Risk and Insurance Management Society (RIMS) Certified Risk Management Professional (CRMP) Practice Exam

What two analytical tools are particularly useful in analyzing the business model?

1. Key performance indicators and total cost of risk

2. Key risk indicators and gap analysis

3. Pareto analysis and root cause analysis

4. Value chain analysis and benchmarking

The correct answer is: Value chain analysis and benchmarking

Value chain analysis and benchmarking are effective analytical tools for examining a business model as they provide insight into the various components that contribute to an organization's performance and competitive standing. Value chain analysis helps organizations identify and evaluate the primary and support activities that create value and produce a competitive advantage. By understanding these activities, businesses can pinpoint areas for improvement, operational efficiencies, and differentiation from competitors. This detailed look at how value is created allows for strategic decisions that enhance overall performance. Benchmarking, on the other hand, involves comparing a company's processes and performance metrics to industry bests or best practices from other companies. This comparative analysis can highlight performance gaps, stimulate improvements, and guide strategic planning by setting standards and goals based on what has been successfully achieved by others in the market. Together, these tools provide a comprehensive framework for assessing both internal operations and external performance, which is crucial in effectively analyzing and refining a business model. This aligns closely with the aspects of risk management as it allows for strategic insights related to both maximizing opportunities and mitigating risks inherent to the business environment.