RSK 2601 TEST BANK
:
ENTERPRISE RISK
MANAGEMENT EXAM
REVIEW QUESTIONS AND
WELL DETAILED
ANSWERS WITH
RATIONALES
1. Which of the following best describes Enterprise Risk Management
(ERM)?
● A) A method for identifying and mitigating financial risks only.
● B) A framework for managing all risks across an organization in a holistic manner.
● C) A strategy focused solely on compliance with regulatory requirements.
● D) A system for managing only operational risks.
Answer: B
Explanation: ERM is a comprehensive and integrated framework that considers all types of
risks—strategic, operational, financial, and compliance—within an organization. It focuses on
identifying, assessing, and mitigating risks in a way that aligns with the organization's overall
objectives.
2. Which risk management standard is commonly associated with ERM?
● A) COSO ERM Framework
● B) Basel II Accord
● C) ISO 31000
● D) Sarbanes-Oxley Act
, Answer: A
Explanation: The COSO ERM framework is widely used in the implementation of Enterprise
Risk Management systems. It helps organizations assess risk in relation to their objectives and
develop appropriate strategies for risk management.
3. What is the primary goal of ERM?
● A) Minimize costs associated with compliance.
● B) Achieve regulatory compliance.
● C) Maximize shareholder value by balancing risk and opportunity.
● D) Eliminate all risks within an organization.
Answer: C
Explanation: The goal of ERM is not to eliminate all risks but to optimize risk-taking by
balancing risks with opportunities, which ultimately maximizes value for shareholders.
4. Which of the following is NOT a key component of ERM?
● A) Risk governance
● B) Risk culture
● C) Risk modeling
● D) Risk-free investing
Answer: D
Explanation: ERM deals with managing risks, not eliminating them through risk-free
investments. Risk governance, culture, and modeling are integral parts of ERM.
5. Which is the correct sequence in the risk management process?
● A) Identification, Response, Evaluation, Monitoring
● B) Identification, Evaluation, Response, Monitoring
● C) Response, Identification, Monitoring, Evaluation
● D) Evaluation, Monitoring, Response, Identification
Answer: B
Explanation: The correct sequence involves first identifying risks, then evaluating their potential
impact, responding with appropriate strategies, and continuously monitoring them to adjust the
response as needed.
6. Which of the following is a qualitative method of risk assessment?
● A) Scenario analysis
● B) Monte Carlo simulation
● C) Value at Risk (VaR)
● D) Sensitivity analysis
Answer: A
Explanation: Scenario analysis is a qualitative method that examines different potential future
scenarios to assess the impact of risks. Monte Carlo simulations, VaR, and sensitivity analysis
are quantitative techniques.
:
ENTERPRISE RISK
MANAGEMENT EXAM
REVIEW QUESTIONS AND
WELL DETAILED
ANSWERS WITH
RATIONALES
1. Which of the following best describes Enterprise Risk Management
(ERM)?
● A) A method for identifying and mitigating financial risks only.
● B) A framework for managing all risks across an organization in a holistic manner.
● C) A strategy focused solely on compliance with regulatory requirements.
● D) A system for managing only operational risks.
Answer: B
Explanation: ERM is a comprehensive and integrated framework that considers all types of
risks—strategic, operational, financial, and compliance—within an organization. It focuses on
identifying, assessing, and mitigating risks in a way that aligns with the organization's overall
objectives.
2. Which risk management standard is commonly associated with ERM?
● A) COSO ERM Framework
● B) Basel II Accord
● C) ISO 31000
● D) Sarbanes-Oxley Act
, Answer: A
Explanation: The COSO ERM framework is widely used in the implementation of Enterprise
Risk Management systems. It helps organizations assess risk in relation to their objectives and
develop appropriate strategies for risk management.
3. What is the primary goal of ERM?
● A) Minimize costs associated with compliance.
● B) Achieve regulatory compliance.
● C) Maximize shareholder value by balancing risk and opportunity.
● D) Eliminate all risks within an organization.
Answer: C
Explanation: The goal of ERM is not to eliminate all risks but to optimize risk-taking by
balancing risks with opportunities, which ultimately maximizes value for shareholders.
4. Which of the following is NOT a key component of ERM?
● A) Risk governance
● B) Risk culture
● C) Risk modeling
● D) Risk-free investing
Answer: D
Explanation: ERM deals with managing risks, not eliminating them through risk-free
investments. Risk governance, culture, and modeling are integral parts of ERM.
5. Which is the correct sequence in the risk management process?
● A) Identification, Response, Evaluation, Monitoring
● B) Identification, Evaluation, Response, Monitoring
● C) Response, Identification, Monitoring, Evaluation
● D) Evaluation, Monitoring, Response, Identification
Answer: B
Explanation: The correct sequence involves first identifying risks, then evaluating their potential
impact, responding with appropriate strategies, and continuously monitoring them to adjust the
response as needed.
6. Which of the following is a qualitative method of risk assessment?
● A) Scenario analysis
● B) Monte Carlo simulation
● C) Value at Risk (VaR)
● D) Sensitivity analysis
Answer: A
Explanation: Scenario analysis is a qualitative method that examines different potential future
scenarios to assess the impact of risks. Monte Carlo simulations, VaR, and sensitivity analysis
are quantitative techniques.
