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Introduction to risk management – Semester 2, 2024
1. The root cause method of using a risk taxonomy is generally preferred because it aids in the design of controls to reduce the likelihood of a risk occurring.
True
False
2. The AS ISO 31000:2018 principle “Inclusive” means that the organisation’s risk management includes appropriate and timely involvement of stakeholders.
True
False
3. Which of the following statements is FALSE?
A. The risk taxonomy is the same for all regulated companies operating in the same industry.
B. How a risk is categorised will determine the risk owner.
C. A risk taxonomy is a comprehensive structured hierarchical set of risk categories and subcategories into which known risks are organised.
D. The risk taxonomy is an essential part of the organisation’s reporting and disclosure of risks.
4. Which one of the following statements is TRUE?
A. Scenario analysis is inflexible to assessing new risks and non-financial risks.
B. A reverse stress test involves creating a scenario in which the organisation fail
C. Stress testing is a type of scenario analysis that assumes that the organisation has failed.
D. A premortem is a type of scenario in which it is assumed that the organisation does not fail but is otherwise stressed.
5. ‘Excessive Optimism’ is the tendency for individuals to underestimate negative factors and overestimate positive outcomes. Select one:
True
False
6. An organisation uses the colour coding scheme of Red, Yellow and Green in their risk matrix to signify which risks are acceptable, within tolerance, and unacceptable respectively.
Which of the following statements best describes their risk matrix design?
A. The colours in the risk matrix represent a 'nominal' measurement scale.
B. The colours in the risk matrix represent an 'ordinal' measurement scale.
C. The colours in the risk matrix represent an 'interval' measurement scale.
D. The colours in the risk matrix represent a 'ratio' measurement scale.
7. Which of the following statements is FALSE?
According to guidance on the AS ISO 31000:2018 risk management standard, the Board is responsible to:
A. Design and manage the risk management framework.
B. Foster a culture consistent with the organisation’s appetite for risk
C. Require the executives to provide information to allow the board to understand the risks that may have a material impact on the organisation’s objectives.
D. Ensure the organisation has the structure and processes to support risk management.
8. Risk management is the systematic and coordinated activities to identify risks faced by a company in order to remove uncertainty.
Select one:
True
False
9. Which of the following statements is FALSE? In the ‘Three Lines of Defence’ model:
A. The second-line of defence is accountable for oversight of the first-line of defence.
B. The first-line of defence is accountable for implementing risk controls.
C. The third-line of defence is accountable for independent assurance to the Board and senior management
D. Risk management is everyone’s accountability.
10. Which of the following statements BEST describes the advantage of quantitative analysis compared to qualitative analysis?
A. Less model error than qualitative analysis.
B. Cheaper to build and more easily explained than qualitative analysis to senior management.
C. More easily able to measure capital adequacy than qualitative analysis.
D. Lower error and more accuracy than qualitative analysis.