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web.groovymark@gmail.com
- December 7, 2024
Question 21
Which of the following is considered a strategic risk?
a) A downturn in the economy
b) A competitor launching a similar product
c) A new government regulation
d) An employee’s mistake in the production process
Correct Answer: b) A competitor launching a similar product
Explanation: Strategic risks involve actions or decisions that affect an organization's ability to achieve its goals, such as competitor actions.
Question 22
Why is communication important in enterprise risk management?
a) To ensure that risks are hidden from stakeholders
b) To share information and strategies to manage risks across the organization
c) To create confusion among departments
d) To limit employee access to risk information
Correct Answer: b) To share information and strategies to manage risks across the organization
Explanation: Effective communication ensures that all relevant parties are aware of the risks and how to manage them.
Question 23
Which of the following is an example of operational risk?
a) A decrease in market demand
b) A process failure in manufacturing
c) A change in interest rates
d) A lawsuit against the company
Correct Answer: b) A process failure in manufacturing
Explanation: Operational risks include failures in internal processes, people, or systems that affect day-to-day operations.
Question 24
What is the first step in developing a risk management plan?
a) Implementing risk controls
b) Identifying risks
c) Communicating with stakeholders
d) Performing a risk audit
Correct Answer: b) Identifying risks
Explanation: The first step in risk management is to identify all potential risks that could impact the organization.
Question 25
What is the main focus of risk monitoring in enterprise risk management?
a) Ensuring all risks are avoided
b) Continuously tracking and reviewing risks to ensure they are being managed
c) Limiting the number of risks identified
d) Ignoring low-level risks
Correct Answer: b) Continuously tracking and reviewing risks to ensure they are being managed
Explanation: Risk monitoring involves tracking and reviewing risks on an ongoing basis to ensure they are effectively managed.
Question 26
Which of the following is a benefit of implementing an enterprise risk management (ERM) framework?
a) Reducing the need for insurance
b) Ensuring better decision-making and improved risk awareness
c) Increasing costs
d) Decreasing employee engagement
Correct Answer: b) Ensuring better decision-making and improved risk awareness
Explanation: ERM frameworks provide a structured approach to risk management, leading to better decision-making and awareness of risks.
Question 27
Which type of analysis is used to evaluate the likelihood and potential impact of a risk event?
a) Scenario analysis
b) Cost-benefit analysis
c) Risk assessment
d) SWOT analysis
Correct Answer: c) Risk assessment
Explanation: Risk assessment evaluates the likelihood of a risk occurring and its potential impact on the organization.
Question 28
How does diversification help in managing risks?
a) It focuses on one type of risk only
b) It spreads risks across different areas to reduce overall exposure
c) It eliminates all risks
d) It increases the complexity of managing risks
Correct Answer: b) It spreads risks across different areas to reduce overall exposure
Explanation: Diversification reduces overall risk by spreading it across different investments or business activities.
Question 29
What is a key characteristic of strategic risks in enterprise risk management?
a) They are usually financial in nature
b) They can affect long-term goals and objectives of the organization
c) They are always short-term
d) They do not affect decision-making
Correct Answer: b) They can affect long-term goals and objectives of the organization
Explanation: Strategic risks are associated with decisions that impact the long-term success and objectives of the organization.
Question 30
What is a residual risk?
a) The total risk before any mitigation efforts
b) The risk that remains after mitigation efforts
c) A risk that has been completely eliminated
d) A risk that is not documented
Correct Answer: b) The risk that remains after mitigation efforts
Explanation: Residual risk is the risk that remains after efforts to reduce or manage it have been implemented.
Question 31
Which of the following is an example of a compliance risk?
a) A security breach
b) A new regulation that requires additional reporting
c) A competitor’s pricing strategy
d) An equipment failure
Correct Answer: b) A new regulation that requires additional reporting
Explanation: Compliance risks arise from legal or regulatory requirements that the organization must adhere to.
Question 32
What is the purpose of a business impact analysis (BIA) in risk management?
a) To estimate the financial costs of risks
b) To evaluate the potential effects of disruptions to business operations
c) To avoid risks altogether
d) To identify competitors
Correct Answer: b) To evaluate the potential effects of disruptions to business operations
Explanation: A BIA assesses the potential consequences of disruptions, helping organizations prepare for and manage risks effectively.
Question 33
Which risk management strategy involves accepting the risk and its potential consequences?
a) Risk avoidance
b) Risk transfer
c) Risk mitigation
d) Risk acceptance
Correct Answer: d) Risk acceptance
Explanation: Risk acceptance is when an organization chooses to accept the risk and deal with its potential consequences, often because the cost of mitigation is too high.
Question 34
What role does risk culture play in enterprise risk management (ERM)?
a) It ensures that only senior management is responsible for risk management
b) It fosters an environment where all employees are aware of and engaged in managing risks
c) It eliminates the need for a risk management framework
d) It increases the number of risks identified
Correct Answer: b) It fosters an environment where all employees are aware of and engaged in managing risks
Explanation: A strong risk culture ensures that everyone in the organization understands the importance of risk management and their role in it.
Question 35
Which of the following is an example of a risk mitigation strategy?
a) Ignoring low-level risks
b) Purchasing insurance to cover potential losses
c) Focusing on internal risks only
d) Accepting all risks
Correct Answer: b) Purchasing insurance to cover potential losses
Explanation: Risk mitigation involves reducing the impact of risks, such as transferring risk through insurance.
Question 36
Why is it important to align risk management with an organization’s strategic goals?
a) To ensure that risks do not affect day-to-day operations
b) To ensure that risk management efforts support the long-term objectives of the organization
c) To avoid the need for external audits
d) To increase the number of risks identified
Correct Answer: b) To ensure that risk management efforts support the long-term objectives of the organization
Explanation: Aligning risk management with strategic goals ensures that risks are managed in a way that helps the organization achieve its long-term objectives.
Question 37
What is the role of internal controls in enterprise risk management?
a) To eliminate all risks
b) To help manage and mitigate risks through policies and procedures
c) To increase the complexity of managing risks
d) To focus on external risks only
Correct Answer: b) To help manage and mitigate risks through policies and procedures
Explanation: Internal controls are policies and procedures that help manage and mitigate risks within an organization.
Question 38
In the context of risk management, what does the term “black swan” refer to?
a) A common and expected event
b) An event that is rare and unpredictable but has significant impact
c) A minor risk event
d) An event that has no impact on the organization
Correct Answer: b) An event that is rare and unpredictable but has significant impact
Explanation: A "black swan" event is rare and difficult to predict but can have a major impact on an organization.
Question 39
Which of the following is an example of a financial risk?
a) A cyberattack
b) A new competitor entering the market
c) A sudden drop in stock prices
d) A disruption in supply chain operations
Correct Answer: c) A sudden drop in stock prices
Explanation: Financial risks include factors that impact the financial performance of an organization, such as changes in stock prices.
Question 40
What is the role of a risk committee in enterprise risk management?
a) To manage day-to-day operations
b) To oversee and provide guidance on the organization’s risk management strategies
c) To develop marketing strategies
d) To supervise IT systems
Correct Answer: b) To oversee and provide guidance on the organization’s risk management strategies
Explanation: A risk committee helps oversee and guide the organization’s risk management strategies and policies.
