Finance for Non-Finance Managers Risk Management and Internal Controls 3

Question 1

Enterprise Risk Management (ERM) differs from traditional risk management primarily because it:

Accepted Answer

Takes a holistic, organization-wide view of all risks and their interrelationships

Answer

ERM considers all categories of risk across the entire organization and how they interact, rather than managing risks in isolated departmental silos.

Question 2

Business continuity planning (BCP) is a risk management practice that primarily aims to:

Accepted Answer

Ensure critical business operations can continue during and after a disruptive event

Answer

BCP identifies critical functions and creates plans to maintain or quickly restore those functions after disasters, cyberattacks, or other disruptive events.

Question 3

A company decides to exit a particular market because the financial risks are too high relative to the potential returns. This is an example of which risk response strategy?

Accepted Answer

Risk avoidance

Answer

Risk avoidance involves choosing not to engage in an activity or market because the level of risk is unacceptable, thereby eliminating the risk entirely.

Question 4

A whistleblower policy in an organization is primarily designed to:

Accepted Answer

Encourage and protect employees who report unethical or illegal activities

Answer

Whistleblower policies create safe channels for employees to report misconduct without fear of retaliation, strengthening governance and fraud detection.

Question 5

Which of the following statements best explains why diversification reduces financial risk?

Accepted Answer

It spreads exposure across different assets so losses in one area can be offset by gains in another

Answer

Diversification lowers overall risk because when assets are not perfectly correlated, losses in one area are likely offset by stable performance or gains in others.

Finance for Non-Finance Managers Practice Test

Finance for Non-Finance Managers Practice Test

Finance for Non-Finance Managers Risk Management and Internal Controls 3