CAS Strategic Planning and Decision Making 3

Question 1

Which concept in strategic management refers to activities that create value for customers and cannot be easily imitated by competitors?

Accepted Answer

Core competencies

Answer

Core competencies, as defined by Prahalad and Hamel, are distinctive capabilities that provide competitive advantage and are difficult for rivals to replicate.

Question 2

In enterprise risk management (ERM), the concept of 'risk appetite' is best described as:

Accepted Answer

The aggregate level of risk an organization is willing to accept in pursuit of its objectives

Answer

Risk appetite is a strategic-level declaration of how much risk an organization will accept while pursuing its goals, distinct from risk capacity or tolerance.

Question 3

Porter's generic strategies suggest that an insurer competing primarily on price in personal auto would be following which strategy?

Accepted Answer

Cost Leadership

Answer

Cost Leadership involves achieving the lowest cost structure in the industry to offer competitive pricing, which is the basis for price-driven competition.

Question 4

In strategic decision-making, 'satisficing' refers to:

Accepted Answer

Choosing an option that meets a minimum threshold of acceptability

Answer

Satisficing, introduced by Herbert Simon, describes selecting the first option that is 'good enough,' reflecting bounded rationality in real-world decisions.

Question 5

A reinsurance company is evaluating whether to expand its catastrophe reinsurance capacity. The primary strategic risk consideration is:

Accepted Answer

Volatility and correlation of catastrophe losses with the overall portfolio

Answer

Expanding catastrophe reinsurance capacity introduces significant loss volatility and potential correlation risks that can destabilize the overall portfolio's risk-return profile.

(CAS) Casualty Actuarial Society Practice Test

(CAS) Casualty Actuarial Society Practice Test

CAS Strategic Planning and Decision Making 3