Portfolio Management & Strategy Flashcards
7 cards from real RIMS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Portfolio Management & Strategy flashcards as text
A risk manager uses a 'heat map' in portfolio strategy primarily to:
Answer: Visualize risks by likelihood and potential impact for prioritization
A heat map plots risks on axes of likelihood and impact, enabling management to quickly identify and prioritize the highest-priority exposures.
Which approach to risk portfolio strategy involves spreading risk exposures across multiple insurers and financing mechanisms to avoid over-reliance on a single counterparty?
Answer: Risk diversification
Risk diversification distributes exposures across multiple insurers, captives, and financing vehicles to reduce counterparty concentration and improve portfolio resilience.
Total Cost of Risk (TCOR) includes all of the following EXCEPT:
Answer: Revenue generated from new product lines
TCOR encompasses premiums, retained losses, and risk management administration costs, but not revenue from new products, which is an income metric unrelated to risk financing costs.
When evaluating a multi-year insurance program as part of portfolio strategy, the primary advantage over annual policies is:
Answer: Greater premium stability and reduced renewal uncertainty over the program period
Multi-year programs lock in terms and premiums for several years, providing budget predictability and protection against market hardening at renewal.
In risk portfolio strategy, 'risk tolerance' differs from 'risk appetite' in that risk tolerance:
Answer: Specifies the acceptable variation around risk appetite thresholds for individual risks
Risk tolerance defines the acceptable deviation from the risk appetite at the operational level, providing specific boundaries for individual risk categories.
A construction firm faces both property damage risk and contract performance risk on large projects. Bundling these into a single integrated insurance program is known as:
Answer: Integrated risk program
An integrated risk program combines multiple coverage lines into a single policy or program structure, often reducing total premium through portfolio effects and administrative efficiencies.
Which risk financing strategy is most appropriate for a low-frequency, high-severity catastrophic exposure that could threaten organizational solvency?
Answer: Transfer via catastrophe (CAT) insurance or reinsurance
Low-frequency, high-severity catastrophic risks that threaten solvency are best addressed through risk transfer mechanisms such as catastrophe insurance or reinsurance, which cap the organization's maximum loss.