ENTERPRISE RISK MANAGEMENT D368 WGU QUESTIONS
WITH ACCURATE ANSWERS
4 Roles of the CRO correct answer 1. Develop and implement the ERM
framework. 2. Identify and assess risks. 3. Monitor and report on risk exposures.
4. Advise the board and management on risk strategies.
4 ways to minimize human bias correct answer 1. Use diverse teams for varied
perspectives.
5 Components of COSO correct answer 1. Governance and Culture. 2. Strategy
and Objective-Setting. 3. Performance. 4. Review and Revision. 5. Information,
Communication, and Reporting.
7 Ways Corporations Deal with Significant Risks correct answer 1. Avoid the risk.
2. Accept the risk. 3. Transfer the risk (e.g., insurance). 4. Mitigate the risk (reduce
impact). 5. Exploit the risk (for opportunities). 6. Share the risk. 7. Enhance the
risk (increase positive outcomes).
8 Principles of ISO correct answer 1. Integrated. 2. Structured and comprehensive.
3. Customized. 4. Inclusive. 5. Dynamic. 6. Best available information. 7. Human
and cultural factors. 8. Continual improvement.
A rare, unexpected, high-impact event is called a __________ __________.
correct answer Black Swan.
Assessing and Quantifying Risk - Qualitative assessment correct answer Expert
judgment.
,Assessing and Quantifying Risk - Quantitative analysis correct answer Statistical
models.
Assessing and Quantifying Risk - Scenario analysis correct answer Analysis of
potential future events.
Assessing and Quantifying Risk - Sensitivity analysis correct answer Analysis of
how different values of an independent variable affect a particular dependent
variable.
Balanced Scorecard correct answer A strategic performance management tool
that translates an organization's mission and vision into measurable objectives
across four perspectives: Financial, Customer, Internal Business Processes, and
Learning and Growth.
Beta correct answer A Key Risk Indicator (KRI) measuring a stock's relative risk
compared to the market. High Beta: Riskier than average (more volatile). Low
Beta: Less risky than average.
Bias awareness training correct answer Provide bias awareness training.
Bowtie Method correct answer Visualizes risk with: Threats (left side), Preventive
Controls (barriers before event), Top Event (central risk event), Mitigative
Controls (barriers after event), and Consequences (right side).
Center of Excellence correct answer A centralized body that promotes best
practices, fosters innovation, and provides guidance for effective risk
management across the enterprise.
, Challenge of Risk Management correct answer Risk abatement reduces current
profits (affecting bonuses), while risks are future 'bad things.' Key: Anticipate and
convince others to act.
Cognitive Bias in Risk Management correct answer Tendency to underestimate
adverse events and overestimate things staying the same, leading to poor risk
anticipation.
Compare ISO and COSO correct answer ISO 31000 is principles-based, flexible,
and internationally focused on risk management processes. COSO ERM is
component-based, integrates with internal controls, and emphasizes governance
and strategy alignment, primarily used in the US.
Compliance (CFO role) correct answer Focuses on ensuring adherence to laws,
regulations, and standards to avoid penalties.
Correlation correct answer Measures how assets move together. Low correlation
improves diversification and reduces risk (e.g., auto insurance in a community has
low correlation; hurricane insurance has high correlation, making it riskier).
Credit Risk correct answer The potential for gain or loss due to changes in the
creditworthiness or a customer or counterparty.
Credit Risk Formula correct answer Expected Loss = Probability of Default (PD) x
Loss Given Default (LGD) x Exposure at Default (EAD). It tells the anticipated
financial loss from a credit exposure.
WITH ACCURATE ANSWERS
4 Roles of the CRO correct answer 1. Develop and implement the ERM
framework. 2. Identify and assess risks. 3. Monitor and report on risk exposures.
4. Advise the board and management on risk strategies.
4 ways to minimize human bias correct answer 1. Use diverse teams for varied
perspectives.
5 Components of COSO correct answer 1. Governance and Culture. 2. Strategy
and Objective-Setting. 3. Performance. 4. Review and Revision. 5. Information,
Communication, and Reporting.
7 Ways Corporations Deal with Significant Risks correct answer 1. Avoid the risk.
2. Accept the risk. 3. Transfer the risk (e.g., insurance). 4. Mitigate the risk (reduce
impact). 5. Exploit the risk (for opportunities). 6. Share the risk. 7. Enhance the
risk (increase positive outcomes).
8 Principles of ISO correct answer 1. Integrated. 2. Structured and comprehensive.
3. Customized. 4. Inclusive. 5. Dynamic. 6. Best available information. 7. Human
and cultural factors. 8. Continual improvement.
A rare, unexpected, high-impact event is called a __________ __________.
correct answer Black Swan.
Assessing and Quantifying Risk - Qualitative assessment correct answer Expert
judgment.
,Assessing and Quantifying Risk - Quantitative analysis correct answer Statistical
models.
Assessing and Quantifying Risk - Scenario analysis correct answer Analysis of
potential future events.
Assessing and Quantifying Risk - Sensitivity analysis correct answer Analysis of
how different values of an independent variable affect a particular dependent
variable.
Balanced Scorecard correct answer A strategic performance management tool
that translates an organization's mission and vision into measurable objectives
across four perspectives: Financial, Customer, Internal Business Processes, and
Learning and Growth.
Beta correct answer A Key Risk Indicator (KRI) measuring a stock's relative risk
compared to the market. High Beta: Riskier than average (more volatile). Low
Beta: Less risky than average.
Bias awareness training correct answer Provide bias awareness training.
Bowtie Method correct answer Visualizes risk with: Threats (left side), Preventive
Controls (barriers before event), Top Event (central risk event), Mitigative
Controls (barriers after event), and Consequences (right side).
Center of Excellence correct answer A centralized body that promotes best
practices, fosters innovation, and provides guidance for effective risk
management across the enterprise.
, Challenge of Risk Management correct answer Risk abatement reduces current
profits (affecting bonuses), while risks are future 'bad things.' Key: Anticipate and
convince others to act.
Cognitive Bias in Risk Management correct answer Tendency to underestimate
adverse events and overestimate things staying the same, leading to poor risk
anticipation.
Compare ISO and COSO correct answer ISO 31000 is principles-based, flexible,
and internationally focused on risk management processes. COSO ERM is
component-based, integrates with internal controls, and emphasizes governance
and strategy alignment, primarily used in the US.
Compliance (CFO role) correct answer Focuses on ensuring adherence to laws,
regulations, and standards to avoid penalties.
Correlation correct answer Measures how assets move together. Low correlation
improves diversification and reduces risk (e.g., auto insurance in a community has
low correlation; hurricane insurance has high correlation, making it riskier).
Credit Risk correct answer The potential for gain or loss due to changes in the
creditworthiness or a customer or counterparty.
Credit Risk Formula correct answer Expected Loss = Probability of Default (PD) x
Loss Given Default (LGD) x Exposure at Default (EAD). It tells the anticipated
financial loss from a credit exposure.
