CME Risk Management & Decision-Making 2

Question 1

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

Accepted Answer

Transfer

Answer

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

Question 2

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

Accepted Answer

Supply chain risk

Answer

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

Question 3

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

Accepted Answer

Project D: 50% chance of $250K gain

Answer

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.

Question 4

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

Accepted Answer

Availability heuristic

Answer

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

Question 5

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

Accepted Answer

To document, track, and prioritize identified risks

Answer

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

(CME) Certified Management Executive Practice Test

(CME) Certified Management Executive Practice Test

CME Risk Management & Decision-Making 2