ESB Risk Management 3

Question 1

Which of the following best describes 'operational risk' for a small business?

Accepted Answer

Risk of loss from failed internal processes, people, systems, or external events

Answer

Risk from fluctuating interest rates on loans

Answer

Risk from a competitor launching a similar product

Answer

Risk from foreign currency exchange fluctuations

Question 2

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:

Accepted Answer

Risk diversification

Answer

Risk pooling

Answer

Risk transfer

Answer

Risk avoidance

Question 3

Which term describes the maximum amount of risk a small business owner is willing to accept in pursuit of business objectives?

Accepted Answer

Risk appetite

Answer

Risk threshold

Answer

Risk exposure

Answer

Risk premium

Question 4

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:

Accepted Answer

Risk reduction

Answer

Risk avoidance

Answer

Risk transfer

Answer

Risk acceptance

Question 5

What is the purpose of a 'key person' life insurance policy in a small business?

Accepted Answer

To protect the business financially if a critical owner or employee dies

Answer

To reward high-performing employees with bonuses

Answer

To provide health benefits to all staff members

Answer

To fund retirement accounts for senior managers

Question 6

Which of the following is an example of 'market risk' facing a small business?

Accepted Answer

A decrease in customer demand due to changing consumer preferences

Answer

An employee accidentally deleting important files

Answer

A supplier failing to deliver on time

Answer

An injury occurring on business premises

Question 7

After implementing risk controls, the remaining level of risk that still exists is known as:

Accepted Answer

Residual risk

Answer

Gross risk

Answer

Inherent risk

Answer

Systemic risk