Enterprise Risk Management Flashcards

What type of risk arises from inadequate or failed internal processes, people, systems, or external events?

Answer: Operational risk

Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people, systems, or from external events.

Which of the following is an example of a 'strategic risk'?

Answer: A new competitor entering the market and eroding market share

Strategic risk relates to threats to the organization's long-term objectives, such as new competition, technological disruption, or changes in market demand.

What does 'business continuity planning' aim to achieve?

Answer: Ensuring an organization can continue critical operations following a disruptive event

Business continuity planning ensures that an organization can maintain or quickly resume critical business functions following a disruptive event such as a disaster or cyberattack.

In the COSO ERM framework, which component involves setting objectives consistent with the organization's risk appetite?

Answer: Objective setting

In the COSO ERM framework, objective setting is the component where management establishes objectives aligned with the organization's risk appetite and mission.

Which of the following describes a 'key risk indicator' (KRI)?

Answer: A forward-looking metric that provides early warning signals of increasing risk exposure

A key risk indicator is a forward-looking metric that signals changes in an organization's risk exposure, providing early warnings before risks materialize.

What is the main purpose of a 'stress test' in risk management?

Answer: Evaluating how an organization or portfolio performs under extreme but plausible adverse scenarios

Stress tests evaluate how an organization, portfolio, or financial position would perform under extreme adverse scenarios to identify vulnerabilities.