Corporate Governance Risk Management & Internal Controls 3

Question 1

What is a 'heat map' in enterprise risk management?

Accepted Answer

A visual tool that plots risks by likelihood and impact to prioritize risk management efforts

Answer

A risk heat map is a two-dimensional grid that categorizes risks by probability of occurrence and magnitude of impact, helping prioritize which risks require the most attention.

Question 2

What is a 'significant deficiency' in internal controls, compared to a material weakness?

Accepted Answer

A control deficiency less severe than a material weakness but still important enough to warrant attention by those responsible for oversight

Answer

A significant deficiency is a noteworthy control gap that doesn't rise to the level of material weakness but warrants reporting to the audit committee and management.

Question 3

What is 'scenario analysis' in risk management?

Accepted Answer

The process of evaluating how specific hypothetical events or conditions could affect the organization's risk profile and financial outcomes

Answer

Scenario analysis examines the impact of specific adverse or favorable events on organizational performance, helping stress-test strategies and identify vulnerabilities.

Question 4

What is 'operational risk' in corporate governance?

Accepted Answer

The risk of loss from failed internal processes, people, systems, or external events

Answer

Operational risk encompasses losses from inadequate or failed processes, human error, system failures, and external events such as natural disasters or cyberattacks.

Question 5

What does 'tone at the top' mean in the context of internal controls?

Accepted Answer

The ethical culture and commitment to integrity set by senior leadership that permeates the entire organization

Answer

Tone at the top refers to the ethical environment created by the board and senior executives through their words, actions, and priorities, which shapes the organization's overall culture.

Corporate Governance Practice Test

Corporate Governance Practice Test

Corporate Governance Risk Management & Internal Controls 3