B. Cyber risk
A source of a rapidly growing quantity of external data is
A. The Internet of Things.