Enterprise Risk Management Flashcards
6 cards from real CIMA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Enterprise Risk Management flashcards as text
Which risk management framework, developed by COSO, is widely used as a reference standard for enterprise risk management?
Answer: ISO 31000
ISO 31000 is an international standard providing principles and guidelines for risk management, though COSO ERM is also widely referenced; both are used, but ISO 31000 is the global risk management standard.
What does 'inherent risk' mean in the context of audit and risk management?
Answer: The risk of material misstatement assuming no related controls exist
Inherent risk is the susceptibility of an account or assertion to material misstatement assuming there are no related internal controls.
Which of the following is an example of 'risk transfer'?
Answer: Taking out an insurance policy against business interruption losses
Risk transfer involves shifting the financial consequences of a risk to a third party, such as an insurer, through insurance or contractual arrangements.
In enterprise risk management, what is a 'risk owner'?
Answer: The individual accountable for managing a specific identified risk
A risk owner is the individual within the organization who is accountable for monitoring and managing a specific identified risk.
What type of risk is associated with changes in foreign exchange rates affecting the value of transactions?
Answer: Currency (transaction) risk
Currency transaction risk arises when exchange rate movements affect the value of foreign currency denominated transactions before they are settled.
Which risk management technique involves creating a reserve fund to cover potential future losses?
Answer: Self-insurance (risk retention fund)
Self-insurance involves setting aside funds (a risk retention fund) to cover potential future losses rather than purchasing external insurance.