Strategic Risk and Governance Flashcards
7 cards from real CRA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Strategic Risk and Governance flashcards as text
A competitor releases a disruptive technology that threatens to erode 30% of your firm's market share within three years. This is BEST classified as:
Answer: Strategic risk requiring board-level response and possible strategy revision
Competitive disruption that threatens the core business model is a strategic risk warranting board-level attention and potential strategy realignment.
Residual risk is defined as the level of risk that remains after:
Answer: Existing controls have been applied to inherent risk
Residual risk is inherent risk minus the effect of existing controls, representing the actual exposure the organization retains.
A risk architect recommends a risk aggregation approach. Which scenario BEST illustrates the benefit of risk aggregation?
Answer: Identifying that two separately reported low-risk exposures combine to create a material enterprise-level risk
Risk aggregation reveals combined exposures that are not apparent when risks are viewed in isolation, preventing underestimation of enterprise-level risk.
Scenario analysis is preferred over historical data analysis for strategic risk assessment PRIMARILY because:
Answer: Scenario analysis can assess risks with no historical precedent or with rare, severe outcomes
Scenario analysis is essential for tail risks, emerging risks, and novel threats that lack sufficient historical loss data for statistical estimation.
The governance principle of 'tone at the top' refers most directly to:
Answer: Senior leadership's visible commitment to ethical conduct and sound risk management
Tone at the top describes how senior leaders' attitudes, behaviors, and priorities shape the organization's risk culture throughout the hierarchy.
When assessing strategic risks, 'velocity' refers to:
Answer: The speed at which a risk event could impact the organization once triggered
Risk velocity measures how quickly a risk materializes and impacts the organization, influencing how much response time is available.
A risk owner's PRIMARY accountability in strategic risk governance is to:
Answer: Monitor assigned risks, ensure controls are effective, and escalate if appetite is breached
Risk owners (typically first-line management) are accountable for day-to-day monitoring, control effectiveness, and timely escalation of material risk changes.