BEC Strategic Planning and Risk Management 2 — Questions and Answers
Question 1: A competitive advantage is considered 'sustainable' when it is:
- Difficult for competitors to imitate, substitute, or replicate over time (Correct answer)
- Based solely on lower pricing than all rivals
- Derived from a single product innovation that won an industry award
- Dependent on a single key employee's expertise
Correct answer: Difficult for competitors to imitate, substitute, or replicate over time
A sustainable competitive advantage persists because it is rooted in capabilities or resources that are valuable, rare, costly to imitate, and not substitutable (the VRIN framework).
Question 2: Scenario planning in strategic management involves:
- Developing multiple plausible future situations and strategies for each (Correct answer)
- Creating a single most-likely forecast and planning around it
- Analyzing historical financial data to extrapolate future performance
- Setting performance targets based on competitor benchmarks
Correct answer: Developing multiple plausible future situations and strategies for each
Scenario planning creates several distinct but plausible future scenarios (e.g., optimistic, pessimistic, most likely) and develops strategic responses for each, improving organizational resilience.
Question 3: The COSO ERM framework identifies which of the following as a core component?
- Risk appetite and strategy alignment (Correct answer)
- Customer relationship management
- Supply chain optimization
- Tax planning and compliance
Correct answer: Risk appetite and strategy alignment
The COSO ERM framework centers on aligning risk appetite with strategy, ensuring that the level of risk an organization is willing to accept informs its strategic decisions.
Question 4: A company's mission statement typically describes:
- The organization's fundamental purpose and reason for existence (Correct answer)
- Specific three-year financial targets and market share goals
- The detailed operational processes used to produce goods
- The organizational chart and reporting structure
Correct answer: The organization's fundamental purpose and reason for existence
A mission statement articulates an organization's core purpose — why it exists, what it does, and for whom — providing direction and a foundation for strategic planning.
Question 5: Benchmarking as a strategic tool involves:
- Comparing performance metrics against best-in-class organizations to identify improvement opportunities (Correct answer)
- Setting internal performance standards based solely on historical company data
- Auditing financial statements against industry accounting standards
- Evaluating employee performance against job description requirements
Correct answer: Comparing performance metrics against best-in-class organizations to identify improvement opportunities
Benchmarking systematically compares an organization's processes and performance metrics to industry leaders or best practices to identify performance gaps and improvement opportunities.
Question 6: A company's residual risk is the risk that remains after:
- Implementing internal controls and other risk mitigation measures (Correct answer)
- Identifying all potential risks in the ERM process
- Purchasing comprehensive insurance coverage
- Completing a full risk audit by external auditors
Correct answer: Implementing internal controls and other risk mitigation measures
Residual risk is the level of risk remaining after management has applied controls and other mitigation strategies — it represents the risk the organization has chosen to accept.
BEC Strategic Planning and Risk Management 2
A competitive advantage is considered 'sustainable' when it is: