Certified Management Accountant Risk Management 2

Question 1

An enterprise risk management (ERM) framework primarily differs from traditional risk management because it:

Accepted Answer

Integrates risk management across the entire organization

Answer

ERM takes a holistic, enterprise-wide view of risk rather than managing risks in isolated departmental silos.

Question 2

Which risk response strategy involves purchasing insurance to offset potential losses?

Accepted Answer

Risk transfer

Answer

Risk transfer shifts the financial consequence of a risk to a third party, such as an insurer.

Question 3

A company's risk appetite is best described as:

Accepted Answer

The amount of risk an organization is willing to accept in pursuit of its objectives

Answer

Risk appetite reflects the board-approved level of risk an organization is willing to tolerate to achieve strategic goals.

Question 4

In a risk heat map, a risk plotted in the upper-right quadrant typically indicates:

Accepted Answer

High likelihood and high impact

Answer

The upper-right quadrant of a heat map represents risks with both high probability and high impact, requiring immediate attention.

Question 5

Which of the following is an example of inherent risk?

Accepted Answer

Risk present in an activity before any controls are applied

Answer

Inherent risk is the raw level of risk in a process or activity before any mitigation or controls are in place.

Certified Management Accountant Practice Test