Risk Control and Mitigation Strategies Flashcards
7 cards from real ARM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Risk Control and Mitigation Strategies flashcards as text
A manufacturer installs an automatic sprinkler system in its warehouse. Which risk control technique does this primarily represent?
Answer: Loss reduction
Sprinklers do not stop fires from starting but limit the severity of fire losses once they occur, which is loss reduction.
Which risk control technique is the only one that reduces the probability of loss from a specific activity to zero?
Answer: Avoidance
Avoidance eliminates the exposure entirely by abandoning or never undertaking the activity, so the chance of loss becomes zero.
A company stores backup copies of critical records at an off-site data center that is used only if the primary records are destroyed. This is an example of:
Answer: Duplication
Duplication keeps spare or backup assets that are not used in daily operations and are activated only after a loss.
A retailer spreads its inventory across four warehouses that are all used in daily operations. Which technique is being applied?
Answer: Separation
Separation disperses assets that are actively used in operations so that a single event cannot damage them all.
Under Haddon's energy release theory, requiring workers to wear hard hats is best described as a strategy that:
Answer: Separates the energy from the person with a physical barrier
A hard hat places a barrier between the released energy and the person exposed to it.
Which of the following is the primary difference between risk control and risk financing?
Answer: Risk control reduces loss frequency or severity, while risk financing generates funds to pay for losses that occur
Risk control alters the frequency or severity of losses, whereas risk financing provides the money to pay for losses that still occur.
A firm decides to stop selling a product line because of severe product liability claims, but customers still own units sold in prior years. What is the main limitation of the avoidance decision here?
Answer: Avoidance does not eliminate liability exposures from products already sold
Abandoning an activity prevents new exposures, but losses from units already in circulation can still occur.