Enterprise Risk Management Exam 1(100% Correct!!)

benefits of ERM in anticipating and responding to risks - ANSWER1. anticipate and recognize emerging risks 2. identify and manage cross-enterprise risks 3. minimize threats to achieving organizational goals 4. enhance risk-response decisions different impediments to successful implementation of ERM - ANSWER1. technological deficiency - for ERM to succeed, people have to receive relevant information 2. the traditional organized culture with its entrenched silos - each different branch had its own function with its own management structure. in the new ERM culture, risk management is integrated throughout the organization Sarbanes-Oxley Act (SOX) - ANSWER-established requirements for internal risk controls and reporting that can best be met by an ERM process involving an organization's internal audit function -requires both the CFO and CEO to personally attest to their company's results in financial statements -requires corporations to review their risk profiles using an enterprise-wide approach pure risk - ANSWERa chance of loss or no loss, but no chance of gain speculative risk - ANSWERa chance of loss, no loss, or gain price risk - ANSWERuncertainty over the size of cash flows resulting from possible changes in the cost of raw materials and other inputs (such as lumber, gas, or electricity), as well as cost-related changes in the market for completed products and other outputs credit risk - ANSWERalthough a credit risk is particularly significant for banks and other financial institutions, it can be relevant to any organization with accounts receivable subjective risk - ANSWERthe perceived amount of risk based on an individual's or organization's opinion objective risk - ANSWERthe measurable variation in uncertain outcomes based on facts and data diversifiable risk - ANSWERa risk that affects only some individuals, businesses, or small groups nondiversifiable risk - ANSWERa risk that affects a large segment of society at the same time