CRO Emerging Risk Identification 2 — Questions and Answers
Question 1: Which horizon-scanning technique uses structured debate between advocates and challengers to test risk assumptions?
- Delphi method
- Dialectical inquiry (Correct answer)
- Scenario analysis
- PESTLE analysis
Correct answer: Dialectical inquiry
Dialectical inquiry pits opposing viewpoints against each other to surface hidden assumptions and stress-test risk narratives.
Question 2: A CRO receives a report that a competitor's AI-based underwriting model produced discriminatory outcomes. Which emerging risk category does this most directly represent?
- Reputational risk
- Algorithmic bias risk (Correct answer)
- Operational resilience risk
- Systemic liquidity risk
Correct answer: Algorithmic bias risk
Algorithmic bias risk arises when AI/ML models embed or amplify discriminatory patterns, creating regulatory and legal exposure.
Question 3: The 'velocity' dimension of an emerging risk refers to:
- The probability the risk will materialize
- The financial magnitude of potential losses
- How quickly the risk can escalate from signal to impact (Correct answer)
- The number of business lines exposed
Correct answer: How quickly the risk can escalate from signal to impact
Velocity measures the speed of risk escalation, which is especially critical for emerging risks that can move from early signal to full impact faster than traditional controls can respond.
Question 4: Which of the following is the BEST indicator that an organization has an effective emerging risk identification process?
- The risk register has not changed in two years
- Risk discussions are limited to quantifiable threats
- Novel risks are added to the register before they cause losses (Correct answer)
- All identified risks have assigned historical loss data
Correct answer: Novel risks are added to the register before they cause losses
An effective process captures novel threats proactively, before they manifest as actual losses, enabling preventive action.
Question 5: Quantum computing is flagged as an emerging risk for financial institutions primarily because it threatens to:
- Increase energy consumption in data centers
- Break current public-key cryptographic standards (Correct answer)
- Replace human traders with autonomous agents
- Reduce the cost of regulatory compliance
Correct answer: Break current public-key cryptographic standards
Sufficiently powerful quantum computers could defeat RSA and elliptic-curve encryption, exposing sensitive financial data and transactions.
Question 6: When applying the SOAR framework to emerging risks, the 'Assess' step primarily involves:
- Deploying controls to reduce exposure
- Determining the risk's likelihood and potential impact (Correct answer)
- Scanning the external environment for weak signals
- Reporting findings to the board
Correct answer: Determining the risk's likelihood and potential impact
In SOAR (Scan, Orient, Assess, Respond), the Assess step evaluates the identified signal's probability and magnitude to prioritize response.
Question 7: Biodiversity loss is increasingly tracked as an emerging financial risk because it can lead to:
- Higher corporate tax rates globally
- Physical and transition risks for companies dependent on ecosystem services (Correct answer)
- Reduced demand for sustainable investment products
- Lower reinsurance premiums in nature-exposed sectors
Correct answer: Physical and transition risks for companies dependent on ecosystem services
Companies relying on pollination, clean water, or other ecosystem services face physical disruption, while policy responses create transition risks similar to those seen in climate risk.
CRO Emerging Risk Identification 2
Which horizon-scanning technique uses structured debate between advocates and challengers to test risk assumptions?