RIMS Risk Identification & Evaluation 2 — Questions and Answers
Question 1: Which technique involves systematically examining each component of a system to identify how it could fail and the impact of that failure?
- Fault tree analysis
- Failure mode and effects analysis (FMEA) (Correct answer)
- Root cause analysis
- Bowtie analysis
Correct answer: Failure mode and effects analysis (FMEA)
FMEA systematically examines each component to identify potential failure modes and their effects on the overall system.
Question 2: A company discovers it relies on a single supplier for 80% of its critical components. This situation is best described as:
- Operational risk
- Concentration risk (Correct answer)
- Counterparty risk
- Liquidity risk
Correct answer: Concentration risk
Concentration risk arises when excessive exposure is tied to a single entity, geography, or source, creating vulnerability if that source fails.
Question 3: In risk evaluation, what does the term 'risk velocity' refer to?
- The frequency with which a risk event occurs
- The speed at which a risk can impact the organization after it materializes (Correct answer)
- The rate at which risk mitigation measures are implemented
- The pace of regulatory change affecting risk levels
Correct answer: The speed at which a risk can impact the organization after it materializes
Risk velocity measures how quickly a risk event can affect an organization once it is triggered, influencing response time requirements.
Question 4: Which qualitative risk assessment tool uses structured group sessions with expert facilitators to identify risks through brainstorming?
- Delphi technique
- Risk workshop (Correct answer)
- Monte Carlo simulation
- Sensitivity analysis
Correct answer: Risk workshop
Risk workshops bring together subject matter experts in facilitated sessions to collectively identify, discuss, and prioritize risks.
Question 5: The primary purpose of a risk register is to:
- Calculate the financial cost of all identified risks
- Document, track, and manage identified risks and their attributes (Correct answer)
- Assign legal liability for each risk to specific departments
- Replace the need for insurance by cataloguing self-insured risks
Correct answer: Document, track, and manage identified risks and their attributes
A risk register serves as the central repository for documenting identified risks, their assessments, owners, and treatment plans.
Question 6: When assessing inherent risk versus residual risk, inherent risk is defined as:
- The risk remaining after controls and mitigation measures are applied
- The raw risk exposure that exists before any controls are implemented (Correct answer)
- The risk transferred to a third party through insurance
- The risk accepted by management as part of normal operations
Correct answer: The raw risk exposure that exists before any controls are implemented
Inherent risk is the level of risk present in a process or activity before any risk controls or mitigation actions are considered.
Question 7: A pharmaceutical company assesses the probability that a drug trial will fail due to unforeseen side effects. This is an example of evaluating:
- Pure risk
- Speculative risk
- Hazard risk
- Strategic risk (Correct answer)
Correct answer: Strategic risk
Strategic risks arise from decisions about business direction, innovation, and investments where outcomes are uncertain and tied to organizational objectives.
RIMS Risk Identification & Evaluation 2
Which technique involves systematically examining each component of a system to identify how it could fail and the impact of that failure?