CPCU 500 Chapter 8

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? Select one: A. Weaknesses B. Strengths C. Threats D. Opportunities

C. Threats

Hi-Tech Phones has been working on two new models of their flagship smart phone. The Research and Development department has been working on a touch-based phone and a voice-activated phone. Which one of the following is a tool that could be used to assess the risks of developing and marketing either or both of these phones? Select one: A. A topographic map. B. A risk map. C. A tree map. D. A heat map.

B. A risk map.

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? Select one: A. Formulating Strategies B. Evaluating Strategies C. Analyzing Environments D. Developing Goals

C. Analyzing Environments

The four SWOT headings are strengths, weaknesses, threats and Select one: A. Ideas. B. Markets. C. Opportunities. D. Priorities.

C. Opportunities.

Strategy development is an important element of the strategic management process. Which one of the following statements is correct with respect to strategy development? Select one: A. Managers typically do not consider the likelihood that personnel will support a strategy before implementing it. B. Whether a strategy will yield a return on investment in the form of profit or stock price is generally not a consideration. C. Strategies should reflect an understanding of the business, including its identity, customers, and purpose. D. Normally, strategies are the same in all departments and at all levels within an organization.

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

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? Select one: A. Organizations that are risk adverse usually have little difficulty meeting strategic goals if managers are excessively cautious. B. In general, there is little difference between risk taking at the strategic and operational levels within an organization. C. At all levels with an organization, decisions are made about which risks should be taken to gain competitive advantage. D. A factor in strategic decision making is whether an organization has an advantage in controlling risk with a given activity.

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

Strategic risk can be created and affected by external factors or internal factors. Which one of the following is considered an internal factor? Select one: A. Resource allocation B. Changes in labor market C. Changes in regulations D. Competitive pressures

A. Resource allocation

Which one of the following statements is true regarding the strategic management process? Select one: A. The strategic management process can be applied to any type of organization, including business, not-for-profit organizations, and government entities. B. The strategic management process focuses on the internal environment of the organization. C. The strategic management process is the responsibility of an organization's board of directors. D. The strategic management process aligns all of an organization's strategies and activities to enable it to meet its short-term goals.

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

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 Select one: A. Will typically result in risk-based decisions that are too rigid and counter-productive. B. Results in higher levels of customer defections due to the high costs of implementation. C. Results in higher capital expenditures and significantly lower returns on investment. D. Requires supervisors to constantly monitor and often micro-manage their direct reports.

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

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

B. Risk tolerance levels can have high-end thresholds, low-end thresholds, or both.

Which one of the following is the most intangible and abstract of the four risk quadrants? Select one: A. Hazard risk B. Strategic risk C. Financial risk D. Operational risk

B. Strategic risk

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? Select one: A. Strengths B. Threats C. Opportunities D. Weaknesses

B. Threats

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

Which one of the following statements is correct regarding formulating an organization's long-term strategies? Select one: A. All parts of an organization play a role in formulating an organization's long-term strategies. B. Formulating an organization's long-term strategy involves determining the "who," "what," and "when" responsibilities of each department. C. A long-term strategy should be an aspirational description of what an organization will accomplish in the long-term future. D. Long-term strategies to improve performance and/or create a competitive advantage, are based on the organization's goals and analysis of internal and external environments.

D. Long-term strategies to improve performance and/or create a competitive advantage, are based on the organization's goals and analysis of internal and external environments.

Which one of the following analysis methods concentrates on an organization's competitive environment? Select one: A. PESTLE analysis B. SWOT analysis C. Scenario analysis D. Porter's Five Forces analysis

D. Porter's Five Forces analysis

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? Select one: A. Because risk appetite is based on the attitudes of executives and shareholders, it is usually static and does not vary over time. B. Economic forces, market forces, and competition generally have little effect on an organizations' risk appetite. C. An organization's risk appetite is typically independent of its capital and other assets, including its human resources. D. Regulatory conditions, political risks, and anti-trust or other legal concerns can reduce an organization's risk appetite.

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

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? Select one: A. Risk-adjusted return on capital B. Economic capital C. Risk threshold D. Risk appetite

D. Risk appetite

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

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