All Flashcards
The decision to make a financial investment is an example of what type of risk?
Speculative.
When considering an emerging risk, what typical outcome will always be in evidence?
Uncertainty.
Rafiq chooses to accept the risks associated with his favourite pastime of deep-sea diving. This choice is an example of
risk voluntariness.
NOT
Risk perception
When applying probability theory to a specific period of time, a measurement of 1 indicates that the event
will occur.
One of the levels of Renn and Rohrmann’s structured framework on risk perception is
emotional factors.
What form of risk is most likely to have a positive influence on an individual’s perception of driving a car?
Controlled risks.
What is a key difference between pure and speculative risks?
Speculative risks may result in a benefit to the risk-taker, whilst pure risks will only result in a loss
or a break-even position.
When considering the likelihood that a risk event may occur, a risk manager should primarily review the probability of its occurrence alongside
frequency.
What must a Chief Risk Officer do, if anything, when identifying a significant new and emerging risk to the business?
Report details of the new risk to the Board of Directors in a timely manner to agree additional budgets and actions.
Within a large organisation, the responsibility for monitoring and advising on the effectiveness of risk management decisions is primarily the responsibility of the
internal audit function.
A key development of the evolution of risk management theory in the fifteenth century was the (share)
invention of the printing press to share ideas and information.
NOT
development of mathematical models.
introduction of probability theory.
A key benefit of effective risk management to a manufacturing company is likely to be
a reduction in insurance costs.
A key factor that an audit team will consider when assessing a large global organization’s enterprise (timing)
relevant risk information is captured and communicated in a timely manner across the organisation.
Where an organisation is unable to assess a risk impact in financial terms, it may typically
measure the risk in qualitative terms.
In a risk management context, internal control activities within an organisation typically relate to
policies and procedures that help ensure that risk actions are taken.
For a risk committee to function effectively within a large organisation, it must
have unrestricted access to accurate risk information.
Succession planning for senior management within an organisation is an example of
risk reduction.
A key disadvantage of relying on risk registers for effective risk management controls within an organisation is that they
may fail to take account of correlations between risks.
NOT
are based on risk models that do not consider all circumstances.
Where a simple risk description table is contained within a risk register, ‘scope of risk’ relates to
a description of associated possible events that might materialise.
The ISO 31000 risk management standard contains a process section which covers
risk identification, assessment and management.
Published international risk management standards should always aim to
establish a benchmark of best practice in the main areas of risk management.
NOT
provide detailed guidance on the effective implementation of enterprise risk management
frameworks.
ensure risk management laws and regulations are fully adhered to.
Where an organisation adopts an internal control approach to risk management, it means that it will always
concentrate on reducing the uncertainty of outcomes by controlling risks.
1
1
When an organisation is looking to expand into a new business market, the emergency services may be able to provide the organisation with useful information on
identified risks and risk trends.
When an organisation is reviewing its risk management concerns, a key limitation of a physical survey is that it is typically
focused narrowly on one specific aspect of the risk.
What method is the insurance risk manager of a large commercial airline most likely to use when categorizing all risks faced by the organisation?
The airline’s own classification system.
NOT
The standardised global classification system for all risks.
A risk manager is analysing the cause and effect of a recent risk event which has occurred within the organisation. The risk manager should consider that (connections)
there may be multiple unconnected causes.
When operating within a risk management framework, identifying risks that are unacceptable to an
organisation is known as risk …
evaluation.
In an organisation, operational risk is typically defined as a risk of loss resulting from
inadequate processes and systems.
Within a large manufacturing company, financial risks are most commonly associated with
liquidity and profitability issues.
NOT
loans and consumer credit defaults.
Within a large organisation, why might a risk manager find it difficult to categorise risks?
There is no universally accepted definition of individual risks.
NOT
There is never a clear purpose for such risk categorisations.
A car dealer is arranging insurance cover for the majority of the risks it faces to protect itself against identified potential losses. The dealer will typically NOT be able to arrange insurance for
losses from reputational damage.
WRONG
credit losses.
Correlated losses
Loses from fraud
A financial services organisation has reviewed its decision-making processes and has found risk management failings relating to data protection and anti-money laundering policies. As a result of … (what sort of risks are these)
Compliance and regulatory risk.
NOT
Legal and operational risk.
A risk manager is reviewing two separate risks within the organisation. She believes that they could
be interrelated, which could result in greater damage than if the risks had remained completely
separate. She is therefore most likely to be considering the concept of
aggregation and correlation.
The Compliance Director within a large organisation is considering implementing a governance, risk and compliance framework. The primary objective she would be seeking to achieve is to
eliminate inherent conflict between the compliance, risk and audit functions.
Enterprise Risk Management within a large financial organisation is regarded as
a holistic approach to risk management.
In a large international bank, to whom would the Chief Risk Officer typically report to in respect of an assessment of risks for the bank?
The Chief Executive Officer, the Board of Directors and appropriate senior management committees.
As a result of recent flooding, a delivery company’s vehicles have all been destroyed. The company now faces losses in respect of its vehicles, revenue and reputational damage. These are examples of
aggregated losses.
NOT
Correlated losses
The main way in which governance, risk and compliance improves operational efficiency within a
manufacturing organisation is by
aligning strategy, processes, technology and staff.
What method of risk retention involves setting up a separate company which is owned and controlled by the parent organisation?
Captive insurance arrangement.
A small plant hire company is seeking to protect itself against responsibility for the legal liability incurred as a result of bodily injury to third parties. In terms of risk transfer, the organisation is most likely to
purchase public liability insurance.
A large global organisation has employed an insurance intermediary to assist the organisation in achieving its risk management objectives. The organisation will therefore most likely require the intermediary to advise an insurer on
facilitate risk surveys, advise on insurer selection and implement appropriate insurance arrangements.
