Risk Management Study Questions and Answers Latest Version Already Passed

Risk Management Study Questions and Answers Latest Version Already Passed What is the main goal of risk management? To identify, assess, and minimize potential losses or threats Why is it important to assess risks in a business? To prevent unexpected disruptions and financial loss What is a risk? An uncertain event that may impact goals or objectives What does it mean to mitigate a risk? To take steps to reduce the impact or likelihood of the risk What is the first step in the risk management process? Risk identification 2 What is the purpose of a risk assessment? To evaluate the severity and likelihood of identified risks What is a risk register used for? To track and document identified risks and actions taken Why should risk management be a continuous process? Because new risks can emerge over time What is an example of a financial risk? Unexpected increase in operating costs What is an operational risk? A risk related to daily activities, systems, or processes What is a reputational risk? The threat of damage to a company’s public image or brand 3 What is risk transfer? Shifting the risk to another party, like through insurance What is risk avoidance? Choosing not to engage in an activity that carries risk What is risk acceptance? A decision to live with the risk and not take action against it What does “likelihood” refer to in risk analysis? The chance that a risk will actually occur What does “impact” mean in the context of risk? The severity of damage or loss if the risk occurs Why is communication important in risk management? To ensure everyone understands potential risks and responses 4 Who is responsible for managing risk in an organization? Everyone, but especially leadership and risk managers What tool helps prioritize which risks to deal with first? A risk matrix What is the purpose of contingency planning in risk management? To prepare a backup plan in case a risk occurs Why do companies purchase insurance as part of risk management? To transfer financial risk to an insurer What is a strategic risk?