COM Risk Assessment & Mitigation 2 — Questions and Answers
Question 1: A risk matrix plots likelihood against which other dimension?
- Time to occurrence
- Impact severity (Correct answer)
- Cost of mitigation
- Number of stakeholders affected
Correct answer: Impact severity
A risk matrix uses two axes — likelihood (probability) and impact severity — to prioritize risks visually.
Question 2: Which risk response strategy involves purchasing insurance or outsourcing a risky activity?
- Risk avoidance
- Risk acceptance
- Risk transfer (Correct answer)
- Risk reduction
Correct answer: Risk transfer
Risk transfer shifts the financial or operational burden of a risk to a third party, such as through insurance or contracts.
Question 3: In a Failure Mode and Effects Analysis (FMEA), the Risk Priority Number (RPN) is calculated as:
- Severity × Occurrence × Detection (Correct answer)
- Probability × Impact × Urgency
- Frequency × Magnitude × Cost
- Likelihood × Severity × Exposure
Correct answer: Severity × Occurrence × Detection
RPN = Severity × Occurrence × Detection, giving a numerical score to prioritize failure modes for corrective action.
Question 4: What is the primary purpose of a risk register in operations management?
- To assign blame when risks materialize
- To document identified risks, their likelihood, impact, and response plans (Correct answer)
- To eliminate all operational risks
- To satisfy regulatory reporting requirements only
Correct answer: To document identified risks, their likelihood, impact, and response plans
A risk register is a living document that captures identified risks along with their probability, impact, owners, and mitigation strategies.
Question 5: Which approach to risk quantification uses probability distributions and repeated simulations to model uncertainty?
- Delphi technique
- Sensitivity analysis
- Monte Carlo simulation (Correct answer)
- Fault tree analysis
Correct answer: Monte Carlo simulation
Monte Carlo simulation runs thousands of scenarios with random variable inputs to generate a probability distribution of outcomes.
Question 6: A company discovers that a single supplier provides 80% of a critical component. This represents which type of risk?
- Market risk
- Concentration risk (Correct answer)
- Compliance risk
- Reputational risk
Correct answer: Concentration risk
Concentration risk arises when excessive dependence on a single source, customer, or supplier creates vulnerability to disruption.
Question 7: When a risk is deemed too minor to address actively, the chosen response strategy is:
- Risk avoidance
- Risk mitigation
- Risk acceptance (Correct answer)
- Risk exploitation
Correct answer: Risk acceptance
Risk acceptance means acknowledging a risk and choosing not to take proactive action, often used when the cost of mitigation exceeds the expected loss.
COM Risk Assessment & Mitigation 2
A risk matrix plots likelihood against which other dimension?