AS-05 (v) Actuarial Aspects of Risk Management Mock Test 09
This section explains important concepts in enterprise risk management, financial risk measurement, and business environment analysis. It discusses the relationship between standard deviation and investment risk, major categories of risk, and the role of Failure Modes and Effects Analysis (FMEA) in identifying root causes of project risks. The chapter emphasizes evaluating risk mitigation options, understanding decision-makers' utility functions, and recognizing the dynamic nature of the business environment. It also introduces economic capital, risk ranking based on probability and impact, residual risk after treatment, and the characteristics of a mixed economy where public and private sectors coexist to support economic development.
1. A greater standard deviation of a security indicates:
A. Lower volatility
B. A larger price range and greater variance
C. A smaller price range
D. No risk
E. Guaranteed returns
2. How many main types of risk are listed in the chapter for detailed study?
A. Twelve
B. Eleven
C. Ten
D. Nine
E. Eight
3. What is the objective of Failure Modes and Effects Analysis (FMEA)?
A. To eliminate all risks
B. To compute exact risk values
C. To quantify risks probabilistically
D. To replace brainstorming
E. The identification of root or common causes which may affect the project as a whole
4. Which of these is one of the three key questions to determine the best course of action to mitigate risks?
A. What is the office location?
B. What is the company's stock price?
C. Who is the CEO?
D. How many employees are there?
E. What can be done and what options are available?
5. The detailed discussion section is titled 'Impact of Decision Maker's Utility Function for' what?
A. Customer Service
B. Tax Planning
C. Enterprise Risk Management
D. Marketing Strategy
E. Human Resources
6. Which of the following is included in the features of business environment?
A. A, B and C
B. Both A and B
C. Sum total of all factors external to the business firm
D. Dynamic in nature
E. Changes are unpredictable
7. Based on the research data, what was the expected value of Economic Capital on average?
A. Equal to net income
B. Half of net income
C. Ten times net income
D. Twenty times net income
E. Between three to five times the level of net income
8. An analysis of the risk exposure for a business often ranks risks according to what?
A. Their alphabetical order
B. The size of the department
C. The age of the manager
D. The colour of the report
E. Their probability of occurring multiplied by the potential loss
9. 'Residual risk' is defined as:
A. The total of all risks
B. Risk that is insured
C. Risk that is ignored
D. Risk before any treatment
E. Risk remaining after risk treatment
10. The mixed economy system implies which of the following?
A. No government role
B. Co-existence of public sector and private sector
C. Foreign ownership only
D. Only private sector
E. Only public sector
