RIMS Portfolio Management & Strategy 3

Question 1

A risk manager uses a 'heat map' in portfolio strategy primarily to:

Accepted Answer

Visualize risks by likelihood and potential impact for prioritization

Answer

A heat map plots risks on axes of likelihood and impact, enabling management to quickly identify and prioritize the highest-priority exposures.

Question 2

Which approach to risk portfolio strategy involves spreading risk exposures across multiple insurers and financing mechanisms to avoid over-reliance on a single counterparty?

Accepted Answer

Risk diversification

Answer

Risk diversification distributes exposures across multiple insurers, captives, and financing vehicles to reduce counterparty concentration and improve portfolio resilience.

Question 3

Total Cost of Risk (TCOR) includes all of the following EXCEPT:

Accepted Answer

Revenue generated from new product lines

Answer

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.

Question 4

When evaluating a multi-year insurance program as part of portfolio strategy, the primary advantage over annual policies is:

Accepted Answer

Greater premium stability and reduced renewal uncertainty over the program period

Answer

Multi-year programs lock in terms and premiums for several years, providing budget predictability and protection against market hardening at renewal.

Question 5

In risk portfolio strategy, 'risk tolerance' differs from 'risk appetite' in that risk tolerance:

Accepted Answer

Specifies the acceptable variation around risk appetite thresholds for individual risks

Answer

Risk tolerance defines the acceptable deviation from the risk appetite at the operational level, providing specific boundaries for individual risk categories.

(RIMS) Risk and Insurance Management Society Certification Practice Test

(RIMS) Risk and Insurance Management Society Certification Practice Test

RIMS Portfolio Management & Strategy 3