Risk Management Flashcards

Which of the following is an operational risk rather than a financial risk?

Answer: A key supplier failing to deliver materials on time

Operational risk arises from failures in internal processes, people, or systems — such as supply chain disruptions.

Value at Risk (VaR) measures:

Answer: The expected loss at a given confidence level over a specified period

VaR estimates the potential loss in portfolio value that will not be exceeded with a given probability over a defined time horizon.

A risk register typically includes all of the following EXCEPT:

Answer: Insurance premium amounts paid

A risk register documents identified risks, their assessments, ownership, and responses — not accounting entries for insurance premiums.

Which risk management concept involves creating multiple layers of controls so that if one fails, others remain?

Answer: Defense in depth

Defense in depth (or layered controls) ensures redundancy so that no single control failure creates a catastrophic exposure.

When assessing the impact of a risk, which dimension is NOT typically considered?

Answer: The risk owner's personal career risk

Risk impact assessments focus on organizational dimensions — financial, operational, reputational, and regulatory — not personal career considerations.

A company diversifies its investments across multiple asset classes to reduce portfolio risk. This strategy is an example of:

Answer: Risk mitigation through diversification

Diversification reduces concentration risk by spreading exposure across assets whose returns are not perfectly correlated.

Which of the following best represents a strategic risk for a company?

Answer: A competitor launching a disruptive technology that erodes market share

Strategic risks threaten an organization's ability to achieve its long-term objectives, such as competitive disruption.