CRAP Risk Assessment & Management 1 — Questions and Answers
Question 1: What is the first step in the risk management process?
- Identify potential risks through systematic analysis (Correct answer)
- Purchase insurance for all possible risks
- Ignore risks until they become problems
- Transfer all risks to third parties
Correct answer: Identify potential risks through systematic analysis
Systematic risk identification is the foundational first step, as risks cannot be managed or mitigated until they are identified and understood.
Question 2: How should risks be prioritized?
- Based on probability of occurrence and potential impact (Correct answer)
- Alphabetically by risk name
- By the order in which they were identified
- All risks should receive equal attention
Correct answer: Based on probability of occurrence and potential impact
Prioritizing by probability and impact ensures resources are allocated to the risks most likely to cause significant harm, maximizing risk management effectiveness.
Question 3: What is risk mitigation?
- Taking actions to reduce the likelihood or impact of identified risks (Correct answer)
- Eliminating all risks completely
- Ignoring risks with low probability
- Transferring all responsibility to insurers
Correct answer: Taking actions to reduce the likelihood or impact of identified risks
Risk mitigation involves specific actions to reduce either the likelihood of risk occurrence or its potential impact, bringing residual risk to acceptable levels.
Question 4: When should a risk register be updated?
- Continuously as new risks emerge and existing risks change (Correct answer)
- Only during annual reviews
- When a risk event actually occurs
- Only when auditors request it
Correct answer: Continuously as new risks emerge and existing risks change
Continuous updates to the risk register ensure it reflects the current risk landscape, enabling timely responses to new and changing risks.
Question 5: What is residual risk?
- The risk remaining after mitigation measures have been applied (Correct answer)
- The original risk before any action
- Risk that has been completely eliminated
- Risk that only affects other organizations
Correct answer: The risk remaining after mitigation measures have been applied
Residual risk is what remains after mitigation measures are applied, and it must be accepted, further reduced, or transferred based on organizational risk tolerance.
Question 6: How does risk appetite influence management decisions?
- It defines the level of risk an organization is willing to accept in pursuit of objectives (Correct answer)
- It eliminates the need for risk assessment
- It only applies to financial risks
- It is determined solely by regulators
Correct answer: It defines the level of risk an organization is willing to accept in pursuit of objectives
Risk appetite defines acceptable risk levels in pursuit of objectives, guiding decisions about which risks to accept, mitigate, transfer, or avoid.
CRAP Risk Assessment & Management 1
What is the first step in the risk management process?