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web.groovymark@gmail.com
- December 9, 2024
Question 21
What is the primary goal of risk transfer strategies?
a) To eliminate risks
b) To shift the financial burden of a risk to a third party, such as through insurance
c) To avoid managing risks
d) To increase financial profits
Correct Answer: b) To shift the financial burden of a risk to a third party, such as through insurance
Explanation: Risk transfer strategies, such as purchasing insurance, help organizations reduce their exposure to certain risks by passing them to another entity.
Question 22
Why is risk escalation important in enterprise risk management?
a) To eliminate risks
b) To ensure that significant risks are raised to higher levels of management for decision-making
c) To avoid managing risks
d) To reduce financial performance
Correct Answer: b) To ensure that significant risks are raised to higher levels of management for decision-making
Explanation: Risk escalation ensures that critical risks are communicated to senior management for appropriate action.
Question 23
What is the purpose of a risk register?
a) To eliminate risks
b) To document identified risks and track their status and management actions
c) To avoid managing risks
d) To increase financial profits
Correct Answer: b) To document identified risks and track their status and management actions
Explanation: A risk register helps organizations keep track of identified risks and monitor the steps being taken to manage them.
Question 24
What is the significance of a heat map in risk management?
a) It helps identify financial profits
b) It visually represents the likelihood and impact of risks on a matrix
c) It eliminates all risks
d) It prevents risk documentation
Correct Answer: b) It visually represents the likelihood and impact of risks on a matrix
Explanation: A heat map provides a visual representation of risks, helping organizations prioritize them based on their likelihood and impact.
Question 25
What is the relationship between risk and opportunity in enterprise risk management?
a) Risks always lead to losses
b) Risks can also present opportunities for growth and innovation
c) Opportunities eliminate risks
d) There is no relationship between risk and opportunity
Correct Answer: b) Risks can also present opportunities for growth and innovation
Explanation: In enterprise risk management, risks are not always negative; they can also lead to new opportunities.
Question 26
What is a black swan event?
a) An event that is expected and easily managed
b) An unpredictable and rare event that has a major impact
c) A minor financial event
d) A regular occurrence in risk management
Correct Answer: b) An unpredictable and rare event that has a major impact
Explanation: Black swan events are highly unlikely, unforeseen events with significant consequences.
Question 27
What is the importance of key risk indicators (KRIs)?
a) To focus only on financial performance
b) To provide early warning signals of potential risks
c) To eliminate risks
d) To track profits
Correct Answer: b) To provide early warning signals of potential risks
Explanation: KRIs help organizations identify potential risks before they escalate, allowing for timely mitigation actions.
Question 28
What is risk avoidance?
a) A strategy to eliminate all risks
b) A strategy to avoid exposure to certain risks by not engaging in the associated activity
c) A financial strategy
d) A method of increasing profits
Correct Answer: b) A strategy to avoid exposure to certain risks by not engaging in the associated activity
Explanation: Risk avoidance involves deciding not to participate in activities that could lead to certain risks.
Question 29
How does a risk culture influence enterprise risk management?
a) By eliminating all risks
b) By shaping how employees and management perceive, assess, and respond to risks
c) By focusing only on financial performance
d) By avoiding risk identification
Correct Answer: b) By shaping how employees and management perceive, assess, and respond to risks
Explanation: Risk culture refers to the organization's collective mindset and attitudes toward risk, which influence how risks are managed.
Question 30
What is a business impact analysis (BIA)?
a) A process to increase profits
b) A process to assess the potential impact of disruptions on business operations
c) A financial analysis tool
d) A method to avoid managing risks
Correct Answer: b) A process to assess the potential impact of disruptions on business operations
Explanation: BIA helps organizations understand the potential consequences of disruptions and prioritize recovery efforts.
Question 31
Why is regulatory compliance important in risk management?
a) It eliminates all risks
b) It ensures that the organization adheres to laws and regulations, reducing the risk of legal penalties
c) It avoids financial performance
d) It avoids documenting risks
Correct Answer: b) It ensures that the organization adheres to laws and regulations, reducing the risk of legal penalties
Explanation: Regulatory compliance helps organizations avoid legal consequences by adhering to relevant laws and regulations.
Question 32
What is the role of internal audit in risk management?
a) To eliminate all risks
b) To provide independent assurance that risks are being managed effectively
c) To increase financial profits
d) To avoid documenting risks
Correct Answer: b) To provide independent assurance that risks are being managed effectively
Explanation: Internal audit ensures that the organization’s risk management processes are functioning properly and effectively.
Question 33
What is reputational risk?
a) A financial risk
b) A risk that arises from negative public perception of the organization
c) A legal issue
d) A risk associated with day-to-day operations
Correct Answer: b) A risk that arises from negative public perception of the organization
Explanation: Reputational risk can damage an organization’s public image, leading to financial and operational impacts.
Question 34
How can risk appetite affect decision-making?
a) It prevents decision-making
b) It guides how much risk an organization is willing to accept in pursuit of its objectives
c) It eliminates all risks
d) It avoids managing risks
Correct Answer: b) It guides how much risk an organization is willing to accept in pursuit of its objectives
Explanation: Risk appetite helps organizations determine which risks they are willing to take on and which ones they should avoid.
Question 35
What is the purpose of a risk management policy?
a) To eliminate all risks
b) To outline the organization’s approach to identifying, assessing, and managing risks
c) To avoid documenting risks
d) To increase financial performance
Correct Answer: b) To outline the organization’s approach to identifying, assessing, and managing risks
Explanation: A risk management policy provides a formal structure for how an organization will approach and handle risks.
Question 36
What is the purpose of conducting a risk assessment?
a) To eliminate risks
b) To evaluate the likelihood and impact of identified risks
c) To avoid managing risks
d) To increase financial performance
Correct Answer: b) To evaluate the likelihood and impact of identified risks
Explanation: Risk assessments help organizations understand the potential severity and frequency of risks.
Question 37
What is a control deficiency in risk management?
a) A control that completely eliminates risks
b) A gap or weakness in the risk management controls that could allow a risk to occur
c) A financial issue
d) A legal matter
Correct Answer: b) A gap or weakness in the risk management controls that could allow a risk to occur
Explanation: Control deficiencies can lead to increased exposure to risks due to ineffective risk mitigation measures.
Question 38
How does a balanced scorecard support risk management?
a) It eliminates all risks
b) It provides a framework for monitoring performance across different areas of the organization, including risk management
c) It increases financial performance
d) It avoids documenting risks
Correct Answer: b) It provides a framework for monitoring performance across different areas of the organization, including risk management
Explanation: A balanced scorecard helps organizations track how well they are managing risks alongside other performance metrics.
Question 39
What is the significance of risk transfer in enterprise risk management?
a) It eliminates all risks
b) It shifts the financial burden of a risk to another party, such as through insurance
c) It increases financial profits
d) It avoids managing risks
Correct Answer: b) It shifts the financial burden of a risk to another party, such as through insurance
Explanation: Risk transfer allows organizations to mitigate certain risks by transferring them to third parties.
Question 40
What is a risk matrix?
a) A financial tool
b) A visual representation of the likelihood and impact of risks
c) A legal document
d) A method to avoid documenting risks
Correct Answer: b) A visual representation of the likelihood and impact of risks
Explanation: A risk matrix helps organizations prioritize risks based on their likelihood of occurring and their potential impact.
