CED Risk Assessment & Management 3

Question 1

A nonprofit board member wants to personally guarantee a loan to the organization. Which risk concern should the executive director raise?

Accepted Answer

Conflict of interest that may compromise board member objectivity

Answer

A board member personally guaranteeing organizational loans creates a conflict of interest that can compromise independent governance.

Question 2

An executive director notices that one staff member has sole control over accounts payable and bank reconciliation. This situation represents:

Accepted Answer

A lack of internal controls creating fraud risk

Answer

Concentrating financial duties in one person without oversight eliminates checks and balances, significantly increasing the risk of fraud or error.

Question 3

In enterprise risk management (ERM), which element ensures that risk management is embedded throughout all organizational levels?

Accepted Answer

Risk culture and governance integration

Answer

ERM requires a risk-aware culture and governance integration so that risk thinking is embedded in decisions at every level of the organization.

Question 4

Which scenario illustrates a 'transfer' strategy in risk management?

Accepted Answer

Purchasing general liability insurance for an annual gala

Answer

Purchasing insurance transfers the financial consequence of a risk event to the insurer.

Question 5

What is a 'risk appetite' as used in executive-level risk management?

Accepted Answer

The amount and type of risk an organization is willing to accept in pursuit of its mission

Answer

Risk appetite defines how much risk an organization's leadership is prepared to accept while pursuing strategic objectives.

(CED) Certified Executive Director Practice Test