COM Risk Assessment & Mitigation 5

Question 1

In quantitative risk analysis, 'Expected Monetary Value' (EMV) is calculated as:

Accepted Answer

Probability of occurrence multiplied by the financial impact

Answer

EMV = Probability × Impact, providing a dollar-weighted average outcome used to compare and prioritize risks or decision options.

Question 2

Which risk monitoring technique involves setting predefined thresholds that trigger escalation when breached?

Accepted Answer

Risk threshold monitoring with KRIs

Answer

KRI thresholds define acceptable risk levels; when a metric crosses the threshold, it automatically signals that management action is required.

Question 3

An operations manager is deciding between two suppliers. Supplier A is cheaper but has a 20% chance of causing a $500K disruption. Supplier B costs $80K more but eliminates the disruption risk. Based on EMV, which is preferable?

Accepted Answer

Supplier B, because its EMV savings ($100K) exceed the $80K premium

Answer

Supplier A's EMV cost = 20% × $500K = $100K expected loss, which exceeds the $80K premium for Supplier B, making B the rational choice.

Question 4

Which phase of the risk management process involves determining which risks need responses and in what priority order?

Accepted Answer

Risk analysis and evaluation

Answer

Risk analysis and evaluation assesses the significance of each risk and ranks them so that limited mitigation resources are directed at the highest priorities.

Question 5

A 'risk owner' in an operational risk framework is responsible for:

Accepted Answer

Monitoring, managing, and reporting on a specific assigned risk

Answer

A risk owner is the individual accountable for ensuring that a particular risk is properly monitored, controlled, and reported throughout its lifecycle.

(COM) Certified Operations Manager Practice Test

(COM) Certified Operations Manager Practice Test

COM Risk Assessment & Mitigation 5