W40-Enterprise Risk Management Flashcards
Q45. Jarrett Corporation is considering establishing an enterprise risk management system. Which of the following is not a benefit of enterprise risk management?
a. Helps the organization seize opportunities
b. Enhances risk response decisions
c. Improves the deployment of capital
d. Insures that the organization shares all major risks
Q45. (d) sharing risk is only one way of responding, and this technique cannot be used for all risks, nor should it be.
Q46. In the COSO enterprise risk management framework, the term risk tolerance refers to
a. The level of risk an organization is willing to accept
b. The acceptable variation with respect to a particular objective
c. The risk of an event after considering management’s response
d. Events that require no risk response
Q46. (b) the COSO ERM framework defines risk tolerance as the acceptable variation with respect to a particular organizational objective. Answer (a) is incorrect because it defines risk appetite. Answer (c) is incorrect because it defines residual risk. Answer (d) is incorrect because it defines risks that are accepted.
Q47. Management of Warren Company has decided to respond to a particular risk by hedging the risk with futures contracts. This is an example of risk
a. Avoidance
b. Acceptance
c. Reduction
d. Sharing
Q47. (d) hedging involves sharing the risk with another party
Q48. Which of the following is not technique for identifying events in an enterprise risk management program?
a. Process flow analysis
b. Facilitated workshops
c. Probabilistic models
d. Loss even data methodologies
Q48. (c) probabilistic models are used for risk assessment
Q49. Devon Company is using an enterprise risk management system. Management of the company has set the company’s objectives, identified events, and assessed risks. What is the next step in the enterprise risk management process?
a. Establish control activities to manage the risks
b. Monitor the risks
c. Determine responses to the risks
d. Identify opportunities
Q49. (c) the next step in the process is to determine the risk responses to the assessed risks.
Q51. Kelly, Inc. is considering establishing an enterprise risk management system. Which of the following is not a limitation of such a system?
a. Business objectives are not usually articulated
b. The system may break down
c. Collusion among two or more individuals can result in system failure
d. Enterprise risk management is subject to management override
Q51. (a) an enterprise risk management system assumes that objectives have been set as a part of the strategic planning process
