CRMA Knowledge 3

Question 1

Key Risk Indicators (KRIs) are best described as:

Accepted Answer

Forward-looking metrics that signal increasing risk exposure before losses materialize.

Answer

KRIs are leading indicators designed to provide early warning of rising risk levels, enabling proactive management before a risk event causes harm.

Question 2

A risk heat map primarily serves to:

Accepted Answer

Visually prioritize risks by plotting likelihood against impact.

Answer

A heat map is a two-dimensional visualization that positions risks on axes of likelihood and impact, enabling stakeholders to quickly identify the most critical risks.

Question 3

Which risk assessment technique involves constructing narratives about how future conditions could unfold to stress-test the organization's strategy?

Accepted Answer

Scenario analysis

Answer

Scenario analysis explores plausible future states — including adverse ones — to evaluate how well current strategies and controls would hold up under different conditions.

Question 4

Monte Carlo simulation is used in risk management primarily to:

Accepted Answer

Model the probability distribution of outcomes by running thousands of random iterations.

Answer

Monte Carlo simulation repeatedly samples from input distributions to generate a probability distribution of possible outcomes, quantifying uncertainty in complex risk scenarios.

Question 5

A bow-tie analysis in risk management visually connects:

Accepted Answer

Causes of a risk event on the left to consequences on the right, with controls at the center.

Answer

A bow-tie diagram places the risk event at the center, shows threat causes on the left with preventive controls, and consequences on the right with recovery controls.

(CRMA) Certification in Risk Management Assurance Practice Test

(CRMA) Certification in Risk Management Assurance Practice Test

CRMA Knowledge 3