BUS532
Ethical Risk Management & Compliance
Midterms Exam Review (Qns & Ans)
2025
1. Which of the following best describes the primary goal of a
corporate compliance program?
- A. Preventing unethical conduct and ensuring adherence to
regulations
- B. Monitoring employee performance metrics
- C. Increasing shareholder value directly
- D. Developing marketing strategies
ANS: A
Rationale: Compliance programs focus on preventing legal
violations and fostering ethical behavior within an organization.
©2025
,2. What is the first step in the risk management process?
- A. Risk identification
- B. Risk evaluation
- C. Risk mitigation
- D. Risk communication
ANS: A
Rationale: Risk management begins with identifying
potential risks to the organization before they can be assessed or
mitigated.
3. Which of the following is NOT a typical component of a
corporate code of ethics?
- A. Statement of organizational values
- B. Guidelines for ethical decision-making
- C. Competitive pricing strategies
- D. Provisions for reporting misconduct
ANS: C
Rationale: A code of ethics typically focuses on ethical
behavior, not on operational tactics like pricing.
©2025
,4. Which framework emphasizes the "three lines of defense" in
risk management?
- A. ISO 31000
- B. COSO ERM Framework
- C. Basel II Framework
- D. The Three Lines Model
ANS: D
Rationale: The "Three Lines Model" organizes
responsibilities for risk management across operational
management, compliance functions, and internal audit.
5. Which type of risk involves the ethical implications of
decisions affecting stakeholders?
- A. Financial risk
- B. Operational risk
- C. Reputational risk
- D. Regulatory risk
ANS: C
Rationale: Reputational risk arises when unethical decisions
harm public perception of an organization.
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©2025
, Fill-in-the-Blank Questions
6. _____________ compliance refers to adhering to the spirit
and purpose of laws, not just their technical requirements.
ANS: Principled
Rationale: Principled compliance focuses on ethical conduct
and upholding the intent behind laws, fostering trust and
accountability.
7. The process of assessing the likelihood and impact of
identified risks is known as _____________.
ANS: Risk evaluation
Rationale: Risk evaluation involves analyzing potential risks
to prioritize mitigation efforts effectively.
8. In ethical risk management, a _____________ occurs when a
company’s policies conflict with societal values or stakeholder
expectations.
ANS: Ethical dilemma
Rationale: Ethical dilemmas arise when decisions involve
trade-offs between competing ethical principles.
©2025
Ethical Risk Management & Compliance
Midterms Exam Review (Qns & Ans)
2025
1. Which of the following best describes the primary goal of a
corporate compliance program?
- A. Preventing unethical conduct and ensuring adherence to
regulations
- B. Monitoring employee performance metrics
- C. Increasing shareholder value directly
- D. Developing marketing strategies
ANS: A
Rationale: Compliance programs focus on preventing legal
violations and fostering ethical behavior within an organization.
©2025
,2. What is the first step in the risk management process?
- A. Risk identification
- B. Risk evaluation
- C. Risk mitigation
- D. Risk communication
ANS: A
Rationale: Risk management begins with identifying
potential risks to the organization before they can be assessed or
mitigated.
3. Which of the following is NOT a typical component of a
corporate code of ethics?
- A. Statement of organizational values
- B. Guidelines for ethical decision-making
- C. Competitive pricing strategies
- D. Provisions for reporting misconduct
ANS: C
Rationale: A code of ethics typically focuses on ethical
behavior, not on operational tactics like pricing.
©2025
,4. Which framework emphasizes the "three lines of defense" in
risk management?
- A. ISO 31000
- B. COSO ERM Framework
- C. Basel II Framework
- D. The Three Lines Model
ANS: D
Rationale: The "Three Lines Model" organizes
responsibilities for risk management across operational
management, compliance functions, and internal audit.
5. Which type of risk involves the ethical implications of
decisions affecting stakeholders?
- A. Financial risk
- B. Operational risk
- C. Reputational risk
- D. Regulatory risk
ANS: C
Rationale: Reputational risk arises when unethical decisions
harm public perception of an organization.
---
©2025
, Fill-in-the-Blank Questions
6. _____________ compliance refers to adhering to the spirit
and purpose of laws, not just their technical requirements.
ANS: Principled
Rationale: Principled compliance focuses on ethical conduct
and upholding the intent behind laws, fostering trust and
accountability.
7. The process of assessing the likelihood and impact of
identified risks is known as _____________.
ANS: Risk evaluation
Rationale: Risk evaluation involves analyzing potential risks
to prioritize mitigation efforts effectively.
8. In ethical risk management, a _____________ occurs when a
company’s policies conflict with societal values or stakeholder
expectations.
ANS: Ethical dilemma
Rationale: Ethical dilemmas arise when decisions involve
trade-offs between competing ethical principles.
©2025
