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

Operational risk arises from failures in internal processes, human error, system breakdowns, or external events that disrupt normal business functions.

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

Diversification spreads risk across multiple products or markets so that poor performance in one area does not devastate the entire business.

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 appetite is the level of risk an organization is willing to accept in pursuit of its goals before additional controls are deemed necessary.

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

Daily offsite backups reduce the impact of data loss events by ensuring recovery is possible, making this a risk reduction strategy.

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

Key person insurance compensates the business for financial losses that would result from the death or incapacitation of a critical individual.

ESB - Entrepreneurship and Small Business Certification Practice Test

ESB - Entrepreneurship and Small Business Certification Practice Test

ESB Risk Management 3