Risk Management and Internal Controls Flashcards
7 cards from real RCC 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 and Internal Controls flashcards as text
Under the COSO ERM framework, which component directly addresses the organization's culture, values, and ethical behavior?
Answer: Governance and Culture
The Governance and Culture component of COSO ERM sets the tone for risk management, embedding ethical values and behaviors throughout the organization.
A detective control would be MOST useful in which scenario?
Answer: Reconciling bank statements to general ledger entries monthly
Monthly bank reconciliations detect discrepancies after transactions have occurred, making them a classic detective control.
Which of the following is an example of a key risk indicator (KRI)?
Answer: The rate of employee turnover in the compliance department
High compliance department turnover is a leading indicator that may signal future control breakdowns, making it a KRI.
A compliance officer at a bank is asked to assess the risk of money laundering through wire transfers. Which approach is most appropriate?
Answer: Apply a risk-based approach analyzing transaction volume, geography, and customer type
A risk-based approach tailors AML controls to the actual risk profile of transactions, customers, and geographies rather than applying blanket measures.
The purpose of a control self-assessment (CSA) program is to:
Answer: Enable management and staff to evaluate the effectiveness of controls in their own areas
CSA programs empower business unit personnel to assess control design and operating effectiveness, fostering risk ownership at the operational level.
Which risk response strategy involves purchasing insurance or outsourcing a function to a third party?
Answer: Risk transfer
Risk transfer shifts the financial consequences of a risk to another party, such as an insurer or outsourcing provider.
When a company chooses not to enter a new market because the compliance risks are too high, it is applying which risk response?
Answer: Risk avoidance
Risk avoidance means deciding not to engage in an activity that gives rise to the risk, thereby eliminating the risk exposure entirely.