RSK 2601 TEST BANK ENTERPRISE
RISK MANAGEMENT QUESTIONS AND
ANSWERS 2025
1. Define Enterprise Risk Management (ERM).
ERM is a coordinated approach to identifying, assessing, managing, and monitoring all
types of risks across an organization to achieve its objectives and protect stakeholder
value.
2. Differentiate between traditional risk management and enterprise risk
management.
Traditional risk management focuses on individual risks within departments, while ERM
takes an integrated, organization-wide approach to manage all risks collectively.
3. List four objectives of risk management.
To protect organizational assets, ensure continuity, support informed decision-making,
and increase stakeholder confidence.
4. What techniques can be used to identify risks in an organization?
Brainstorming, SWOT analysis, interviews, risk checklists, risk workshops, and
reviewing historical data.
5. Explain the difference between qualitative and quantitative risk assessment.
Qualitative assessment uses descriptive terms such as high, medium, or low, whereas
quantitative assessment expresses risk in numerical terms such as probability or
financial impact.
6. Name the four main strategies used to respond to risks.
Avoid, reduce, transfer, and accept.
7. Differentiate between risk avoidance and risk mitigation.
Risk avoidance eliminates the risk entirely, while risk mitigation reduces the impact or
likelihood of the risk.
8. What are the components of the COSO ERM framework?
Internal environment, objective setting, event identification, risk assessment, risk
response, control activities, information and communication, and monitoring.
9. What is the importance of monitoring in risk management?
It ensures that the ERM process remains effective, identifies weaknesses, and allows
for continuous improvement.
10. Explain the relationship between corporate governance and risk management.
Corporate governance provides oversight and accountability, ensuring that risks are
, managed effectively to protect stakeholders.
11. What is risk appetite?
Risk appetite is the level of risk an organization is willing to accept in pursuit of its
objectives.
12. Define inherent risk and residual risk.
Inherent risk exists before controls are applied, while residual risk remains after controls
and mitigation strategies are implemented.
13. What is the purpose of a risk register?
A risk register documents identified risks, their assessment, responses, and monitoring
actions to track progress over time.
14. Describe the benefits of implementing ERM.
Improved decision-making, enhanced corporate governance, better resource allocation,
and increased resilience.
15. What are the key roles of the board in ERM?
Setting risk appetite, approving risk policies, monitoring management of key risks, and
ensuring accountability.
16. Why is risk communication important?
It ensures timely sharing of risk information, enabling consistent understanding and
coordinated responses across the organization.
17. Define risk culture.
Risk culture refers to the values and behaviors that influence how employees perceive
and manage risk within an organization.
18. What is operational risk?
Operational risk arises from failed internal processes, systems, or human error.
19. Explain strategic risk.
Strategic risk arises when a company’s strategy is poorly defined, executed, or fails to
respond to external changes.
20. What is the difference between internal and external risks?
Internal risks originate within the organization (e.g., employee error), while external risks
arise from outside factors (e.g., economic downturns).
21. What are key risk indicators (KRIs)?
KRIs are metrics used to signal increasing exposure to risk or potential future losses.
22. What is the link between ERM and performance management?
ERM aligns risk management with strategic objectives, ensuring performance targets
are achieved within acceptable risk levels.
23. Explain the risk management process.
It involves risk identification, assessment, evaluation, response, monitoring, and review.
RISK MANAGEMENT QUESTIONS AND
ANSWERS 2025
1. Define Enterprise Risk Management (ERM).
ERM is a coordinated approach to identifying, assessing, managing, and monitoring all
types of risks across an organization to achieve its objectives and protect stakeholder
value.
2. Differentiate between traditional risk management and enterprise risk
management.
Traditional risk management focuses on individual risks within departments, while ERM
takes an integrated, organization-wide approach to manage all risks collectively.
3. List four objectives of risk management.
To protect organizational assets, ensure continuity, support informed decision-making,
and increase stakeholder confidence.
4. What techniques can be used to identify risks in an organization?
Brainstorming, SWOT analysis, interviews, risk checklists, risk workshops, and
reviewing historical data.
5. Explain the difference between qualitative and quantitative risk assessment.
Qualitative assessment uses descriptive terms such as high, medium, or low, whereas
quantitative assessment expresses risk in numerical terms such as probability or
financial impact.
6. Name the four main strategies used to respond to risks.
Avoid, reduce, transfer, and accept.
7. Differentiate between risk avoidance and risk mitigation.
Risk avoidance eliminates the risk entirely, while risk mitigation reduces the impact or
likelihood of the risk.
8. What are the components of the COSO ERM framework?
Internal environment, objective setting, event identification, risk assessment, risk
response, control activities, information and communication, and monitoring.
9. What is the importance of monitoring in risk management?
It ensures that the ERM process remains effective, identifies weaknesses, and allows
for continuous improvement.
10. Explain the relationship between corporate governance and risk management.
Corporate governance provides oversight and accountability, ensuring that risks are
, managed effectively to protect stakeholders.
11. What is risk appetite?
Risk appetite is the level of risk an organization is willing to accept in pursuit of its
objectives.
12. Define inherent risk and residual risk.
Inherent risk exists before controls are applied, while residual risk remains after controls
and mitigation strategies are implemented.
13. What is the purpose of a risk register?
A risk register documents identified risks, their assessment, responses, and monitoring
actions to track progress over time.
14. Describe the benefits of implementing ERM.
Improved decision-making, enhanced corporate governance, better resource allocation,
and increased resilience.
15. What are the key roles of the board in ERM?
Setting risk appetite, approving risk policies, monitoring management of key risks, and
ensuring accountability.
16. Why is risk communication important?
It ensures timely sharing of risk information, enabling consistent understanding and
coordinated responses across the organization.
17. Define risk culture.
Risk culture refers to the values and behaviors that influence how employees perceive
and manage risk within an organization.
18. What is operational risk?
Operational risk arises from failed internal processes, systems, or human error.
19. Explain strategic risk.
Strategic risk arises when a company’s strategy is poorly defined, executed, or fails to
respond to external changes.
20. What is the difference between internal and external risks?
Internal risks originate within the organization (e.g., employee error), while external risks
arise from outside factors (e.g., economic downturns).
21. What are key risk indicators (KRIs)?
KRIs are metrics used to signal increasing exposure to risk or potential future losses.
22. What is the link between ERM and performance management?
ERM aligns risk management with strategic objectives, ensuring performance targets
are achieved within acceptable risk levels.
23. Explain the risk management process.
It involves risk identification, assessment, evaluation, response, monitoring, and review.
