ESB Risk Management 2

Question 1

Which of the following is the FIRST step in a formal risk management process?

Accepted Answer

Identify and assess potential risks

Answer

The first step in risk management is identifying and assessing potential risks before any controls or mitigation strategies can be applied.

Question 2

A small retailer installs a sprinkler system and fire extinguishers to reduce potential fire damage. This is an example of:

Accepted Answer

Risk reduction

Answer

Risk reduction involves taking proactive steps to lower the likelihood or severity of a risk, such as installing safety equipment.

Question 3

What is 'speculative risk' in entrepreneurship?

Accepted Answer

Risk that can result in loss, gain, or no change

Answer

Speculative risk has three possible outcomes — gain, loss, or no change — making it inherent to entrepreneurial decision-making.

Question 4

A small business uses a SWOT analysis partly to:

Accepted Answer

Identify internal and external risks alongside opportunities

Answer

A SWOT analysis helps identify Weaknesses and Threats — internal and external risk factors — alongside Strengths and Opportunities.

Question 5

Which type of insurance specifically protects a small business owner if a client claims that professional advice caused them financial harm?

Accepted Answer

Professional liability (errors & omissions) insurance

Answer

Professional liability insurance (also called E&O) covers claims that a business's professional advice or services caused a client financial loss.

ESB - Entrepreneurship and Small Business Certification Practice Test