Risk Management

Question 1

Approaches Used to Quantify Risk

Answer 1

(1) Benchmark
(2) Probabilistic Models
(3) Non-probabilistic models

Question 2

Benchmark

Answer 2

Compares expected outcomes to common measures

Question 3

Probabilistic Models

Answer 3

Develop expected models using probabilities of possible outcomes

Question 4

Non-probabilistic Models

Answer 4

Uses subjective assumptions to measure possible incomes

Question 5

Inherent Risk

Answer 5

Risk to entity if no action is taken

Question 6

Residual Risk

Answer 6

Risk to entity that would remain if action were taken and controls taken into account

Question 7

Alternative Responses to Risk

Answer 7

(1) Acceptance
(2) Risk Sharing
(3) Risk Reduction
(4) Risk Avoidance

Question 8

Risk Acceptance

Answer 8

Indicates that entity would take no action and simply allow the risk to occur

Question 9

When Is Risk Acceptance Appropriate

Answer 9

When entity believes inherent risk is already at an acceptable level or cost of taking action would exceed reduction in risk