CPCU 2

Which one of the following is the first step in the text mining process? Select one: A. Create a model using data mining techniques B. Retrieve and prepare text with preprocessing techniques C. Create structured data from unstructured data (words) D. Evaluate the model

b

After meeting with an external expert on climate change, an organization's risk professional will need to do all of the following, EXCEPT: Select one: A. Communicate all of the potential risks cited by the external expert to the board of directors B. Recommend a treatment technique for risks with severe potential C. Identify those risks that are most likely to affect the organization D. Assess the potential severity of the risks to the organization

A

Certain types of property losses such as drought, flood, and earthquake are referred to as natural because Select one: A. It is beyond human control. B. There is no way to mitigate the damages. C. It has a clear beginning and end. D. There is no way to reduce its impact.

A

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? Select one: A. A retaliation claim B. A retirement claim C. An overtime pay claim D. An exempt employment claim

A

SoCal Movie Company produces movies at a studio in Southern California. The risk manager decided to identify the range of potential consequences associated with various risks that the company faces. For example, if a severe earthquake occurred while the company was filming a movie, there could be deaths and injuries, destruction of movie sets, delays in production, costs associated with filming at an alternative location, and loss of reputation and good will. The type of analysis performed by the risk manager is called Select one: A. Scenario analysis. B. HAZOP analysis. C. Sensitivity analysis. D. SWOT analysis.

A

The National Oceanic and Atmospheric Administration (NOAA), a U.S. Government agency, monitors tsunami risk. Earthquakes under the sea often cause large waves which can have a disastrous impact on coastal communities. In addition to monitoring earthquake data and tides, NOAA recently added a new tool -- tsunami detection buoys. The buoys are placed in the sea and they are equipped with sensors to detect high wave levels so that an early warning can be given to a coastal area if an evacuation is needed. This application of the use of smart products illustrates their use in Select one: A. Catastrophe management. B. Workplace safety management. C. Supply chain management. D. Transportation management.

A

When negotiating noninsurance risk transfer terms, risk management professionals should consider the Select one: A. Legal enforceability of contract provisions. B. Reduction in insurer risk charges and premium taxes that might result. C. Effect on the organization's relationship with its insurance broker. D. Effect on the organization's insurance program.

A

Which one of the following is described as a distributed database that serves as a collectively shared ledger? Select one: A. Blockchain B. Big data C. Telematics D. The Internet of Things

A

Which one of the following is the goal with strategic risk? Select one: A. The goal is to use information about strategic risks to make informed decisions that optimize the risk-reward ratio. B. The goal is to remain solvent and cover the risk retained by the organization. C. The goal is to use information about strategic risks to eliminate negative risks and/or their consequences. D. The goal is to make sure that products and processes are done right.

A

Which one of the following provides a measure of the maximum potential damage associated with an occurrence? Select one: A. Exposure B. Maximum probable loss C. Duration D. Underwriting risk

A

Which one of the following statements about blockchain is true? Select one: A. Blockchain stores a record of transactions across a network of servers. B. While blockchain can reduce operational risks, it is easy to manipulate and hack. C. Blockchain centralizes control of transaction data on a single computer server. D. Although blockchain can increase efficiency of operating systems, the tradeoff is data inaccuracy.

A

Which one of the following statements is correct regarding characteristics of ideally insurable loss exposures? Select one: 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. Intertemporal risk transfer, the spreading of risk through time, requires a large number of similar exposure units. C. One requirement of the law of large numbers is that past events occur under different circumstances in the future. D. Loss exposures such as homes and automobiles generally will not meet the ideally insurable requirement that the exposure be of a large number of similar exposure units.

A

Which one of the following statements is true regarding event tree analysis? Select one: A. Event tree analysis typically provides only two options, success or failure. B. Event tree analysis provides only qualitative information. C. Event tree analysis provides only quantitative information. D. Event tree analysis can be used to select the most effective strategy to achieve a goal.

A

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? Select one: A. Will this organization achieve its objectives for the current period, or is an intervention required? B. Will this organization's current business strategies still allow it to achieve its goals, or is a change required? C. Are this organization's objectives in alignment with the sound enterprise risk management practices in a changing environment, or are changes required? D. Are the organization's current business strategies in alignment with its mission statement, or is a change required?

B

A systematic procedure that uses the results of other analysis techniques to identify the predominant determinants of an accident is called Select one: A. "5 Whys" analysis. B. Root cause analysis. C. Failure mode and effects analysis. D. Fault tree analysis.

B

Blakely Company insures its fleet of vehicles under an auto policy with a $10,000 deductible for auto physical damage losses. The estimated probability distribution for Blakely's auto physical damage losses is shown below: Size of LossNumber of Losses $0 - $5,00027 $5,001 - $10,0006 $10,001 - $15,0003 $15,001 - $20,0002 $20,001 - $25,0001 $25,001 +1 Total40 Based on this information, what is the probability that auto physical damage losses will be within the $10,000 deductible? Select one: A. 15.0% B. 82.5% C. 33.0% D. 6.5%

B

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 one of the following statistical measurements would be useful for the risk manager when calculating the probability of the different risk factors causing severe accidents? Select one: A. Inverse covariance B. Variance C. Telematics D. Monte Carlo simulation

B

On a local television program, a financial reporter stated, "There will be big news this week about Sixth National Bank's bad real estate development loans. Unless they get acquired soon, the bank will be broke." The next morning, long lines of depositors waited outside of each Sixth National Bank branch. When the branches opened, depositors began withdrawing their funds. Sixth National Bank did not have enough funds to pay all the depositors and had to close early, which only further compounded the problem. Which one of the following financial risks is Sixth National Bank facing by not having enough cash on hand to meet the immediate demand? Select one: A. Exchange rate risk. B. Liquidity risk. C. Default risk. D. Credit risk.

B

One category of operational risk includes procedures and practices organizations use to conduct their business activities. This category is Select one: A. Systems risk. B. Process risk. C. Business complexity risk. D. Technological risk.

B

Tania works in the fraud unit for Greatview Insurance. There is a claimant who appears to be involved in multiple cases of insurance fraud. Tania decides to use social media to obtain information that may be used to develop a profile of the claimant. Tania's use of social media is an example of which one of the following types of data? Select one: A. Structured external B. Unstructured external C. Structured internal D. Unstructured internal

B

Taylor owns Paoli Hardware, a mid-sized hardware store with 25 employees. Paoli Hardware has won best local hardware store 3 years in a row. Taylor would like to expand operations and has undertaken a SWOT analysis. His most dedicated customers are generally over 40 years old and engaged in small house projects, but his biggest revenue generator continues to be the sale of lumber. He would like to obtain more commercial customers and increase lumber sales. One of the major complaints Taylor hears from his customers is the difficulty finding local contractors. So, he is considering hiring a general contractor at the store who would also make house calls to assist customers. This will allow him to bill for labor and increase the sale of his products, but he is concerned it may increase his insurance claims and premiums. One of the younger store employees suggested they create a website to expand sales to on-line purchases and target electronic advertisements to commercial accounts. Taylor is not sure that he has the expertise to maintain a website and run the store. The employee claims to know a company that can maintain a website for Paoli at minimal cost. Taylor believes the website is a good idea and will increase sales of lumber. To protect Paoli from increases in the cost of lumber, Taylor is considering a forward contract with the lumber yard. Which one of the following could Taylor's SWOT analysis consider an opportunity or a threat, or both an opportunity and a threat? Select one: a. Reputation b. Technological advancements c. Lack of Expertise d. Shortage of personnel to explore new projects

B

The amount that property is worth based on the ability of the property to produce income is known as its Select one: A. Book value. B. Economic value. C. Net present value. D. Market value.

B

The fundamental purpose of a risk management framework is to Select one: A. Maximize profits for all stakeholders. B. Integrate risk management throughout the organization. C. Reduce the cost of risk. D. Define and eliminate potential losses.

B

The predictive approach to data-driven decision making would be most appropriate for which one of the following situations? Select one: A. A contractor is concerned about rising employee injuries at a jobsite. B. A transportation company is looking for a way to optimize routes and improve fuel efficiency. C. A marketing company is concerned about higher than average employee turnover at its Atlanta office. D. A restaurant is looking for a more reliable supplier of seafood.

B

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? Select one: A. Seek feedback from stakeholders B. Enhance stakeholders' confidence in the process C. Define the organization's risk appetite D. Stay focused on the organization's objectives

B

Which one of the following is an example of exploratory data analysis? Select one: A. Classification trees B. Correlation matrix C. Association rule learning D. Clustering

B

Which one of the following statements is true with regard to preventive analytics? Select one: A. Preventive analytics involves data collection at discrete points in time, such as 10 AM or 4 PM each day, and comparison of these values at discrete points in time. B. Preventive analytics uses smart products and data analytics to identify root loss causes and their implications. C. Preventative analytics uses human assets to analyze data collected by smart products. D. Preventive analytics is backward-looking, basing corrective prescriptions on the organization's past loss history.

B

Which one of the following types of risk analysis uses historical data to assign specific values to consequences and their probabilities to reach a numeric indication of the level of risk? Select one: A. Expert analysis B. Quantitative analysis C. Qualitative analysis D. Predictive analysis

B

A risk control technique that reduces the severity of a particular loss is Select one: A. Duplication. B. Diversification. C. Loss reduction. D. Loss prevention.

C

From a system safety perspective, change analysis is an analysis Select one: A. That identifies the critical components of a system and ranks the severity of losing each component. B. That dissects a repetitive task to determine potential hazards if each action is not performed. C. That projects the effects a given system change is likely to have on an existing system. D. That uses the results of the other analysis techniques to identify the cause of the accident.

C

George works for a large company and part of his job is to monitor assets according to their liquidity. George is particularly concerned that the company fleet cars are affecting its liquidity and rising fuel prices are having an adverse effect during tight economic markets. If George's concerns were categorized as causes of loss according to the quadrants of risk, his concern most directly relates to which one of the following types of risks? Select one: A. Operational risks B. Hazard risks C. Financial risks D. Strategic risks

C

Noise level, temperature extremes, and poor air quality are worksite sources of Select one: A. Trauma. B. Ergonomic stresses. C. Disabling illnesses. D. Disabling injuries.

C

Telematics devices allow organizations to accurately identify patterns of risk and predict risk for which one of the following types of loss exposures? Select one: A. Business income B. Property C. Automobile D. Workers compensation

C

The Life Safety Code requires that many buildings or structures should have Select one: A. Exits that rely on a single safeguard. B. A minimum of one means of egress. C. Fire alarms. D. Doorways not leading to exits.

C

The control technique that disperses a particular asset or activity over several locations and regularly relies on that asset or activity as a part of an organization's working resources is which one of the following? Select one: A. Diversification B. Risk transfer C. Separation D. Duplication

C

Which of the following risk management program goals is an essential goal for all public entities? Select one: A. Survival B. Earning stability C. Continuity of operations D. Growth

C

A facility established for the purpose of purchasing income-producing assets from an organization, holding title to them and then using those assets to collateralize securities that will be sold to investors is Select one: A. A catastrophe bond. B. A forward contract. C. An insurance derivative. D. A special purpose vehicle.

D

An advantage of a large deductible plan is that it allows the insured organization to Select one: A. Increase its cost of risk compared with other insurance plans. B. Decrease its uncertainty about the cost of its retained losses. C. Benefit from handling its own claims without insurer control. D. Benefit from the cash flow available on the retained loss reserves.

D

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. Deliver a message that recipients don't want to hear C. Gain the support of executives and decision makers D. Request feedback and determine if the message has been understood

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 Select one: A. Transducer technology. B. Visual acuity. C. Accelerometer technology. D. Computer vision.

D

Determining earnings-at-risk (EaR) entails modeling the influence of factors such as Select one: A. Differences in the prices of products from competitors' prices. B. The potential for both positive and negative credit risk for the organization. C. Employee satisfaction and other subjective variables that can be used for financial organizations but not nonfinancial organizations. D. Changes in the prices of products and production costs on an organization's earnings.

D

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, and benchmarking between different underwriting offices. The indicators of underwriting performance Insurance Company uses are called Select one: A. Exposure indicators. B. System indicators. C. Process indicators. D. Control indicators.

D

Jones, Inc. buys grain from local farmers and re-sells the grain to a number of customers. Jones, Inc. has been approached by Snack Cracker Company. Snack Cracker would like to purchase wheat and corn from Jones, Inc. to use in the crackers it produces. Snack Cracker would like to pay for the grain within 30 days of the date the grain is delivered. As Snack Cracker is a new customer, Jones, Inc. asked to review its financial statements. 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? Select one: A. Debt-to-equity ratio B. Debt-to-assets ratio C. Equity-to-assets ratio D. Current ratio

D

Olivia is planning a meeting to explain a new cyber security procedure. She expects that the meeting will be impeded by hidden agendas. Which one of the following is the best way for Olivia to deal with potential hidden agendas? Select one: A. Olivia should start the meeting by stating that she does not expect everyone like the new procedure, but they must accept it. B. Olivia should refuse to take questions during her meeting, and request that any questions be forwarded to her in writing after the meeting. C. Olivia should hold a separate meeting for those individuals who she suspects have a hidden agenda. D. Olivia should start the meeting by asking participants to state their concerns or feeling about the procedure.

D

Partridge Office Supplies has a history of theft losses as follows: Historical Amount Adjusted to DateAmountYear 3 Price Levels Year 1 2/16 $500 $590 3/30 $200 $236 4/16 $600 $708 8/15 $800 $944 Year 2 1/01 $1100 $1166 3/19 $700 $742 5/19 $4000 $4240 11/22 $1500 $1590 12/05 $4400 $4664 Year 3 4/04 $2000 $2000 5/21 $1400 $1400 7/09 $3500 $3500 10/11 $3700 $3700 12/24 $5600 $5600 12/27 $6000 $6000 During the last three years, Partridge has expanded its hours of operation to remain open 24 hours a day, 7 days a week. Partridge has also begun to carry a line of computer equipment, including small portable accessories such as flash drives, USB converters, and wireless accessories. Based on Partridge's loss history, the most appropriate forecasting technique is Select one: A. Standard deviations. B. Theoretical probability analysis. C. Empirical probability analysis. D. Trend analysis.

D

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 determine if employees had been informed of the commitment to risk management and had accepted it? Select one: A. Check employee absenteeism before and after the policy was instituted. B. Ask senior management to prepare a report on the subject. C. Use a measure such as sales per employee or net income per employee to track performance. D. Ask the internal audit department to administer a risk management questionnaire to employees.

D

The weighted average of all the possible outcomes of a theoretical probability distribution is the Select one: A. Median. B. Mode. C. Dispersion. D. Expected value.

D

Which one of the following statements is correct with respect to risk tolerance? Select one: A. A zero-risk tolerance level will typically result in the best risk-based decisions. B. Risk tolerance is stated in both quantitative and qualitative terms. C. An organization's risk tolerance is typically unrelated to its risk appetite. D. Risk tolerance levels can have high-end thresholds, low-end thresholds, or both.

D

William is a project manager for Parker International. He has been assigned a key project with a short deadline. William realizes that this project is going to require revising the job duties of some individuals and a collaborative effort from of all team members. When revising job duties, William should do which one of the following? Select one: A. Overload some individuals with more work than others B. Focus on the individuals' personality rather than results C. Rely on the most senior individuals to take on additional duties D. Try to enrich individuals' work rather than merely expand it

D

Location is a key pre-loss activity to control earthquake damage because Select one: A. The availability of construction operations in a location is crucial. B. Designs for earthquake-resistant buildings are ineffective. C. Structures situated on stable earth can absorb most earthquake shock waves. D. The availability of other temporary facilities helps an organization return to operations more quickly.

c