Certified Management Accountant Risk Management 5 — Questions and Answers
Question 1: Which committee is primarily responsible for risk oversight at the board level in a publicly traded US company?
- Compensation committee
- Nominating and governance committee
- Audit committee (Correct answer)
- Executive committee
Correct answer: Audit committee
The audit committee typically oversees the organization's risk management framework and internal control environment at the board level.
Question 2: Expected Monetary Value (EMV) is calculated as:
- Probability × Impact (Correct answer)
- Impact ÷ Probability
- Probability + Impact
- Impact − Probability
Correct answer: Probability × Impact
EMV is the product of the probability of a risk event occurring and its monetary impact, used to prioritize risk responses.
Question 3: Which of the following is an example of reputational risk?
- Rising raw material costs squeezing margins
- A data breach exposing customer personal information leading to public backlash (Correct answer)
- Interest rate increases raising borrowing costs
- A supplier delivering substandard components
Correct answer: A data breach exposing customer personal information leading to public backlash
Reputational risk involves damage to an organization's brand or public standing, such as negative publicity following a data breach.
Question 4: A risk that has been identified but for which management has consciously decided to do nothing is said to be:
- Avoided
- Transferred
- Accepted (Correct answer)
- Mitigated
Correct answer: Accepted
Risk acceptance (also called risk retention) is when an organization acknowledges a risk and chooses to bear any resulting loss without further action.
Question 5: In the context of supply chain risk, 'single sourcing' increases which type of risk?
- Currency risk
- Concentration risk (Correct answer)
- Compliance risk
- Liquidity risk
Correct answer: Concentration risk
Relying on a single supplier concentrates dependency risk — if that supplier fails, the entire supply is disrupted.
Question 6: Business continuity planning (BCP) is designed primarily to:
- Eliminate all risks before they occur
- Ensure critical operations can continue or recover quickly after a disruption (Correct answer)
- Transfer catastrophic risks to insurance companies
- Identify and rank all risks by probability
Correct answer: Ensure critical operations can continue or recover quickly after a disruption
BCP focuses on maintaining or rapidly restoring essential business functions following a significant disruption event.
Question 7: Which of the following risk indicators would be considered a lagging indicator?
- Number of employee safety training sessions completed
- Percentage of IT systems with outdated patches
- Number of customer complaints received last quarter (Correct answer)
- Ratio of new-hire onboarding completion rates
Correct answer: Number of customer complaints received last quarter
Lagging indicators measure outcomes that have already occurred, such as complaint counts, rather than predicting future risk events.
Certified Management Accountant Risk Management 5
Which committee is primarily responsible for risk oversight at the board level in a publicly traded US company?