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Risk Management and Business Processes

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Questions and Answers

What is the primary source of external risks?

Competitive environment and economic factors (correct)

Internal culture and values

Business processes and internal controls

Relationships among employees and suppliers

What is the purpose of assigning an owner or owners to a risk?

To delegate risk to other departments

To establish clear accountability (correct)

To ignore the risk

To avoid accountability

What is the primary goal of assessing the impact of a risk?

To identify the root cause of the risk

To implement a mitigation strategy

To determine the likelihood of the risk occurring

To evaluate the potential loss or damage resulting from the risk (correct)

What is the purpose of evaluating mitigation options?

To recognize the trade-off between cost and benefits Signup and view all the answers

What is the next step after assessing the impact of a risk?

Evaluating mitigation options Signup and view all the answers

What is the purpose of monitoring the results of a mitigation strategy?

To make adjustments as needed Signup and view all the answers

What is the primary goal of a risk management program?

To identify and mitigate potential risks Signup and view all the answers

What type of risk arises from a lack of honesty or integrity?

Moral Hazard Signup and view all the answers

What is the primary focus of internal auditors?

Operating activities and compliance with directives Signup and view all the answers

What is the primary purpose of internal control systems?

To provide reasonable assurance that policies are being followed Signup and view all the answers

What type of risk is associated with natural disasters such as earthquakes and fires?

Physical Risk Signup and view all the answers

What is the primary goal of regulatory compliance?

To ensure conformity with official requirements Signup and view all the answers

What is the primary difference between hazard risk and enterprise risk?

Hazard risk is a component of enterprise risk, which also includes operating, strategic, and financial risks. Signup and view all the answers

What are the two characteristics of risk in the context of enterprise risk?

Variability and Upside of Risk Signup and view all the answers

What is the level of risk that would cause a reduction of current year revenues or earnings that has a substantial impact on operations?

Significant Loss Signup and view all the answers

What is an example of a critical or major loss?

A collapse of a major operating unit or product line, followed by a substantial financial setback Signup and view all the answers

What is the primary focus of enterprise risk?

Operating, strategic, and financial risk Signup and view all the answers

Why do actual results sometimes not match expected results?

Because the world is variable Signup and view all the answers