AS-05 (v) Actuarial Aspects of Risk Management Mock Test 18
This section explains important enterprise risk management concepts, including aggregation and diversification risk, asset-liability management (ALM), portfolio performance, and risk mitigation strategies. It discusses gap tolerance, tracking error, and the key principles of risk assessment. The chapter emphasizes the importance of identifying and allocating project risks before bidding, encouraging transparency and fair risk pricing. It also highlights risk avoidance as an often underutilized strategy, explains the role of investment banking spreads, and describes contingency funding plans for low-probability, high-impact events. Effective risk ownership and appropriate mitigation techniques are essential for successful project and financial risk management
1. Aggregation and Diversification Risk arises because risks may be:
A. Always independent
B. Always negative
C. Always positive
D. Super-additive (combined impact greater than the sum of individual parts)
E. Always equal
2. As a widespread standard in the ALM report, what gap tolerance level is applied in each time bucket?
A. 0.75
B. 0.5
C. 1
D. 0.2
E. 0.1
3. A low tracking error means a portfolio is:
A. Risk-free
B. Highly volatile
C. Guaranteed to lose money
D. Far from its benchmark
E. Closely following its benchmark
4. How many key principles of risk assessment are described in the chapter?
A. Four
B. Three
C. Seven
D. Six
E. Five
5. Owners' project representatives should explicitly identify all project risks to be allocated to contractors and the owner. Why?
A. To increase litigation
B. To avoid quantifying risks
C. To hide risks from bidders
D. So these risks should be made known to prospective bidders for a market-based approach
E. To eliminate the bidding process
6. Risk avoidance is probably underutilized as a strategy for risk mitigation because what?
A. It is illegal
B. It cannot be quantified
C. Risk transfer is over utilized and owners are more likely to think first of how they can pass the risk to someone else rather than how they can restructure the project to avoid the risk
D. It increases the risk
E. It always costs more
7. What does the spread represent for the investment banker?
A. A dividend payment
B. A penalty
C. Compensation for services rendered
D. A marketing cost
E. A tax liability
8. Dealing with a Contingency Funding Plan (CFP) is about finding adequate actions with regard to which type of events?
A. High-probability and low-impact events
B. Routine daily events
C. Marketing events
D. Recruitment events
E. Low-probability and high-impact events
9. In risk mitigation planning, who could the owner of the risk be?
A. An agency planner, engineer, or construction manager, depending on the contracting method and risk allocation
B. Only an external auditor
C. Only a government regulator
D. Only the insurance company
E. Only the agency planner
10. Risk mitigation techniques can take how many basic forms?
A. Four
B. Three
C. Five
D. Two
E. One
