Deck 6: Risk Management

Question 1

Over the last five decades, the economic toll of extreme weather events has ______.

A) Slightly decreased
B) Stayed the same
C) Increased
D) Dramatically decreased

Answer 1

Increased

Question 2

______ is the process of deciding which risks are worth addressing and the extent to which these risks should be avoided.

A) Risk assessment
B) Strategy
C) Avoidance
D) Risk management

Answer 2

Risk management

Question 3

Risk ______ describes preference for risk, ranging from risk aversion to willingness to accept risk.

A) Appetite
B) Avoidance
C) Management
D) Assessment

Answer 3

Appetite

Question 4

An effective risk management framework should increase ______ to stakeholders, improve organizational process efficiency, and promote the sharing of best practices to identify, asses, and respond to risks.

A) Stock price
B) Market share
C) Transparency
D) Revenue

Question 5

A(n) ______ is when one party's activity generates a risk that another party bears without consent or compensation.

A) Internality
B) Externality
C) Risk response
D) Insurance policy

Question 6

To ______ a risk means the party responsible for creating a risk ultimately takes responsibility for it.

A) Internalize
B) Avoid
C) Share
D) Externalize

Question 7

______ means reducing the severity of damage that exposure to uncontrollable external risk might cause.

A) Risk assessment
B) Internalizing
C) Reporting
D) Impact mitigation

Question 8

The extent to which a business can mitigate risk depends upon situational factors that provide challenges and opportunities. These include inventory, transportation, outsourcing, social conditions, ______ conditions, and economic conditions.

A) Labor
B) Shareholder
C) Investor
D) Environmental

Question 9

______ is a process that enables an organization to properly evaluate risks, prepare a response plan that is aligned with the company's objectives, and have a system in place to respond when needed.

A) Global Reporting Initiative
B) Enterprise risk management
C) Internal control
D) Risk avoidance

Question 10

On the enterprise risk management continuum, the ______ is an organization's culture, the ethical principles and values that define the character of an organization, how the core team of leaders responsible for critical functions view risk, and the extent to which leaders of a company desire risk.

A) Control activity
B) External environment
C) Governance structure
D) Internal environment

Question 11

On the enterprise risk management continuum, risk ______ points out the weaknesses of and threats to the company.

A) Avoidance
B) Response
C) Internalization
D) Identification

Question 12

Risk ______ is the determination of a potential adverse event's magnitude and likelihood.

A) Assessment
B) Response
C) Identification
D) Management

Question 13

Risk assessment determines the chance that an adverse impact might occur, as well as the ______ of that impact.

A) Likelihood
B) Remoteness
C) Proximity
D) Magnitude

Question 14

Risk ______ decides which risks are worth addressing and the means by which they should be addressed.

A) Assessment
B) Response
C) Identification
D) Avoidance

Question 15

On the enterprise risk management continuum, ______ are the procedures and protocols that an organization implements to make sure the path chosen in the risk response stage is actually carried out.

A) Monitoring activities
B) Control activities
C) Reporting activities
D) Delegation activities

Question 16

In the enterprise risk management continuum, ______ means tracking risk performance via information technology and risk-related metrics.

A) Control activities
B) Objective setting
C) Monitoring
D) Risk assessment

Question 17

Enterprise risk management is a(n) ______.

A) Set of rules
B) Immaterial issue
C) One-time project
D) Ongoing process

Question 18

______ risk impacts customer purchasing decisions by impairing the company's brand through negative association.

A) Reputational
B) Operational
C) Strategic
D) Financial

Question 19

______ risk is the potential for costly government intervention into commercial activity owing to unreasonably high risk levels.

A) Commercial
B) Reputational
C) Regulatory
D) Taxation

Question 20

______ risks are associated with management failure, employee error, equipment malfunction, or some internal tactical mistake.

A) Supplier
B) Operational
C) Reputational
D) Regulatory

Question 21

Strategic risks are the ______, often made under conditions of uncertainty, which businesses must make to compete in a specific industry at any given time.

A) Disclosures
B) Externalities
C) Risk/reward tradeoffs
D) Internal controls

Question 22

______ risk is the potential for random disruptions from wild card events.

A) Occupational
B) Financial
C) Social
D) Hazard

Question 23

______ risk is the challenge posed by the management of company capital, debt, equity, and cash flow.

A) Financial
B) Compensation
C) Stock market
D) Shareholder

Question 24

Preventable risks are those that can be avoided through ______.

A) Careful planning
B) Externalizing
C) Lobbying
D) Internalizing

Question 25

______ risks are external to an organization and beyond the scope of managerial influence.

A) Operational
B) Supply Chain
C) Uncontrollable
D) Financial

Question 26

______ risk analysis is a formulaic approach to determining the risk level of a given event.

A) Internal
B) External
C) Financial
D) Probabilistic

Question 27

The formula for determining the risk level of a given event is ______ times the Magnitude of Harm.

A) Internality
B) Externality
C) Likelihood of occurrence
D) Cost of avoidance

Question 28

In the risk level formula, the ______ associated with an event is comprised of three elements: exposure, vulnerability, and resilience.

A) Likelihood of occurrence
B) Magnitude of harm
C) Adaptation
D) Mitigation

Question 29

______ is the extent of a system to be impacted if an adverse event were to occur.

A) Resilience
B) Materiality
C) Mitigation
D) Exposure

Question 30

______ is the extent to which a system could withstand external shocks, and is determined by susceptibilities, fragilities, weaknesses, deficiencies, and lack of capacities.

A) Vulnerability
B) Exposure
C) Adaptation
D) Materiality

Question 31

______ is the ability of a system to adapt, survive, and even improve in the event of a disaster.

A) Avoidance
B) Mitigation
C) Internal control
D) Resilience

Question 32

______ provides descriptions of alternative possible futures, and serves to raise issues and provide context and perspective on the nature of risks and what strategic responses might be available.

A) Risk assessment
B) Insurance
C) Monitoring
D) Scenario planning

Question 33

The four stages of business continuity planning are: conduct a business impact analysis; implement a process to ______ critical business functions; prepare a core team; and conduct employee drills and training.

A) Recover
B) Impair
C) Innovate
D) Retire

Question 34

______ risk means voluntarily accepting risk.

A) Bearing
B) Avoiding
C) Managing
D) Sharing

Question 35

______ risk means reducing risk likelihood through behavior change.

A) Bearing
B) Avoiding
C) Managing
D) Sharing

Question 36

______ risk means reducing risk impact through preparation, and is used to reduce vulnerability and exposure to unavoidable risk.

A) Bearing
B) Avoiding
C) Mitigating
D) Sharing

Question 37

______ risk, such as by obtaining property insurance, changes who bears a risk but does not change the overall likelihood or magnitude of that risk.

A) Sharing
B) Avoiding
C) Mitigating
D) Managing

Question 38

Business continuity planning is the ______ of business interruptions with emergency response plans.

A) Externalization
B) Anticipation
C) Inspection
D) Investigation

Question 39

Resilience is necessary when risks are unavoidable; resilience is the opposite of ______.

A) Vulnerability
B) Exposure
C) Avoidance
D) Magnitude

Question 40

The main causes for engaging business ______ include IT failure, extreme weather events, power outage, and building fires.

A) Strategy
B) Governance
C) Continuity plans
D) Resources

Question 41

A ______ enterprise has five capabilities: robustness, responsiveness, recovery, resourcefulness, and redundancy.

A) Traditional
B) Resilient
C) Versatile
D) Diversified

Question 42

______ means that an organization has excess capacity and back-up systems in the event of system failure.

A) Resourceful
B) Responsiveness
C) Exposure
D) Redundancy

Question 43

Over the last century, the life-expectancy of the average Fortune 500 company has substantially decreased in part because managers are pressured to increase share price even if it means taking on unreasonable ______.

Question 44

A former US Treasury Secretary and the President of the World Bank both agree that ______ has significant economic consequences.

Question 45

______ risk impacts customer purchasing decisions by impairing the company's brand through negative association.

Question 46

Water-related business risks can impair supply chains, product use, and ______.

Question 47

Climate change is not just an environmental issue, because it may bring about operational, marketing, financial, supply chain, and ______ risks.

Question 48

Explain the role of risk identification, risk assessment, and risk response in the enterprise risk management continuum.

Question 49

Explain the carbon bubble hypothesis.

Question 50

State the basic and expanded versions of the risk level formula used in probabilistic risk analysis.
Correct

Question 51

Distinguish the four types of risk response.

Question 52

Does the insurance industry care about climate change? Why or why not?