Enterprise Risk Management
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1.Which of the following best defines Enterprise Risk Management (ERM)
within an organization?
A. A process focused only on purchasing insurance to transfer risks
B. A coordinated approach for identifying, assessing, managing, and
monitoring risks across the entire organization
C. A financial reporting method used exclusively by accounting departments
D. A strategy designed only to eliminate all business uncertainty
Correct Answer: B
Enterprise Risk Management is an integrated and organization-wide
framework that identifies, evaluates, responds to, and monitors various
types of risks to support strategic objectives and value creation.
2. What is the primary objective of an Enterprise Risk Management
framework?
A. To ensure that no risks occur within the organization
B. To eliminate the need for internal controls
C. To manage risks within acceptable levels while achieving organizational
,objectives
D. To transfer all risks to external parties
Correct Answer: C
The purpose of ERM is not to eliminate risk completely but to optimize risk-
taking by keeping exposures within the organization’s risk appetite while
pursuing goals.
3. Which organization developed one of the most widely recognized ERM
frameworks used globally?
A. International Accounting Standards Board (IASB)
B. Committee of Sponsoring Organizations of the Treadway Commission
(COSO)
C. World Trade Organization (WTO)
D. International Monetary Fund (IMF)
Correct Answer: B
The COSO ERM framework is one of the most recognized global models for
establishing effective enterprise-wide risk management practices.
4. In ERM, risk appetite refers to:
A. The total amount of insurance coverage purchased by an organization
B. The level and type of risk an organization is willing to accept in pursuit of
its objectives
C. The amount of financial loss already experienced
D. The maximum number of employees allowed to make decisions
Correct Answer: B
Risk appetite represents the amount and nature of risk an organization is
prepared to accept while achieving strategic objectives.
5. Which of the following is considered a strategic risk?
,A. Failure of computer equipment
B. Employee payroll errors
C. Poor business decisions resulting in loss of competitive position
D. Incorrect invoice processing
Correct Answer: C
Strategic risks arise from decisions affecting the organization’s direction,
competitive position, and long-term objectives.
6. What is the role of the board of directors in ERM?
A. Performing all daily risk assessments personally
B. Establishing oversight, approving risk appetite, and ensuring effective
governance
C. Eliminating operational responsibilities from management
D. Managing every individual business process
Correct Answer: B
The board provides governance oversight by setting expectations,
approving risk appetite, and ensuring management maintains an effective
ERM system.
7. Which component of ERM focuses on identifying potential events that
may affect objectives?
A. Risk identification
B. Risk financing
C. Risk transfer
D. Risk elimination
Correct Answer: A
Risk identification involves recognizing internal and external events that
could influence the achievement of organizational objectives.
, 8. A risk assessment process generally includes which two major
activities?
A. Risk avoidance and risk transfer
B. Risk identification and risk analysis
C. Risk reporting and risk elimination
D. Risk acceptance and risk outsourcing
Correct Answer: B
Risk assessment involves identifying risks and analyzing their likelihood,
impact, and significance to determine appropriate responses.
9. Which of the following represents a risk mitigation strategy?
A. Ignoring the risk completely
B. Implementing controls to reduce the likelihood or impact of the risk
C. Removing all organizational objectives
D. Increasing exposure without analysis
Correct Answer: B
Risk mitigation reduces risk exposure by applying controls, procedures, or
actions that lower probability or consequences.
10. The term “risk universe” refers to:
A. All possible risks that could affect an organization
B. Only risks that have caused losses previously
C. Risks covered by insurance policies
D. Risks associated only with financial markets
Correct Answer: A
The risk universe includes the broad range of potential risks an
organization may face across strategic, operational, financial, and
compliance areas.
Professional Exam Practice Questions
And Correct Answers (Verified Answers)
Plus Rationale 2026 Q&A| Instant
Download Pdf
1.Which of the following best defines Enterprise Risk Management (ERM)
within an organization?
A. A process focused only on purchasing insurance to transfer risks
B. A coordinated approach for identifying, assessing, managing, and
monitoring risks across the entire organization
C. A financial reporting method used exclusively by accounting departments
D. A strategy designed only to eliminate all business uncertainty
Correct Answer: B
Enterprise Risk Management is an integrated and organization-wide
framework that identifies, evaluates, responds to, and monitors various
types of risks to support strategic objectives and value creation.
2. What is the primary objective of an Enterprise Risk Management
framework?
A. To ensure that no risks occur within the organization
B. To eliminate the need for internal controls
C. To manage risks within acceptable levels while achieving organizational
,objectives
D. To transfer all risks to external parties
Correct Answer: C
The purpose of ERM is not to eliminate risk completely but to optimize risk-
taking by keeping exposures within the organization’s risk appetite while
pursuing goals.
3. Which organization developed one of the most widely recognized ERM
frameworks used globally?
A. International Accounting Standards Board (IASB)
B. Committee of Sponsoring Organizations of the Treadway Commission
(COSO)
C. World Trade Organization (WTO)
D. International Monetary Fund (IMF)
Correct Answer: B
The COSO ERM framework is one of the most recognized global models for
establishing effective enterprise-wide risk management practices.
4. In ERM, risk appetite refers to:
A. The total amount of insurance coverage purchased by an organization
B. The level and type of risk an organization is willing to accept in pursuit of
its objectives
C. The amount of financial loss already experienced
D. The maximum number of employees allowed to make decisions
Correct Answer: B
Risk appetite represents the amount and nature of risk an organization is
prepared to accept while achieving strategic objectives.
5. Which of the following is considered a strategic risk?
,A. Failure of computer equipment
B. Employee payroll errors
C. Poor business decisions resulting in loss of competitive position
D. Incorrect invoice processing
Correct Answer: C
Strategic risks arise from decisions affecting the organization’s direction,
competitive position, and long-term objectives.
6. What is the role of the board of directors in ERM?
A. Performing all daily risk assessments personally
B. Establishing oversight, approving risk appetite, and ensuring effective
governance
C. Eliminating operational responsibilities from management
D. Managing every individual business process
Correct Answer: B
The board provides governance oversight by setting expectations,
approving risk appetite, and ensuring management maintains an effective
ERM system.
7. Which component of ERM focuses on identifying potential events that
may affect objectives?
A. Risk identification
B. Risk financing
C. Risk transfer
D. Risk elimination
Correct Answer: A
Risk identification involves recognizing internal and external events that
could influence the achievement of organizational objectives.
, 8. A risk assessment process generally includes which two major
activities?
A. Risk avoidance and risk transfer
B. Risk identification and risk analysis
C. Risk reporting and risk elimination
D. Risk acceptance and risk outsourcing
Correct Answer: B
Risk assessment involves identifying risks and analyzing their likelihood,
impact, and significance to determine appropriate responses.
9. Which of the following represents a risk mitigation strategy?
A. Ignoring the risk completely
B. Implementing controls to reduce the likelihood or impact of the risk
C. Removing all organizational objectives
D. Increasing exposure without analysis
Correct Answer: B
Risk mitigation reduces risk exposure by applying controls, procedures, or
actions that lower probability or consequences.
10. The term “risk universe” refers to:
A. All possible risks that could affect an organization
B. Only risks that have caused losses previously
C. Risks covered by insurance policies
D. Risks associated only with financial markets
Correct Answer: A
The risk universe includes the broad range of potential risks an
organization may face across strategic, operational, financial, and
compliance areas.
