Risk Identification and Analysis 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 Identification and Analysis flashcards as text
A risk manager reviews a manufacturer's balance sheet to find assets that could be damaged or destroyed. Which risk identification method is being used?
Answer: Financial statement analysis
Financial statement analysis uses the balance sheet, income statement, and cash flow statement to reveal assets, liabilities, and income streams exposed to loss.
Which risk identification method is MOST useful for revealing bottlenecks where a single loss could halt an entire production process?
Answer: Flowchart analysis
Flowcharts map the movement of goods or processes, exposing critical points and dependencies where a loss would interrupt operations.
What is a key limitation of standardized risk assessment questionnaires?
Answer: They may miss exposures unique to the specific organization
Standardized questionnaires are generic, so unusual or organization-specific exposures may not be captured.
Which of the following is NOT one of the four elements of a loss exposure analysis framework used in ARM?
Answer: The insurer's combined ratio
A loss exposure is described by the asset exposed, the cause of loss, the financial consequences, and the entity affected, not by an insurer's financial ratio.
A firm's loss history shows only small, frequent losses over five years. What is the MAIN risk of relying solely on this data?
Answer: Low-frequency, high-severity exposures may be absent from the record
Rare catastrophic events may not appear in a short loss history, so relying only on past losses can understate severe exposures.
Reviewing a lease agreement to determine who is responsible for damage to the premises is an example of which identification method?
Answer: Document analysis
Contracts such as leases are reviewed through document analysis to identify assumed or transferred loss exposures.
Hazard analysis focuses primarily on which of the following?
Answer: Conditions that increase the frequency or severity of loss
Hazard analysis identifies conditions, such as poor housekeeping or wet floors, that increase the likelihood or severity of losses.