CRMA Risk Response and Treatment

Question 1

Which of the following best describes the four primary risk response strategies recognized in enterprise risk management?

Accepted Answer

Avoid, Reduce, Share, Accept

Answer

The four primary risk response strategies are Avoid, Reduce (mitigate), Share (transfer), and Accept, as defined in ERM frameworks including COSO.

Question 2

Risk avoidance as a response strategy is most appropriate when:

Accepted Answer

The cost of other responses exceeds the potential benefit

Answer

Risk avoidance is appropriate when the cost of mitigation or transfer exceeds the expected benefit, making it more rational to exit the risk-generating activity entirely.

Question 3

Which risk response strategy involves shifting the financial consequence of a risk to a third party?

Accepted Answer

Risk transfer

Answer

Risk transfer shifts the financial burden of a risk to a third party, commonly through insurance, outsourcing, or contractual agreements.

Question 4

Residual risk is best defined as:

Accepted Answer

The risk remaining after management has applied risk responses

Answer

Residual risk is the level of risk that remains after management has implemented risk responses and controls to address the inherent risk.

Question 5

Risk acceptance is most appropriate when:

Accepted Answer

The risk falls within the organization's defined risk appetite and tolerance

Answer

Risk acceptance is appropriate when residual risk falls within the organization's established risk appetite and tolerance, meaning the organization is comfortable bearing the risk.

(CRMA) Certification in Risk Management Assurance Practice Test

(CRMA) Certification in Risk Management Assurance Practice Test

CRMA Risk Response and Treatment