FREE ARM Risk Control and Mitigation Strategies Questions and Answers

Question 1

What is the primary goal of risk control?

Accepted Answer

Reducing risk likelihood and impact.

Answer

Risk control encompasses strategies and actions designed to manage and modify identified risks. The primary goal is not necessarily to eliminate all risks, which is often impossible or impractical, but rather to reduce the probability of a risk occurring (likelihood) and/or lessen the severity of its consequences (impact) if it does occur. This makes risks more manageable and acceptable.

Question 2

Which of the following is an example of a risk mitigation strategy?

Accepted Answer

Installing fire alarms and safety systems.

Answer

Risk mitigation involves implementing measures to reduce the likelihood or impact of a risk. Installing fire alarms and safety systems is a direct example of mitigation, as it aims to reduce the damage from a fire (impact) and potentially provide early warning to prevent widespread loss. This proactive step helps to control the consequences of a potential hazard.

Question 3

What is the purpose of risk avoidance in risk control?

Accepted Answer

Eliminating exposure to specific risks.

Answer

Risk avoidance is a strategy where an organization decides not to undertake an activity or engage in a situation that carries a specific risk. By completely avoiding the source of the risk, the organization eliminates its exposure to that particular threat. This is distinct from mitigation, which aims to reduce the risk rather than remove it entirely.

Question 4

Which of the following is an example of risk retention?

Accepted Answer

Setting aside financial reserves for potential losses.

Answer

Risk retention occurs when an organization chooses to accept the financial burden of a potential loss rather than transferring it to another party (like an insurer) or avoiding the risk. Setting aside financial reserves, such as a self-insurance fund or contingency budget, is a classic example of planned risk retention, preparing the organization to cover losses internally.

Question 5

How does risk transfer help organizations manage risk?

Accepted Answer

By shifting financial responsibility to another entity.

Answer

Risk transfer is a strategy where the financial consequences of a potential loss are shifted from one party to another, typically through insurance contracts or indemnification clauses. This allows the original entity to protect itself from significant financial impact by paying a premium or fee, while the transferee (e.g., insurer) assumes the financial responsibility for covered losses.

ARM - Associate in Risk Management Practice Test

ARM - Associate in Risk Management Practice Test

FREE ARM Risk Control and Mitigation Strategies Questions and Answers