CPCU 500 - Practice Assignment 8

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

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

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

B. Analyzing Environments

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

C. Risk appetite

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? A. A risk map. B. A tree map. C. A topographic map. D. A heat map.

A. A risk map

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

A. Strategic risk

Which one of the following is the goal with strategic risk? 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. The goal is to use information about strategic risks to make informed decisions that optimize the risk-reward ratio.

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

B. Porter's Five Forces analysis

Which one of the following statements is correct with respect to risk tolerance? A. 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. 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.

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

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

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

A company's management team is preparing to conduct a SWOT analysis as part of its strategic management process. Which one of the following questions can the management team expect to answer as a result of the SWOT analysis? A. Are the organization's current business strategies in alignment with its mission statement, or is a change 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. 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?

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? A. Opportunities B. Strengths C. Threats D. Weaknesses

C. Threats

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

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

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

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

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

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

A. Opportunities.

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? A. Regulatory conditions, political risks, and anti-trust or other legal concerns can reduce an organization's risk appetite. 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. Because risk appetite is based on the attitudes of executives and shareholders, it is usually static and does not vary over time.

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

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

A. Resource allocation

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? a. Strength b. Weakness c. Threat d. Opportunities

A. Strength

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? a. How competitive you are with existing firms. b. The suppliers bargaining power to drive prices up. c. The threat of customers finding a substitute way of doing what you do. d. The customers' bargaining power to drive prices down.

b. The suppliers bargaining power to drive prices up

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. Increase in competition c. Need for a growth initiative d. Lack of expertise among employees

b. increase in competition