Wiley P2 Sec-D Flashcard

Describe the probability risk assessment technique, Expected Loss. Probabilities are assigned to a loss outcome and the weighted-average probability of the amount of loss is Expected Loss. 2 FC..FC003_1709 Regarding risk mitigation, how can a firm reduce (mitigate) the risk? The firm can engage in actions that will reduce the risk associated with a particular action. 3 FC..FC002_1709 What is the inherent problem with estimating the likelihood of an outcome? The estimation process can be subject to bias due to the subjectivity involved in judging the likelihood of an outcome. 4 FC..FC004_1709 Give some examples of operational risk. Inexperienced or unethical employees Internal control failures Product issues External events Inadequate backup in computer systems Lack of segregation of duties Natural disasters Failure to comply with appropriate laws and regulations