RISK MANAGEMENT EXAMINATION QUESTIONS AND
CORRECT ANSWER WITH EXPLANATION GRADED A+
STUDY GUIDE SOUTHERN NEW HAMPSHIRE UNIVERSITY
1. Risk management is the process of:
A. Identifying, assessing, and controlling risks
B. Increasing profits only
C. Eliminating all losses permanently
D. Marketing products
Answer: A
Rationale: It focuses on handling uncertainty.
2. Risk refers to:
A. Uncertainty of outcomes
B. Guaranteed profit
C. Fixed income
D. Tax rate
Answer: A
Rationale: Possibility of loss or variation.
3. The first step in risk management is:
A. Risk identification
B. Risk elimination
C. Profit calculation
D. Investment
Answer: A
Rationale: You must identify risks first.
4. Risk identification involves:
A. Finding potential threats
B. Ignoring problems
C. Increasing debt
D. Setting prices
Answer: A
Rationale: Recognizing possible risks.
5. Risk assessment evaluates:
A. Likelihood and impact of risks
, B. Profit only
C. Sales only
D. Taxes
Answer: A
Rationale: Measures severity and probability.
6. Risk mitigation means:
A. Reducing risk exposure
B. Increasing risk
C. Ignoring risk
D. Eliminating profit
Answer: A
Rationale: Taking steps to reduce impact.
7. Risk avoidance is:
A. Not engaging in risky activity
B. Accepting all risks
C. Increasing exposure
D. Transferring risk
Answer: A
Rationale: Completely avoiding risk.
8. Risk transfer involves:
A. Shifting risk to another party
B. Keeping all risk
C. Ignoring risk
D. Increasing risk
Answer: A
Rationale: Insurance is a common method.
9. Risk acceptance means:
A. Accepting consequences of risk
B. Eliminating risk
C. Avoiding all activities
D. Transferring risk
Answer: A
Rationale: No action taken.
10. Risk appetite is:
A. Level of risk an organization is willing to take
, B. Profit level
C. Tax level
D. Revenue level
Answer: A
Rationale: Risk tolerance capacity.
11. Risk tolerance is:
A. Acceptable variation in outcomes
B. Guaranteed return
C. Profit margin
D. Debt level
Answer: A
Rationale: Allowed risk range.
12. Operational risk is caused by:
A. Internal process failures
B. Market changes
C. Currency changes
D. Inflation
Answer: A
Rationale: Internal system issues.
13. Financial risk relates to:
A. Loss from financial decisions
B. Weather changes
C. Politics only
D. Marketing
Answer: A
Rationale: Money-related uncertainty.
14. Market risk is:
A. Risk from market price changes
B. Internal error
C. Fraud only
D. Liquidity gain
Answer: A
Rationale: Price fluctuations.
15. Credit risk is:
A. Risk of default by borrower
CORRECT ANSWER WITH EXPLANATION GRADED A+
STUDY GUIDE SOUTHERN NEW HAMPSHIRE UNIVERSITY
1. Risk management is the process of:
A. Identifying, assessing, and controlling risks
B. Increasing profits only
C. Eliminating all losses permanently
D. Marketing products
Answer: A
Rationale: It focuses on handling uncertainty.
2. Risk refers to:
A. Uncertainty of outcomes
B. Guaranteed profit
C. Fixed income
D. Tax rate
Answer: A
Rationale: Possibility of loss or variation.
3. The first step in risk management is:
A. Risk identification
B. Risk elimination
C. Profit calculation
D. Investment
Answer: A
Rationale: You must identify risks first.
4. Risk identification involves:
A. Finding potential threats
B. Ignoring problems
C. Increasing debt
D. Setting prices
Answer: A
Rationale: Recognizing possible risks.
5. Risk assessment evaluates:
A. Likelihood and impact of risks
, B. Profit only
C. Sales only
D. Taxes
Answer: A
Rationale: Measures severity and probability.
6. Risk mitigation means:
A. Reducing risk exposure
B. Increasing risk
C. Ignoring risk
D. Eliminating profit
Answer: A
Rationale: Taking steps to reduce impact.
7. Risk avoidance is:
A. Not engaging in risky activity
B. Accepting all risks
C. Increasing exposure
D. Transferring risk
Answer: A
Rationale: Completely avoiding risk.
8. Risk transfer involves:
A. Shifting risk to another party
B. Keeping all risk
C. Ignoring risk
D. Increasing risk
Answer: A
Rationale: Insurance is a common method.
9. Risk acceptance means:
A. Accepting consequences of risk
B. Eliminating risk
C. Avoiding all activities
D. Transferring risk
Answer: A
Rationale: No action taken.
10. Risk appetite is:
A. Level of risk an organization is willing to take
, B. Profit level
C. Tax level
D. Revenue level
Answer: A
Rationale: Risk tolerance capacity.
11. Risk tolerance is:
A. Acceptable variation in outcomes
B. Guaranteed return
C. Profit margin
D. Debt level
Answer: A
Rationale: Allowed risk range.
12. Operational risk is caused by:
A. Internal process failures
B. Market changes
C. Currency changes
D. Inflation
Answer: A
Rationale: Internal system issues.
13. Financial risk relates to:
A. Loss from financial decisions
B. Weather changes
C. Politics only
D. Marketing
Answer: A
Rationale: Money-related uncertainty.
14. Market risk is:
A. Risk from market price changes
B. Internal error
C. Fraud only
D. Liquidity gain
Answer: A
Rationale: Price fluctuations.
15. Credit risk is:
A. Risk of default by borrower
