RIMS Client Advisory & Consultation 2

Question 1

A risk manager is advising a client whose board has asked for a risk appetite statement. Which element is MOST critical to include in that statement?

Accepted Answer

Quantitative and qualitative thresholds that define acceptable risk levels

Answer

A risk appetite statement must define both quantitative and qualitative thresholds so stakeholders understand which risk levels are acceptable versus which require escalation or mitigation.

Question 2

During a client consultation, the advisor discovers the client's current property coverage has a co-insurance clause of 80%. The insured value is $4M but the property is worth $10M. If a $2M loss occurs, what is the primary advisory concern?

Accepted Answer

The client will receive only a fraction of the loss due to co-insurance penalty

Answer

Because the insured value ($4M) is below the required 80% of actual value ($8M), the co-insurance formula will reduce the claim payout significantly below the actual $2M loss.

Question 3

A client asks their risk advisor to help prioritize risks using a heat map. What does a heat map primarily plot?

Accepted Answer

Likelihood of occurrence versus potential severity of impact

Answer

A risk heat map plots probability (likelihood) on one axis and impact (severity) on the other to help visually prioritize which risks demand the most attention.

Question 4

When advising a multinational client on a global insurance program, which structure allows local policies to fill gaps where a master policy cannot respond due to local regulations?

Accepted Answer

Difference in Conditions (DIC) / Difference in Limits (DIL) structure

Answer

A DIC/DIL structure layers local admitted policies beneath the master policy so that local regulatory requirements are met while the master policy fills any gaps in coverage or limits.

Question 5

A client's CFO questions the value of a risk management program that has had no major claims for three years. What is the BEST advisory response?

Accepted Answer

Explain that absence of claims may reflect the program's effectiveness and present total cost of risk data

Answer

A skilled advisor frames low claims as potential evidence of effective risk controls and presents total cost of risk (TCOR) metrics to demonstrate overall program value beyond just claims.

(RIMS) Risk and Insurance Management Society Certification Practice Test

(RIMS) Risk and Insurance Management Society Certification Practice Test

RIMS Client Advisory & Consultation 2