Financial Risk Management Flashcards
7 cards from real CPFM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Risk Management flashcards as text
Operational risk includes losses arising from:
Answer: Failed internal processes, people, systems, or external events
Operational risk stems from inadequate or failed processes, human error, systems failures, or external events.
A risk register is primarily used to:
Answer: Document, assess, and track identified risks and their controls
A risk register catalogs identified risks along with their likelihood, impact, owners, and mitigation actions.
In a risk matrix, risks are typically prioritized by combining:
Answer: Likelihood and impact
Risk matrices rank risks by multiplying or plotting probability of occurrence against severity of impact.
Which response is an example of risk avoidance?
Answer: Declining to enter a market deemed too risky
Risk avoidance means not undertaking the activity that creates the risk in the first place.
Hedging with a forward contract locks in:
Answer: A predetermined future price or rate
A forward contract fixes the price or exchange rate for a future transaction, removing uncertainty.
Enterprise Risk Management (ERM) is best characterized by:
Answer: A holistic, organization-wide approach to managing all risk categories
ERM integrates the identification and management of strategic, operational, financial, and compliance risks across the entire organization.
A company's risk appetite refers to:
Answer: The amount and type of risk it is willing to accept to pursue objectives
Risk appetite expresses the level of risk an organization is prepared to take on in pursuit of its goals.