CRMA Risk Response and Treatment 2

Question 1

What is the key distinction between inherent risk and residual risk?

Accepted Answer

Inherent risk exists before controls; residual risk exists after controls are applied

Answer

Inherent risk is the raw risk before any controls or responses, while residual risk is the remaining exposure after management applies its risk responses.

Question 2

Insurance is primarily an example of which risk response strategy?

Accepted Answer

Risk transfer

Answer

Insurance transfers the financial consequences of a risk to an insurer in exchange for a premium, making it a classic example of risk transfer.

Question 3

In the context of CRMA, what is a 'control' in risk response?

Accepted Answer

Any action, policy, or procedure that reduces the likelihood or impact of a risk

Answer

A control is any action, policy, or procedure implemented by management to reduce the likelihood or impact of a risk event, supporting the risk response strategy.

Question 4

Which risk response approach is MOST appropriate for a low-likelihood, low-impact risk?

Accepted Answer

Risk acceptance

Answer

Low-likelihood, low-impact risks typically fall within risk tolerance, making acceptance the most cost-effective and practical response.

Question 5

What is the primary role of internal audit in evaluating an organization's risk responses?

Accepted Answer

Providing independent assurance that risk responses are effective and aligned with risk appetite

Answer

Internal audit's assurance role includes independently evaluating whether risk responses are operating effectively and whether residual risk aligns with the organization's risk appetite.

(CRMA) Certification in Risk Management Assurance Practice Test

(CRMA) Certification in Risk Management Assurance Practice Test

CRMA Risk Response and Treatment 2