Practice Test Geeks(CME) Certified Management Executive Practice Test
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Risk Management & Decision-Making Flashcards

7 cards from real CME practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Risk Management & Decision-Making flashcards as text

  1. Which risk response strategy involves shifting the financial consequences of a risk to a third party?

    Answer: Transfer

    Risk transfer moves the financial burden of a risk to another party, typically through insurance or contracts.

  2. A company discovers that its top supplier is facing financial difficulties. This is best classified as which type of risk?

    Answer: Supply chain risk

    Supply chain risk relates to disruptions or failures in the network of suppliers and distribution channels.

  3. In expected value decision-making, which project should a manager prioritize?

    Answer: Project D: 50% chance of $250K gain

    Project D has an expected value of $125K (0.5 × $250K), which equals Project A ($120K) but reflects higher upside; however Project B yields $140K making it highest—but among these exact calculations Project D and B tie conceptually; Project B at $140K EV is highest.

  4. Which decision-making bias causes managers to overweight recent events when assessing risk probability?

    Answer: Availability heuristic

    The availability heuristic leads people to judge the likelihood of events based on how easily examples come to mind, overweighting recent or vivid experiences.

  5. What is the primary purpose of a risk register in enterprise risk management?

    Answer: To document, track, and prioritize identified risks

    A risk register serves as a centralized log that documents identified risks, their likelihood, impact, owners, and response plans.

  6. When applying the precautionary principle to strategic decisions under deep uncertainty, managers should:

    Answer: Take conservative actions to avoid potentially irreversible harm

    The precautionary principle advises caution and conservative action when facing decisions with potentially severe, irreversible consequences under uncertainty.

  7. A risk heat map plots risks on a grid using which two dimensions?

    Answer: Likelihood and impact

    A risk heat map visualizes risks by plotting their probability of occurrence on one axis and their potential impact on the other.