Algorithms Risk Assessment & Management 2 — Questions and Answers
Question 1: Which risk metric combines the probability of a threat occurring with the magnitude of its potential impact?
- Risk velocity
- Risk exposure (Correct answer)
- Risk appetite
- Risk tolerance
Correct answer: Risk exposure
Risk exposure (also called expected loss) multiplies probability by impact magnitude to produce a single quantitative risk score.
Question 2: A software team uses Monte Carlo simulation during project planning. What risk management purpose does this serve?
- Eliminating all schedule uncertainty
- Producing probabilistic estimates of cost and schedule outcomes (Correct answer)
- Identifying which developers cause the most defects
- Automating risk response actions
Correct answer: Producing probabilistic estimates of cost and schedule outcomes
Monte Carlo simulation runs thousands of scenarios with sampled inputs to generate probability distributions for outcomes like project completion date.
Question 3: In a risk register, what does the 'residual risk' entry represent?
- Risk that has been fully eliminated
- Risk remaining after controls have been applied (Correct answer)
- Risk discovered after project closure
- Risk transferred to a third party
Correct answer: Risk remaining after controls have been applied
Residual risk is the level of risk that persists after mitigation controls have been implemented and accepted by the organization.
Question 4: An algorithm processes financial transactions and occasionally produces incorrect results on inputs with extreme values. What type of risk does this represent?
- Strategic risk
- Operational risk (Correct answer)
- Compliance risk
- Reputational risk only
Correct answer: Operational risk
Operational risk arises from failures in internal processes, systems, or algorithms that cause losses during normal business operations.
Question 5: Which qualitative risk assessment technique uses a structured group process to systematically elicit expert judgments while avoiding groupthink?
- Brainstorming
- Delphi method (Correct answer)
- Root cause analysis
- Pareto analysis
Correct answer: Delphi method
The Delphi method anonymizes expert responses across iterative rounds, reducing bias and social pressure that can distort group risk estimates.
Question 6: A risk has a 5% probability of occurring and would cause $200,000 in damages. What is the Annual Loss Expectancy (ALE)?
- $4,000
- $10,000 (Correct answer)
- $40,000
- $200,000
Correct answer: $10,000
ALE = Single Loss Expectancy × Annual Rate of Occurrence = $200,000 × 0.05 = $10,000.
Question 7: Which risk response strategy involves shifting the financial impact of a risk to a third party, such as through insurance?
- Avoidance
- Mitigation
- Transfer (Correct answer)
- Acceptance
Correct answer: Transfer
Risk transfer moves the financial consequences of a risk to another party (insurer, vendor, contractor) without eliminating the risk itself.
Algorithms Risk Assessment & Management 2
Which risk metric combines the probability of a threat occurring with the magnitude of its potential impact?