Risk Management Flashcards
7 cards from real ESB practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Risk Management flashcards as text
Which of the following best describes 'operational risk' for a small business?
Answer: Risk of loss from failed internal processes, people, systems, or external events
Operational risk arises from failures in internal processes, human error, system breakdowns, or external events that disrupt normal business functions.
A food truck owner decides to diversify her menu across multiple cuisine types to avoid over-reliance on one food trend. This is an example of:
Answer: Risk diversification
Diversification spreads risk across multiple products or markets so that poor performance in one area does not devastate the entire business.
Which term describes the maximum amount of risk a small business owner is willing to accept in pursuit of business objectives?
Answer: Risk appetite
Risk appetite is the level of risk an organization is willing to accept in pursuit of its goals before additional controls are deemed necessary.
A small business owner backs up all digital data daily to an offsite cloud server to protect against data loss. This practice is best categorized as:
Answer: Risk reduction
Daily offsite backups reduce the impact of data loss events by ensuring recovery is possible, making this a risk reduction strategy.
What is the purpose of a 'key person' life insurance policy in a small business?
Answer: To protect the business financially if a critical owner or employee dies
Key person insurance compensates the business for financial losses that would result from the death or incapacitation of a critical individual.
Which of the following is an example of 'market risk' facing a small business?
Answer: A decrease in customer demand due to changing consumer preferences
Market risk refers to losses caused by changes in market conditions, such as shifts in consumer demand, competition, or economic trends.
After implementing risk controls, the remaining level of risk that still exists is known as:
Answer: Residual risk
Residual risk is the risk that remains after all risk management controls and mitigation strategies have been applied.