CFO Risk Management

Question 1

Under the 2017 COSO ERM framework (Integrating with Strategy and Performance), how many components are there?

Accepted Answer

Five

Answer

COSO ERM 2017 has five components: Governance & Culture; Strategy & Objective-Setting; Performance; Review & Revision; and Information, Communication & Reporting.

Question 2

A board states it will accept no more than a 5% decline in annual EBITDA from any single risk event. This statement best describes:

Accepted Answer

Risk tolerance

Answer

Risk tolerance is the acceptable amount of variation around a specific objective, often stated in measurable terms.

Question 3

In the IIA Three Lines Model, which function typically provides independent assurance to the board?

Accepted Answer

Internal audit

Answer

Internal audit is the third line and gives the governing body independent, objective assurance.

Question 4

Which metric is the best example of a key risk indicator (KRI) rather than a key performance indicator (KPI)?

Accepted Answer

Percentage of receivables more than 90 days past due

Answer

Rising aged receivables is a forward-looking warning sign of credit and liquidity risk, which is what a KRI measures.

Question 5

Residual risk is best defined as:

Accepted Answer

Risk left over after management responses and controls are applied

Answer

Residual risk is the exposure that remains after mitigation; inherent risk is the exposure before any response.

CFO - Certified Chief Financial Officer Practice Test

CFO - Certified Chief Financial Officer Practice Test

CFO Risk Management