CPCU 500 - Full Practice Exam
Probability analysis is best suited for organizations that have A. A substantial volume of data on past losses. B. Unstable operations. C. A relatively small number of past losses. D. Changing and complex business environments.
A. A substantial volume of data on past losses.
Under a large deductible plan, the amount that the insurer incurs to adjust losses A. Can be inside or outside the deductible. B. Is prorated between the insured and the insurer based on the size of the loss. C. Is inside, or included, in the deductible. D. Is outside the deductible.
A. Can be inside or outside the deductible.
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: A. Catastrophe management B. Supply chain management C. Transportation management D. Workplace safety management
A. Catastrophe management
Nancy, the general liability claims manager, is concerned about a significant rise in claim frequency in the state of New Jersey during the past 18 months. She cannot identify the cause of the increase and has asked James, a data analyst, to help. James decides to develop a model to analyze the dataset of New Jersey claims, and see if any previously unknown grouping can be identified for further analysis. Which one of the following data analysis techniques is James using? A. Cluster analysis B. Linear regression analysis C. Classification tree D. Correlation matrix
A. Cluster analysis
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 A. Computer vision. B. Transducer technology. C. Visual acuity. D. Accelerometer technology.
A. Computer vision.
The emerging technologies applied to risk assessment and control link the physical domain to the virtual domain. Together, these domains linked by the emerging technologies create a A. Connected ecosystem. B. Smart system. C. Risk management information system. D. Risk management matrix.
A. Connected ecosystem.
A risk manager and safety engineer need to consider which one of the following interdependent elements when evaluating the premises condition? A. Construction, occupancy, protection, and external exposures B. Air quality and movement C. Ergonomic stress D. Temperature extremes
A. Construction, occupancy, protection, and external exposures
The important first step in a decision-making model is to A. Define the problem. B. Purchase the technology. C. Assign a data scientist. D. Prepare the data.
A. Define the problem.
Take Your Order (TYO) is a company that specializes in taking product orders for vendors. The manufacturer of a product can run a television or internet ad for a product with a toll-free number. Customer calls for the products are routed to TYO, where one hundred operators are available to receive the calls. Each operator is assigned a cubicle with a computer terminal, video display monitor, and a telephone. TYO experienced high workers compensation claims from its operators, claiming neck strain, eye strain, and wrist pain. In an effort to reduce such injuries, TYO evaluated each operator's work area. The height of chairs and video monitors were adjusted, curved computer keyboards and wrist-rests were provided, and the telephones were replaced with audio headsets. Workers compensation costs dropped significantly. The science of designing work spaces based on interaction between people and the equipment in the work space is called: A. Ergonomics B. Smart systems C. Data analytics D. Artificial intelligence
A. Ergonomics
Home Appliance Company has decided to change its production method. Previously, small teams of workers assembled washers, dryers, and dishwashers. Under the new production method, an assembly-line will be used, with some functions performed by robotics. Before making the change, Home Appliance Company has created a team of experts from company personnel to identify all of the risks inherent in the new production method and to recommend measures to address these risks. The team will assemble in a facilitated workshop and follow these steps: Divide the production method into components Review each component to identify risk Identify causes and potential outcomes for each risk Develop a solution for each risk. This team approach is risk identification is called a A. Hazard and operability (HAZOP) study. B. Delphi technique. C. SWOT (strengths, weaknesses, opportunities, threats) analysis. D. Facilitated workshop.
A. Hazard and operability (HAZOP) study.
Which one of the following types of risks can result in losses but not in any gains? A. Hazard risks B. Financial risks C. Speculative risks D. Strategic risks
A. Hazard risks
Regarding sexual harassment claims, isolated incidents are insufficient from a legal standpoint to establish the existence of which one of the following types of work environments? A. Hostile B. Unpleasant C. Congenial D. Diverse
A. Hostile
The fundamental purpose of a risk management framework is to A. Integrate risk management throughout the organization. B. Define and eliminate potential losses. C. Maximize profits for all stakeholders. D. Reduce the cost of risk.
A. Integrate risk management throughout the organization.
Which of the following uses infrared light to detect nearby objects? A. Lidar B. Wearables C. Drones D. Robots
A. Lidar
The relationship between which two basic measures is critical for risk management in assessing risk and deciding whether and how to manage it? A. Likelihood and consequences B. Exposure and time horizon C. Correlation and likelihood D. Volatility and time horizon
A. Likelihood and consequences
A risk control technique that reduces the frequency of a particular loss is A. Loss prevention. B. Loss reduction. C. Diversification. D. Duplication.
A. Loss prevention.
Which one of the following is a data analysis technique that operates in a way similar to the human brain? A. Neural networks B. Social network analysis C. Clustering D. Regression
A. Neural networks
Brendan is a new risk manager at a Shelton Manufacturing in North Carolina. Because the company has never experienced any consequences from a hurricane, the previous risk manager never really analyzed the risks associated with such an event. Brendan feels that a hurricane could trigger multiple far-reaching consequences and that the risk requires a thorough analysis. Due to Shelton Manufacturing's lack of historical data Brendan has decided to use a structured process that incorporates expert opinions into the probability estimations. Which one of the following types of risk assessment is Brendan using? A. Predictive technique B. Risk management technique C. Risk control technique D. Qualitative analysis
A. Predictive technique
Which one of the following statements is correct with respect to risk tolerance? A. Risk tolerance levels can have high-end thresholds, low-end thresholds, or both. B. An organization's risk tolerance is typically unrelated to its risk appetite. C. A zero-risk tolerance level will typically result in the best risk-based decisions. D. Risk tolerance is stated in both quantitative and qualitative terms.
A. Risk tolerance levels can have high-end thresholds, low-end thresholds, or both.
Local Petroleum Distributors (LPD) sells gas and diesel fuel to 72 independent gas stations and convenience stores. Receiving accurate data on the fuel needs of its customers is a critical operational concern. LPD installed sensors in the fuel storage tanks owned by each customer. At 11 PM each evening, the sensors send fuel data electronically to LPD. LPD receives the data, and a computer enters each record. The data are analyzed, and the analysis determines which retailers require a fuel shipment in the next three days. The electronic system has increased operational efficiency as shipments can be better coordinated, and retailers are no longer required to measure the fuel level and report manually. LPD's use of a computer to enter the data reported by the sensors is an example of A. Robotic process automation. B. Blockchain. C. Data analytics. D. Monte Carlo simulation.
A. Robotic process automation.
Which one of the following risk management program goals enhances an organization's reputation? A. Social responsibility B. Tolerable uncertainty C. Survival D. Economy of operations
A. Social responsibility
A new computer chip that could position a company for explosive growth is an example of: A. Strategic risk. B. Tactical risk. C. Strategic planning. D. Operational risk.
A. Strategic risk
Catastrophes such as recent earthquakes and the 2011 tsunami in Japan pointed out a need for many organizations to evaluate and manage their: A. Supply-chain risk B. Compliance risk C. Derivative risk D. Political risk
A. Supply-chain risk
Which one of the following is a tool that can be used by fraud investigators to compare documents and analyze notes? A. Text mining B. Blockchain C. Telematics D. Root cause analysis
A. Text mining
From a system safety perspective, change analysis is an analysis A. That projects the effects a given system change is likely to have on an existing system. B. That identifies the critical components of a system and ranks the severity of losing each component. C. That dissects a repetitive task to determine potential hazards if each action is not performed. D. That uses the results of the other analysis techniques to identify the cause of the accident.
A. That projects the effects a given system change is likely to have on an existing system.
Which one of the following statements is true regarding the evolution of risk and risk management? A. The definition of risk has evolved to include positive as well as negative attributes. B. Risk management now involves only those areas where the organization has some degree of control over the outcome. C. Risk management is increasingly being applied to the risks associated with accidental losses. D. The definitions of risk and risk management have become considerably more focused over the years.
A. The definition of risk has evolved to include positive as well as negative attributes.
Regression analysis assumes that A. The variable being forecast varies predictably with another variable. B. Dependent variables are unaffected by independent variables. C. For any given past year, the projected trend value will be the same as the actual outcome. D. The linear regression line is more accurate the further it gets from the actual data values used.
A. The variable being forecast varies predictably with another variable.
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? A. Unstructured external B. Unstructured internal C. Structured internal D. Structured external
A. Unstructured external
Vandenberg Company retains workers compensation medical expenses. The risk manager ran a regression using workers compensation medical costs as the dependent variable and company payroll (in actual dollars) as the independent variable. Results of the regression were: y = .098 x + 5.20 Next year's payroll is expected to be $3,750,000. As medical costs continue to rise at a rate higher than inflation, the risk manager would like to adjust the expected medical costs upward by 10%. Based on this information, what are the expected workers compensation medical costs for next year? A. $372,227 B. $404,256 C. $409,970 D. $416,540
B. $404,256
The number of auto physical damage claims for fleet vehicles at Right-a-Way Delivery Service in any year is normally distributed. Next year, the expected number of fleet vehicle physical damage claims is expected to be 712 with a standard deviation of 25. Based on this information, what is the probability that between 737 and 762 auto physical damage claims will occur next year? A. 2.2% B. 13.6% C. 24.3% D. 27.2%
B. 13.6%
An exculpatory clause is A. The intentional relinquishment of a known right. B. A contractual provision that relieves one party from liability resulting from a negligent or wrongful act. C. The surety's right to seek reimbursement from the principal for the surety's payments. D. The substitution of one party for another.
B. A contractual provision that relieves one party from liability resulting from a negligent or wrongful act.
The process of comparing the key risk indicators of an organization with those of other organizations in the same industry is known as A. Hedging. B. Benchmarking. C. Trend analysis. D. Root cause analysis.
B. Benchmarking.
Three HillsLaw is a legal firm specializing in multiple-plaintiff cases. One current case involves alleged birth defects caused by exposure to polluted groundwater. There are currently 78 plaintiffs represented in the pending legal action. Up-to-date records on the condition of each child is a critical operational concern. Three HillsLaw turned to a secured digital ledger system in which independent third parties (nurses, physicians, and parents) can update the status of individual children, and the record for the entire group is automatically updated. The latest update showed seven children have died, 14 have a terminal diagnosis, 27 have permanent disabilities, and 30 cases are listed as "developing" (awaiting definitive diagnosis). The secured distributed ledger system used by Three HillsLaw is called A. Robotic process automation. B. Blockchain. C. Telematics. D. Cryptocurrency.
B. Blockchain.
Earthquake-resistant construction, used in buildings under three stories tall, that integrates roof and floor diaphragms that can flex to transmit and distribute the forces an earthquake exerts on a structure, is called A. Frame action design. B. Box action design. C. Diaphragmatic design. D. Rolling weight-bearing design.
B. Box action design.
Which of the following risk management program goals is an essential goal for all public entities? A. Survival B. Continuity of operations C. Growth D. Earning stability
B. Continuity of operations
In an effort to grow its personal lines book, an insurer decides to offer discounts on homeowners and personal auto insurance to the employees of its largest business lines account. Which one of the following risk measures is most likely to increase as a result of this marketing decision? A. Time horizon B. Correlation C. Consequences D. Volatility
B. Correlation
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 A. Independent. B. Definite. C. Fortuitous. D. Pure risks.
B. Definite.
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 projected to be $200,000 90% of the time. D. Earnings at risk are projected to be greater than $200,000 10% of the time.
B. Earnings at risk are projected to be less than $200,000 10% of the time.
A construction company based in the U.S. has building contracts in five different foreign nations. The construction company agreed to accept payment for its work in each country's currency. The risk of loss of value when these foreign payments are converted to U.S. dollars is called A. Pure risk. B. Exchange-rate risk. C. Credit risk. D. Liquidity risk.
B. Exchange-rate risk.
The original cost of a property is known as the A. Replacement cost. B. Historical cost. C. Market value. D. Tax-appraised value.
B. Historical cost.
Which one of the following is an internal source that can often provide information regarding risks that aren't obvious? A. Production manager B. Internal auditing C. Board of directors D. Human resources
B. Internal auditing
An organization has had a high percentage of repetitive stress injuries to workers in a particular phase of their production process. The risk manager has been asked to analyze these injuries from a system safety analysis perspective. Which one of the following techniques should the risk manager use to investigate these accidents? A. Failure mode and effects analysis B. Job safety analysis C. Future states analysis D. Strategy analysis
B. Job safety analysis
Southwest Interstate Railroad (SIR) is concerned about the number derailments in recent years. It's not cost effective to use human assets to inspect tracks, bridges, and trestles. Instead, SIR has started to use drones. A drone can fly low over tracks and above/below bridges and trestles. The drones record video that is transmitted to corporate headquarters where it is simultaneously scanned for derailment hazards. In the past six months, the drones detected a track blockage caused by a rock slide and damage to tracks in a remote area cause by an earthquake. SIR dispatched work crews to make the tracks once again passable, and no derailments occurred. SIR's use of drones, video, real-term video scanning, and computer analysis illustrates which one of the following? A. Risk management information systems B. Preventive analytics C. Big data analytics D. Insurtech
B. Preventive analytics
SE Industries has identified windstorm as a risk. The risk manager has assembled a team to project the potential consequences of windstorm. The team includes individuals from various functions within the organization. Which one of the following team approaches to risk identification is SE Industries using? A. HAZOP B. Scenario analysis C. Delphi technique D. SWOT analysis
B. Scenario analysis
Last year, three Metro City firemen died responding to a fire at a chemical plant, when they were overcome by toxic fumes. In response, Metro City is purchasing advanced first responder gear. It includes special flame retardant suits with chemical and explosive fume sensors, air quality sensors, and heat sensors. Responders will also wear special watches that will track a responder's pulse, respiration, and blood pressure; and helmets that include video cameras. All of these sensors will feed data to a computer in real-time. The computer will analyze the data and issue threat levels and evacuation orders, if necessary. The protective gear Metro City will purchase and the data transmission and analysis capability illustrate the use of: A. Insurtech B. Smart products C. Risk management information systems D. Catastrophe modeling
B. Smart products
Precision Electronic Components manufactures circuit boards, microchips, and other electronic products. Given the precision necessary for their products, the manufacturing environment must be controlled. Temperature, humidity, static electricity and other factors must be monitored. After losing several batches of products due to human monitoring failures and imprecise adjustments, the company moved to a system of sensors. The sensors monitor and regulate temperature, humidity, static electricity, and other factors. The sensors transmit data to and from each other, and the manufacturing environment is continuously adjusted to assure production is successful. The network of sensors transmitting data and the autonomous corrective actions without human interaction is called: A. Sensitivity analysis B. The Internet of Things C. Computer-directed manufacturing D. Web-based manufacturing
B. The Internet of Things
Risk managers today differ from traditional risk managers in which one of the following ways? A. They attempt to identify a loss's predominant cause B. They attempt to minimize threats and optimize opportunities C. They generally look backward for risk factors D. They struggle with data that is too large to capture, store, and analyze
B. They attempt to minimize threats and optimize opportunities
Which one of the following best explains how most smart products potentially improve risk management? A. They assess risks in dangerous areas. B. They generate big data to which advanced analytics can be applied. C. They scan and inspect structures for unsafe conditions. D. They measure worker fatigue.
B. They generate big data to which advanced analytics can be applied.
Which one of the following statements is true concerning robotic process automation (RPA)? A. RPA cannot be used as part of business process management. B. RPA is more focused on the range of tasks that can be performed by a robot rather than the process of completing a task. C. Although RPA can help control some organizational risks, use of RPA can create other risks. D. When RPA is employed, it always involves the use of robots.
C. Although RPA can help control some organizational risks, use of RPA can create other risks.
In an effort to reduce expenses, increase profitability, and reduce human errors; ABC Insurance Company decided to automate most of its personal lines underwriting function. The company now uses standardized application forms that are submitted electronically to one of the company's regional offices. At each regional office, a computer with a scanner reads the applications. The computer has been programmed with acceptable answers to the questions. If the answers on the application are all acceptable, the policy is automatically issued. Rejected applications are automatically forwarded to a human underwriter who reviews them. The use of this technology has reduced the company's expense ratio by two and a half percent, and reduced the time it takes to issue a policy. ABC Insurance Company's use of computers to evaluate applications electronically is an application of: A. Actuator technology. B. Radiant sensors. C. Artificial intelligence. D. Risk management information systems.
C. Artificial Intelligence
Which one of the following is a major benefit that blockchain technology provides to holistic risk management? A. Blockchain technology can monitor driving habits by measuring acceleration, speed, braking, and distance traveled. B. Blockchain technology allows organizations to share data through wireless internet and networking services. C. Because of their security, blockchains can eliminate the need to verify the accuracy of risk management data. D. Blockchains can monitor things such as heat, moisture, noise, and air quality.
C. Because of their security, blockchains can eliminate the need to verify the accuracy of risk management data.
An advantage of a large deductible plan is that it allows the insured organization to A. Decrease its uncertainty about the cost of its retained losses. B. Increase its cost of risk compared with other insurance plans. C. Benefit from the cash flow available on the retained loss reserves. D. Benefit from handling its own claims without insurer control.
C. Benefit from the cash flow available on the retained loss reserves.
In addition to metal detectors, many airports have installed a second type of scanning technology for checked baggage and cargo. The checked bags and cargo pass through a portal with scanners programmed to detect and test for explosive trace fumes. These scanners, which detect explosives based on air samples, are an example of what type of sensor used for risk assessment and control? A. Thermal sensors B. Radiant sensors C. Biochemical sensors D. Mechanical sensors
C. Biochemical sensors
Which one of the following is described as a distributed database that serves as a collectively shared ledger? A. Telematics B. Big data C. Blockchain D. The Internet of Things
C. Blockchain
A company's benefit administrator, while acting on behalf of the company, invested 100 percent of the plan funds in speculative stock. The return on the investment was ten fold. The duty violated by the plan fiduciary in this instance is A. Prudence. B. Adherence. C. Diversification. D. Loyalty.
C. Diversification.
Data Entry Company (DEC) offers customers data entry services. A customer can hire DEC to enter survey data to be analyzed. Many DEC employees spend long hours entering data on a computer. DEC has experienced neck strain and wrist pain complaints from their employees, increasing the company's workers compensation costs. DEC investigated the complaints of its data-entry employees. DEC adopted curved keyboards for data entry, wrist-rests for those entering data, and uniform chair heights and display monitor heights to reduce neck strain claims. The science of designing work spaces based on the health concerns of those who will operate in the work space is called: A. Predictive analytics B. Big data C. Ergonomics D. Accelerometer technology
C. Ergonomics
An organization can use securitization to exchange A. Cash for income-producing assets. B. Debt for income-producing assets. C. Income-producing assets for cash. D. Liabilities for mortgage receivables.
C. Income-producing assets for cash
The portion of fire safety that focuses on the minimum building design, construction, operation, and maintenance requirements necessary to assure occupants of a safe exit from the burning portion of the building is A. Fire safety. B. Occupancy safety. C. Life safety. D. COPE safety.
C. Life safety.
Emerald Industries has just invested a large sum in new, highly-sophisticated computer equipment and building renovations. Emerald installed state-of-the-art smoke detection devices throughout the facility. Emerald's state-of-the-art smoke detection devices are an example of A. Loss prevention. B. Avoidance. C. Loss reduction. D. Duplication.
C. Loss reduction.
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. Change in asset and liability valuation from historical cost to fair value has no effect on the value of shareholders' equity. 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. D. The balance sheet contains important financial information about net worth and assets, both which indicate the source of an organization's funding.
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.
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? 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 start the meeting by asking participants to state their concerns or feeling about the procedure. D. Olivia should hold a separate meeting for those individuals who she suspects have a hidden agenda.
C. Olivia should start the meeting by asking participants to state their concerns or feeling about the procedure.
An example of a post-loss action for the windstorm cause of loss is A. Designing building and structures to withstand anticipated wind loads. B. Providing storm shutters and blinds. C. Patrolling premises to prevent looting or vandalism. D. Securing materials and equipment
C. Patrolling premises to prevent looting or vandalism.
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 is backward-looking, basing corrective prescriptions on the organization's past loss history. C. Preventive analytics uses smart products and data analytics to identify root loss causes and their implications. D. 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.
C. Preventive analytics uses smart products and data analytics to identify root loss causes and their implications.
In order to achieve collaboration, group leaders must A. Remain focused on achieving the goals of their individual groups. B. Focus on the worker's personality rather than results. C. Remain focused on preventing stakeholders from straying from the common goal. D. Promote competition among members of the group.
C. Remain focused on preventing stakeholders from straying from the common goal.
The level of confidence an organization places in the organization's risk management culture, practices, and procedures is called A. Risk tolerance. B. Tolerable uncertainty. C. Risk assurance. D. Probable maximum loss.
C. Risk assurance.
Don is the Risk Manager for Rafferty Corporation. One of his peers, Sally, asks him one day, "How do you define risk?" When Don replies, which one of the following statements is accurate? A. Risk has consistent meanings within the insurance and risk management communities. B. Risk can also be used to refer to the insurance provider (the insurer). C. Risk has different meanings within the risk management and insurance communities. D. Risk has so many definitions that it has become an almost meaningless term.
C. Risk has different meanings within the risk management and insurance communities
The difference between risk tech and insurtech is: A. Risk tech is applicable in personal risk management situations, which insurtech is designed for application in commercial business situations. B. Insurtech applies to many different industries while risk tech is limited in focus to insurance, reinsurance, and nontraditional risk financing alternatives. C. Risk tech goes beyond insurtech by expanding its focus to making risk financing more efficient and preventing and mitigating losses in a variety of industries. D. Insurtech is a broader concept and incorporates risk tech as one of its underlying tenets.
C. Risk tech goes beyond insurtech by expanding its focus to making risk financing more efficient and preventing and mitigating losses in a variety of industries.
Which one of the following is one of the five steps of the risk management process? A. Establish accountability B. Allocate resources C. Scan environment D. Align and integrate
C. Scan environment
Which one of the following theories of accident causation presumes that accidents are the result of a chain of accidental factors? A. Technique of operations review approach B. Energy transfer theory C. Sequence of events theory D. Job safety analysis
C. Sequence of events theory
Which one of the following is the most intangible and abstract of the four risk quadrants? A. Financial risk B. Hazard risk C. Strategic risk D. Operational risk
C. Strategic risk
William is a risk manager for Green Mountain Trucking. He has always analyzed auto loss frequency and severity rates for the fleet. William would like to collect data on vehicle speeds, braking patterns, and distance traveled and compare that with the loss history. Which one of the following would help William capture and analyze this data? A. Cloud computing B. Catastrophe modeling C. Vehicle telematics D. Text mining
C. Vehicle telematics
In a normal distribution 34.13% of all outcomes are within one standard deviation above the mean. The portion between one and two standard deviations above the mean contains 13.59% of all outcomes. What percentage of the total outcomes is between two standard deviations below the mean and two standard deviations above? A. 20.54% B. 47.72% C. 68.26% D. 95.44%
D. 95.44%
Mutual Fund Company (MFC) offers a wide array of mutual fund options to investors. Each mutual fund has a different fund objective and set of investment guidelines that apply to the fund. While MFC gives considerable freedom to its fund portfolio managers, they are required to abide by the fund's investment guidelines. To monitor compliance, MFC developed a computer algorithm. The computer algorithm continuously monitors each fund's compliance with investment guidelines. If a fund manager violates the investment guidelines, the computer immediately notifies MFC's internal control director, and corrective action is taken. MFC's use of the computer algorithm to monitor investment compliance and to provide notification when corrective action is necessary illustrates use of: A. Transducer technology B. Computer vision C. Mechanical sensors D. Artificial intelligence
D. Artificial intelligence
The balance sheet provides a snapshot of an organization's financial condition A. For at least two points in time for comparison purposes. B. At the start and end of a business day. C. Over one 12 month period. D. At a given point in time.
D. At a given point in time.
Hold-harmless agreements are A. Enforceable without legal consideration. B. Highly regulated. C. Standardized. D. Comprised of two parties—the indemnitor and the indemnitee.
D. Comprised of two parties—the indemnitor and the indemnitee.
Which one of the following statements is true regarding the basic measures that apply to risk management? A. Longer time horizons are generally less risky that shorter ones. B. Risk increases as volatility decreases. C. Hedging is a risk management strategy that can reduce the risk of correlation. D. Consequences measure the degree to which an occurrence could positively or negatively affect an organization.
D. Consequences measure the degree to which an occurrence could positively or negatively affect an organization.
When organizations invest their assets among a mix of stocks and bonds from companies in different industry sectors they are using the risk management technique of A. Separation. B. Risk transfer. C. Duplication. D. Diversification.
D. Diversification.
Which one of the following statements about the use of drones is true? A. The reliance on humans to operate drones severely limits their application for commercial uses. B. Space and weight limitations prevent drones from being equipped with sensors and cameras. C. The use of drones is limited to military applications. D. Drones may be equipped with cameras that relay data in real-time.
D. Drones may be equipped with cameras that relay data in real-time
Hanna is preparing her presentation for a meeting. She has a very specific objective which has been shared with the audience. Hanna wants to include several slides in her presentation because she has read that people tend to learn more from presentations that are accompanied by visual aids. Hanna should use the slides to do which one of the following? A. Keep her speaking to a minimum B. Detail as much content as possible C. Provide complex detailed graphics D. Emphasize key points
D. Emphasize key points
Which one of the following statements is true regarding event tree analysis? A. Event tree analysis can be used to select the most effective strategy to achieve a goal. B. Event tree analysis provides only quantitative information. C. Event tree analysis provides only qualitative information. D. Event tree analysis typically provides only two options, success or failure.
D. Event tree analysis typically provides only two options, success or failure.
Which of the following is an example of a wearable? A. Unmanned aircraft B. Robots C. Heart monitors D. Helmets that monitor fatigue
D. Helmets that monitor fatigue
Home Housewares Inc. is a retail store applying for commercial coverage with ABC Insurance. The underwriter requested a copy of Home Houseware's most recent financial statements. The underwriter will use the balance sheet to determine A. Home Houseware's sources of cash as of the balance sheet date. B. Dividend payments to shareholders as of the balance sheet date. C. Home Houseware's gross profit margin as of the balance sheet date. D. Home Houseware's financial position as of the balance sheet date.
D. Home Houseware's financial position as of the balance sheet date.
A worker for Build-Rite Construction Company removed the pressure gauge and warning sticker from an air compressor. The pressure gauge automatically shuts off the compressor when the pressure gets too high. The sticker warned that an explosion could result if the pressure was too high. Without the pressure gauge in place, the air compressor exploded. The explosion killed one worker and severely injured another. If Build-Rite performs a root cause analysis (RCA) of this fatal accident, which one of the following might be determined to be a root cause? A. Removal of the warning sticker B. Explosion of the air compressor C. Removal of the pressure gauge D. Inadequate training
D. Inadequate training
Which one of the following data capture tools has led to an explosion of risk management innovation by allowing smart products to transmit data to each other and to central hubs? A. Cloud computing B. Blockchain C. Artificial intelligence D. Internet of Things
D. Internet of Things
After being promoted to a supervisory position, Henry decided that he needed to work on becoming an active listener. All of the following are elements of active listening, EXCEPT: A. Suspension of judgement B. Attention C. Response D. Introduction of new ideas
D. Introduction of new ideas
A municipal water plant installed water flow sensors and water pressure sensors on the water pipes leaving the plant. The sensors make sure water is flowing properly and that there are no leaks or clogs which could produce a loss. These types of sensors are: A. Biochemical Sensors B. Thermal Sensors C. Radiant Sensors D. Mechanical Sensors
D. Mechanical Sensors
The traditional definition of risk management reflects the traditional concept of risk as: A. Uncontrollable B. Both positive and negative C. Strategic D. Negative
D. Negative
AMRM Insurance Company sells insurance in Virginia, North Carolina, South Carolina, and Georgia. The company has compiled a policyowner data base that can be used to send text messages when hurricanes approach. The company provides early warnings, storm updates from the National Weather Service, and hurricane safety measures. The company credits the system with reduced hurricane claims. The use of the texting system is an example of: A. Artificial intelligence B. Sensor networks C. Experience rating D. Preventive analytics
D. Preventive analytics
One category of operational risk includes procedures and practices organizations use to conduct their business activities. This category is A. Technological risk. B. Systems risk. C. Business complexity risk. D. Process risk.
D. Process risk.
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. Association rule learning. C. Cluster analysis. D. Regression.
D. Regression.
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 management has little, if any, effect on controlling the consequences of events caused by natural sources. C. Deliberate acts of individuals or groups are generally considered natural risk sources. D. Risk control techniques can usually manage the likelihood and consequences of human risk sources to some extent.
D. Risk control techniques can usually manage the likelihood and consequences of human risk sources to some extent.
Many auto manufacturers have automated a portion of their assembly lines by introducing a smart product. The smart product performs repetitive tasks, such as making the same weld on each vehicle frame as it passes the smart product. These smart products, which can be fixed or mobile, reduce repetitive motion injuries that humans might suffer. They can also be used to perform dangerous tasks and in heavy-lifting jobs. These smart products are called: A. Drones B. Wearables C. Automated sensors D. Robots
D. Robots
Which one of the following is a major benefit that smart insurance contracts can provide to insurance customers? A. Smart contracts can render a risk completely preventable. B. Smart contracts can significantly increase the speed of premium payments. C. Smart contracts can provide broader coverage at a lower cost. D. Smart contracts can dramatically increase the speed of loss payments.
D. Smart contracts can dramatically increase the speed of loss payments.
Regarding diversifiable and nondiversifiable risk, which one of the following statements is accurate? A. An example of a nondiversifiable risk is a fire. B. Risks must be either diversifiable or nondiversifiable. C. An example of a diversifiable risk is inflation. D. Systemic risks are generally nondiversifiable.
D. Systemic risks are generally nondiversifiable.
Jean is a director on the board of an apparel promotional company. Towards the company, Jean owes a duty of A. Profitability. B. Divided loyalty. C. Undivided time. D. Undivided loyalty.
D. Undivided loyalty.
Data analytics is especially useful for A. Internal data. B. Databases. C. Structured data. D. Unstructured data.
D. Unstructured data.
Clear-Rite Company specializes in the clean-up of hazardous chemical spills. Workers performing clean-up operations must use safety suits to prevent exposure to the chemicals. The suits include pulse and respiration monitors, body temperature sensors, and chemical sensors. The monitors and sensors report data to a mobile operations center which is deployed to each clean-up site. The pulse and respiration monitors and the sensors that are part of the protective gear are called A. Magnetometers. B. Drone technologies. C. Accelerometers. D. Wearable technologies.
D. Wearable technologies.
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 A. Results in higher capital expenditures and significantly lower returns on investment. B. Results in higher levels of customer defections due to the high costs of implementation. C. Requires supervisors to constantly monitor and often micro-manage their direct reports. D. Will typically result in risk-based decisions that are too rigid and counter-productive.
D. Will typically result in risk-based decisions that are too rigid and counter-productive.
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? a. Introducing on-line sales b. Lack of expertise among employees c. Increase in competition d. Need for a growth initiative
c. Increase in competition
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? a. Reputation b. Lack of Expertise c. Shortage of personnel to explore new projects d. Technological advancements
d. Technological advancements
