AS-05 (v) Actuarial Aspects of Risk Management Mock Test 15
This section explains project risk monitoring, enterprise risk management (ERM), financial leverage, and actuarial valuation concepts. It emphasizes continuous monitoring of risks to identify trigger events and ensure timely response planning. The chapter introduces the risk matrix for evaluating risks based on likelihood and impact, explains standard deviation as a measure of variability, and discusses the Degree of Operating Leverage (DOL). It also covers project evaluation, reserving and valuation of liabilities, effective ERM steps, loss and loss adjustment expense reserves, and the application of higher discount rates for projects in countries with greater political and economic uncertainty.
1. As project activities are conducted and completed, risk factors and events are monitored to determine what?
A. If salaries should rise
B. If marketing has increased
C. If competitors exist
D. If in fact trigger events have occurred that would indicate the risk is now a reality
E. If the office should move
2. The commonly used risk tool (Table 1) is a two-by-two matrix assigning a risk to one of four quadrants based on:
A. Its relative impact (high/low) and the likelihood of its occurrence (high/low)
B. Profit and loss
C. Cost and time
D. Internal and external factors
E. Legal and financial criteria
3. In the self-examination questions, the standard deviation measures:
A. Impact of change in the single underlying risk factor
B. Dispersion of a dataset relative to its mean
C. Risk due to active management decisions
D. The effect of changing a set of factors
E. Weighted mean of the portfolio
4. In the Degree of Operating Leverage formula DOL = CM / (CM - FC), what does 'CM' stand for?
A. Capital Market
B. Credit Margin
C. Common Money
D. Cost Multiplier
E. Contribution Margin
5. If unanticipated risks emerge or a risk's impact is greater than expected, what may happen?
A. All risks are eliminated
B. The planned response or risk allocation may not be adequate, so the project team must perform additional response planning
C. The budget is automatically doubled
D. The monitoring process stops
E. The project automatically succeeds
6. What is the main focus of Chapter 6 on Reserving & Valuation of Liabilities?
A. Marketing strategy
B. Asset pricing, hence determining the value of the liability
C. Brand building
D. Employee management
E. Tax avoidance
7. According to the chapter, which is described as the most common type of evaluation?
A. Salary evaluation
B. Logo evaluation
C. Lunch evaluation
D. Furniture evaluation
E. Project evaluation
8. How many steps to effective enterprise risk management are described in the chapter?
A. Five
B. Eight
C. Nine
D. Seven
E. Six
9. Loss and loss adjustment expense is the portion of reserves set aside for:
A. Dividends
B. Tax payments
C. Marketing costs
D. Share buybacks
E. Unpaid losses and the costs of investigation and adjustment for losses
10. An international company might apply a higher discount rate to projects located in:
A. Countries with unstable political regimes
B. Its home country
C. Low-risk markets
D. Established markets
E. Diversified portfolios
