D368 Enterprise Risk Management - Set 1 - Part 1

Test your knowledge of technical writing concepts with these practice questions. Each question includes detailed explanations to help you understand the correct answers.

Question 1: A financial institution offers loans to people with low credit ratings, taking on more credit risk than competitors. How does this institution compare with competitors in terms of risk management?

It has a lower risk tolerance

It has a higher risk appetite

It has a conservative risk strategy

It has a risk avoidance strategy

Question 2: A company experiences a data breach due to human error, leading to the dissemination of trade secret information. Which risk mitigation step should the company take to reduce future risks?

Increase marketing efforts

Replace key personnel

Add a secondary control procedure

Reduce the workforce

Question 3: A wood furniture manufacturer faces rising timber prices and increasing transport costs due to changing weather conditions. What adjustment should the company make to its risk management profile?

Focus on marketing efforts

Increase production

Adjust procurement cost risk

Ignore market fluctuations

Question 4: A company is struggling to manage risks associated with the technological advancements in its industry. The firm is using outdated technology, which is leading to inefficiencies. What does this exemplify in risk terms?

Risk driver

Risk mitigation

Risk transference

Risk avoidance

Question 5: A company's employees are failing to implement risk protocols on an assembly line despite committing to safety. What should the company focus on to achieve compliance?

Hiring more employees

Explicitly communicating risk procedures

Changing leadership

Reducing employee tasks

Question 6: A company is facing regulatory scrutiny due to failing contract oversight audits. What structural change should the organization implement to mitigate this compliance risk?

Increase salaries

Add more contractors

Build risk awareness into directors' performance goals

Outsource all contracts

Question 7: A company has experienced significant stock price declines due to market volatility. What should the company focus on to manage this equity price risk?

Increase investment in marketing

Hedge against price fluctuations

Reduce the workforce

Cease operations

Question 8: A shoe manufacturer faces frequent equipment breakdowns and plans to purchase equipment breakdown insurance. Which risk management strategy is the company using?

Risk retention

Risk avoidance

Risk sharing

Risk transfer

Question 9: A company undergoes a scenario planning exercise to analyze risks related to new consumer behaviors. How should the company incorporate these insights into its risk management strategy?

By ignoring the results

By incorporating the risk insights into strategic planning

By increasing salaries

By eliminating non-essential roles

Question 10: A company's board has delegated risk oversight to a risk oversight committee. What action should the committee take to fulfill its role effectively?

Report to shareholders

Keep communication channels open with ERM leaders

Increase executive salaries

Avoid reporting risks

Question 11: A technology company is assessing risks related to launching a new AI platform. Which approach should the company take to measure and assess these risks effectively?

Ignore market trends

Implement a dynamic risk assessment framework

Outsource risk management

Cease AI development

Question 12: A company is expanding its operations into a country with high geopolitical risk. What type of risk mitigation strategy should the company consider?

Risk sharing

Risk retention

Risk avoidance

Risk acceptance

Question 13: A CFO has been tasked with assessing the financial impact of possible risks to the company’s supply chain. What should the CFO focus on when making this assessment?

Advertising costs

Opportunity costs of missed sales

Employee satisfaction

Expansion into new markets

Question 14: A company’s chief financial officer (CFO) has increased risk tolerance after a pause in interest rate hikes by the central bank. What risk should the CFO account for when increasing risk tolerance?

Decreased employee retention

Financing cost increases if interest rates rise again

Market share decline

Decreased advertising costs

Question 15: A company has experienced a ransomware attack. The IT team is conducting vulnerability scanning and implementing patch management. Which types of controls are they using?

Corrective and compensatory

Detective and preventive

Directive and compensatory

Corrective and preventive

Question 16: A company relies heavily on third-party vendors for payroll services. Which risk mitigation strategy should it implement to reduce the risk of payroll fraud?

Risk avoidance

Implement reconciliation of payroll reports

Increase employee salaries

Eliminate third-party services

Question 17: A company is planning to expand its product line into a new market but faces regulatory challenges. How should the company manage this strategic risk?

Risk avoidance

Risk retention

Risk transfer

Risk sharing

Question 18: A company is using a project management dashboard to monitor development progress. Several projects remain in “possible delay” or “unmitigated disaster” status. How should the company address this issue?

Increase the project budget

Develop targeted action plans for delayed projects

Ignore the status and proceed

Hire additional project managers

Question 19: A company has decided to outsource non-core functions to free up resources. Which question should the ERM team address in the decision document?

"How can we reduce our marketing costs?"

"What are the key concerns that must be addressed to ensure performance?"

"How can we increase our product line?"

"What is the total cost of outsourcing?"

Question 20: A software company is assessing the potential risks of launching a new AI platform in a rapidly changing industry. What risk assessment approach should the company take?

Focus solely on financial risks

Conduct exploratory scenario planning sessions

Avoid risk analysis

Cease the project

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