risk 2

Preventive controls assist the overall control environment of an organization by

Reducing risk of unauthorized actions.

Which one of the following statements is true regarding the strategic management process?

The strategic management process can be applied to any type of organization, including business, not-for-profit organizations, and government entities.

The BIS created a capital requirement for large, global, systemically important banks as part of its global liquidity framework under

The Basel III agreement.

Which one of the following is true with regards to the IT operational classification risks?

The classification of Availability includes the period of inaccessibility and any restoration period.

Strategic risk can be created and affected by external factors or internal factors. Which one of the following is considered an internal factor?

Resource allocation

An option is an agreement that gives the holder the

Right, but not the obligation, to buy or sell an asset at a specific price over a period of time.

When assessing strategic risk, which one of the following represents the amount of risk an organization is willing to take on in order to achieve an anticipated result or return?

Risk appetite

Which one of the following is the goal with strategic risk?

The goal is to use information about strategic risks to make informed decisions that optimize the risk-reward ratio.

Which one of the following statements is true regarding swaps?

Swaps are commonly used to manage interest rate and currency rate of exchange risk.

Radley Contracting Company is installing new signage on the front of a building. George, a passerby walking near the building is injured when a Radley employee accidentally drops a tool from a crane. George likely has the ability to assert which one the following types of claim?

Premises and operations liability

If a business dispute arises between companies who are domiciled in two different countries with dissimilar laws, one issue that must be considered is whether

The chosen court has the right to hear the legal dispute.

Which one of the following can limit liability if they are posted so that they are physically apparent, expressed in clear terms, in language the other party understands, and reasonable in extent?

Unilateral notices

Frozen food spoiling in an unrefrigerated vehicle is an example of

An inherent vice.

A court can order a party to refrain from doing a particular activity. This is called

An injunction.

During which one of the following stages of the strategic management process would an organization use methods such as Porter's Five Forces Analysis and PESTLE Analysis?

Analyzing Environments

Organizations face strategic risks. Strategic risks

Are systemic risks that are outside the control of any single organization.

The cost of medical expenses and the restoration of lost wages are both examples of

Special damages.

Regarding options, the strike price is the

Specific price at which the holder of an option can buy or sell the asset associated with the option.

Which one of the following types of systems used in fleet safety can sense when a vehicle is traveling too fast in a curve and automatically apply the vehicle's brakes?

Stability control system

Anti-discrimination laws and corporate governance laws are examples of

Statutes that impose legal liability on an organization.

Which one of the following commonly used categories of operational risk includes risks associated with technology and equipment?

Systems

Which one of the following commonly used categories of operational risk includes risks associated with technology and equipment? Select one:

Systems

Which one of the following terms refers to a condition that can cause property to deteriorate or destroy itself?

Inherent vice

Liability exposures entail both direct and indirect costs. The former include the cost of settlements and jury awards. Indirect costs include

Loss of market share

If an organization directly securitized its income-producing assets without using a special purpose vehicle (SPV) as an intermediary, investors

Must consider the overall credit risk of the organization.

Operational risk can be more challenging to manage than cyber risk because

Operational risk can come from anywhere in the organization.

Which one of the following major IT risks is likely to arise when an organization's revenue stream falls?

Project back-log

The level of capital required to provide a cushion against unexpected loss of economic value at a financial institution is known as

Risk capital.

A major benefit of involving a special purpose vehicle (SPV) in a securitization transaction is that investors can decide whether to invest in the securities based on the

Risk presented by the income-producing assets held as collateral by the SPV.

The importance of systems relationships from a risk control and fleet safety management perspective is that

When a smaller system fails, the larger system of which the smaller system is a part is more likely to fail.

When determining whether an international legal dispute involves public international law, the most important issue is

Whether a treaty or other international agreement applies to the dispute.

Widget Manufacturing board of directors recently adopted a zero-risk tolerance for work place accidents. Initially the chief risk officer thought this was a great idea, however, he has found it very hard to implement. One reason that a zero-risk tolerance policy is hard to implement is because zero-risk tolerance

Will typically result in risk-based decisions that are too rigid and counter-productive

Widget Manufacturing board of directors recently adopted a zero-risk tolerance for work place accidents. Initially the chief risk officer thought this was a great idea, however, he has found it very hard to implement. One reason that a zero-risk tolerance policy is hard to implement is because zero-risk tolerance

Will typically result in risk-based decisions that are too rigid and counter-productive.

Risk appetite is an important component of strategic risk management (SRM). Which one of the following statements is correct with respect to an organization's risk appetite?

Regulatory conditions, political risks, and anti-trust or other legal concerns can reduce an organization's risk appetite.

One category of operational risk includes procedures and practices organizations use to conduct their business activities. This category is

Process risk

ABC Supplement Company has expanded its business from the Midwestern United States into South America due to the popularity of a weight-loss product which has increased ABC's revenue. The Chief Risk Officer (CRO) assigned to this new operation has discussed different strategic risk scenarios with the board of directors and feels that although the South American Market has strong demand to this new product, there could be cases where some users have experienced negative effects from its use. The CRO feels that foreign governments could eventually intervene and impose regulations or significant tariffs which could be detrimental to the company. What kind of strategic risk challenge does the CRO believe is the biggest obstacle for ABC?

Regulatory

Which one of the following statements is true regarding operational risk

Operational risk is integrated in every activity of an organization

Which one of the following statements is true regarding operational risk?

Operational risk is integrated in every activity of an organization

Clothing Store leases its space from Leasing Company. In the lease agreement between the companies, Leasing Company makes it clear that it wants Clothing Store to be responsible for anyone injured while in the leased space. This wording inclusion in the lease agreement is called a

Hold-harmless agreement.

Other than with catastrophe put notes, a disadvantage associated with contingent capital arrangements is that

Funds received are loans, not equity.

Basel I and Basel II prescribe capital requirements for

Financial institutions.

An organization can use securitization to exchange

Income-producing assets for cash.

The majority of fleet vehicle accidents are caused by

Driver error

In a forward contract, the buyer and seller of a commodity

Know its price prior to delivery

In a forward contract, the buyer and seller of a commodity

Know its price prior to delivery.

Punitive damages are intended to

Punish the defendant.

The two types of compensatory damages are

Special and general.

U.S. statutory accounting rules allow insurers to issue contingent surplus notes, which

Are counted as policyholders' surplus rather than as a liability

The physical environment of fleets as systems encompasses

Weather conditions.

One example of an indirect cost incurred as a result of an underlying liability loss is

Loss of reputation

Which one of the following is the most intangible and abstract of the four risk quadrants?

Strategic risk

The body of legal principles governing relationships among nations is

Public international law.

An organization can be held legally liable because of which one of the following three major liability causes of loss?

Torts, contracts, and statutes

One way to control the loss exposures associated with the vehicle component in a fleet safety system is through

Vehicle selection

After an organization develops and implements its strategic plan, it needs to determine how risk taking will be controlled. Which one of the following statements is correct with respect to risk taking?

A factor in strategic decision making is whether an organization has an advantage in controlling risk with a given activity

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

A special purpose vehicle.

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

A special purpose vehicle.

Cargo is least likely to be damaged when

A suitable vehicle is selected for transporting the specific cargo.

COBIT's management approach to control operational risks focuses on

Balancing the costs of IT-related risks with their benefits

The catastrophe losses that trigger payment under a catastrophe bond

Can be based on aggregate catastrophe losses over a defined period of time or the occurrence of a single catastrophic event.

Catastrophe bonds

Can be issued for any type of catastrophic insurable risk

Catastrophe bonds

Can be issued for any type of catastrophic insurable risk.

Eliminating old vehicles and retiring or reassigning aging operators is an example of which one of the following phases in the system life cycle for a motor fleet?

Disposal phase

One of the essential steps in selecting new operators for any motor vehicle is

Finding prospects through advertising, pre-screening, and reviewing applications.

Which one of the following vehicle monitoring systems helps drivers to maintain safe following distances, by alerting them of slow-moving traffic, stalled or stopped vehicles ahead of them, and merging vehicles?

Forward collision warning systems (FCWS)

Other than with catastrophe put notes, a disadvantage associated with contingent capital arrangements is that

Funds received are loans, not equity

An implied contract is a contract that

Has terms and intentions indicated by the actions of the parties to the contract and the surrounding circumstances.

The production phase of an organization's fleet life cycle involves

Purchasing vehicles selected in the conceptual and engineering phases.

Operational risk can be more challenging to manage than cyber risk because

Organizational risk can come from anywhere in the organization.

Which one of the following is an effective safety related technology for fleet operations to reduce roll-overs?

Lane departure warning system

6) The four SWOT headings are strengths, weaknesses, threats and

Opportunities.

Which one of the following statements is true regarding a standby credit facility

The terms of the credit arrangement are specified in advance for a standby credit facility.

In reviewing its business results, Metal Shop, a fabricator of metal tools, discovered that the development costs of new tools far exceed expectations and budget. The root cause of the excess costs is the competition for skilled workers. Skilled tool makers are in demand, and Metal Shop has lost several during the year to competitors, replacing them with new inexperience tool makers at higher salaries. In a SWOT analysis, how would Metal Shop categorize its inability to maintain skilled tool makers?

Weakness

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. If Taylor completed a PESTLE analysis instead of a SWOT analysis, the PESTLE analysis would include which one of the following?

Increase in competition

A term insurers use to refer to a condition that can cause property to deteriorate or destroy itself is

Inherent vice

Printer Ink, a business that refills empty printer cartridges, is conducting a SWOT analysis to examine reasons for the growing number of complaints and returned faulty printer cartridges. Printer Ink's managers have listed the following as weaknesses during their brainstorming session: Lack of experience: Printer Ink and has been unable to keep experienced employees. New business: Printer Ink has only been in business for two years. Low capital: Printer Ink is in debt and pays a high rent. Location: Printer Ink is relatively difficult for customers to locate. Weaknesses are ordered by the degree to which they affect performance and by their relative importance. Based on the reasons for the analysis, which weakness should Printer Ink's managers list first in their prioritization of weaknesses?

Lack of experience

Inserted into a contractual agreement, which one of the following provisions limits the amount for which one party might otherwise be liable?

Liquidated damages clause

Driver behavior can be monitored by using which one of the following technological advances in fleet safety?

Onboard computers

Wilson Community College (WCC) invested significant time and financial resources to develop a new registration system. The system could be used to register for classes at its two campuses, as well as online classes. The new system was rolled-out just in time for the heavy fall registration period. Unfortunately, with the high volume of activity, the system kept freezing and requiring students to log-off and start over. Students were complaining that it took them twice as long to register with the new system. This is an example of which one of the following classifications of IT operational risk?

Performance

Adverse weather conditions that can threaten the safe delivery of cargo arise from which one of the following environments?

Physical

Adverse weather conditions that can threaten the safe delivery of cargo arise from which one of the following environments? Select one:

Physical

SleepWell Motels is a regional chain of motels. In addition to the motel rooms, each facility has a furnished lobby, an exercise room, a coffee shop, and a meeting room. To increase revenues, the motels routinely rent the meeting room for graduation parties, birthday parties, wedding receptions, and similar functions. A lawsuit was filed against SleepWell last week for injuries sustained by a guest at a wedding reception held in a meeting room. In order to best control its exposure to liability claims SleepWell should

Require tenants to sign a hold-harmless agreement.

Which one of the following is a motor fleet vehicle system component that can likely lead to losses?

Routes

Which one of the following is the method often used to assess IT operational risk?

Scenario analysis

ABC Construction Company agreed to build a bridge for a state. The state required a surety bond. When construction was half-way completed, ABC realized that it would not be able to complete the project on time and budget. It stopped working on the project and moved its construction equipment to another job site. Unfortunately, the surety bond was not properly drafted, so the surety company had no responsibility to the state. The state sued the construction company. Rather than issuing a monetary award, the court ordered the construction company to return to the bridge site and complete the project. The court in this case ordered

Specific performance.

Few defenses are available to an organization to reduce the fine or penalty it faces when it violates

Statutes.

Strategy development is an important element of the strategic management process. Which one of the following statements is correct with respect to strategy development?

Strategies should reflect an understanding of the business, including its identity, customers, and purpose.

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. When Taylor completes his SWOT analysis in which quadrant of the SWOT analysis will he place reputation?

Strength

6) Basic Cells, a manufacturer of cell phones, has failed to meet its sales goals for the second consecutive year. The management team at Basic Cells develops the following information as a result of its SWOT analysis: · Strength: We produce economy cell phones less expensively than any competitor. · Weakness: Our cell phones are considered to be too large by industry standards. · Opportunity: Our largest and growing market population is people over age 65. · Threat: Competitors are continually increasing the technology in their cell phones. As a result of the SWOT analysis, the management team decided to develop a line of inexpensive cell phones with large buttons and numbers, and with a lanyard attachment to wear around the neck. These will be marketed to people over age 65 who tend to have vision impairments. Which one of the following statements best describes the logic behind this decision?

Strengths that can be paired with opportunities are areas of competitive advantage

Basic Cells, a manufacturer of cell phones, has failed to meet its sales goals for the second consecutive year. The management team at Basic Cells develops the following information as a result of its SWOT analysis: Strength: We produce economy cell phones less expensively than any competitor. Weakness: Our cell phones are considered to be too large by industry standards. Opportunity: Our largest and growing market population is people over age 65. Threat: Competitors are continually increasing the technology in their cell phones. As a result of the SWOT analysis, the management team decided to develop a line of inexpensive cell phones with large buttons and numbers, and with a lanyard attachment to wear around the neck. These will be marketed to people over age 65 who tend to have vision impairments. Which one of the following statements best describes the logic behind this decision?

Strengths that can be paired with opportunities are areas of competitive advantage.

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?

Technological advancements

Which one of the following statements is true regarding a generic model of a securitization?

The organization sells income-producing assets to an SPV in exchange for cash.

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 Porter's Five Forces is most greatly affected by Paoli's ability to negotiate a forward contract with a lumber supplier?

The suppliers bargaining power to drive prices up.

Altria, one of the world's largest manufacturers and distributors of tobacco products, acquired a 35% stake in Juul Labs, an electronic cigarette company and producer of e-cigarettes. The strategic risk that Altria was trying to address by initiating the purchase of a 35% stake in Juul Labs was which one of the following?

They are addressing the declining sales and demand for cigarettes.

Clark's Electronics is considering launching new technology for the medical industry. Before investing major resources in the project, the company decided to perform a SWOT analysis. The fact that there are new medical industry regulations pending would fall under which one of the following quadrants of a SWOT analysis?

Threats