D368 FINC 3105
Enterprise Risk Management
FA REVIEW 1
© 2024/2025
,1. Multiple Choice: Which of the following is not a component of
the COSO Enterprise Risk Management Framework?
a) Risk Assessment
b) Information and Communication
c) Financial Reporting
d) Event Identification
Correct Answer: c) Financial Reporting
Rationale: The COSO framework includes eight components,
but Financial Reporting is not one of them; it is an outcome of
good enterprise risk management.
2. Fill-in-the-Blank: The process of ___________ involves the
prioritization of risks based on their probability of occurrence and
impact.
Correct Answer: Risk Ranking
Rationale: Risk ranking is the process where risks are prioritized
based on their likelihood and potential impact on the organization.
3. True/False: Risk tolerance is the exact amount of risk that an
organization is willing to accept.
Correct Answer: False
© 2024/2025
, Rationale: Risk tolerance is the general level of risk that an
organization is willing to accept, but it is not an exact measure. It is
more of a range or a threshold.
4. Multiple Response: Select all that apply. Which of the following
are typically included in a risk register?
a) Risk description
b) Risk owner
c) Control measures
d) Financial impact
Correct Answers: a) Risk description, b) Risk owner, c) Control
measures
Rationale: A risk register typically includes the risk description,
the risk owner, and the control measures. The financial impact is
usually documented in a separate financial analysis.
5. Multiple Choice: In the context of risk response, what does
'avoidance' mean?
a) Taking action to enhance the risk
b) Taking action to transfer the risk
c) Taking action to eliminate the risk
d) Taking no action as the risk is acceptable
Correct Answer: c) Taking action to eliminate the risk
© 2024/2025
, Rationale: Avoidance is a risk response strategy that involves
taking actions to remove the risk entirely.
6. Fill-in-the-Blank: ___________ risk refers to the uncertainty
surrounding changes in the value of assets due to market
fluctuations.
Correct Answer: Market
Rationale: Market risk is the potential for investors to experience
losses due to factors that affect the overall performance of the
financial markets.
7. True/False: A 'black swan' event is a predictable, high-frequency
occurrence with moderate impact.
Correct Answer: False
Rationale: A 'black swan' event is an unpredictable event that is
beyond what is normally expected of a situation and has potentially
severe consequences.
8. Multiple Response: Which of the following are objectives of
Enterprise Risk Management?
a) Enhancing risk response decisions
b) Minimizing operational surprises and losses
c) Reducing performance variability
d) Eliminating risk entirely
© 2024/2025
Enterprise Risk Management
FA REVIEW 1
© 2024/2025
,1. Multiple Choice: Which of the following is not a component of
the COSO Enterprise Risk Management Framework?
a) Risk Assessment
b) Information and Communication
c) Financial Reporting
d) Event Identification
Correct Answer: c) Financial Reporting
Rationale: The COSO framework includes eight components,
but Financial Reporting is not one of them; it is an outcome of
good enterprise risk management.
2. Fill-in-the-Blank: The process of ___________ involves the
prioritization of risks based on their probability of occurrence and
impact.
Correct Answer: Risk Ranking
Rationale: Risk ranking is the process where risks are prioritized
based on their likelihood and potential impact on the organization.
3. True/False: Risk tolerance is the exact amount of risk that an
organization is willing to accept.
Correct Answer: False
© 2024/2025
, Rationale: Risk tolerance is the general level of risk that an
organization is willing to accept, but it is not an exact measure. It is
more of a range or a threshold.
4. Multiple Response: Select all that apply. Which of the following
are typically included in a risk register?
a) Risk description
b) Risk owner
c) Control measures
d) Financial impact
Correct Answers: a) Risk description, b) Risk owner, c) Control
measures
Rationale: A risk register typically includes the risk description,
the risk owner, and the control measures. The financial impact is
usually documented in a separate financial analysis.
5. Multiple Choice: In the context of risk response, what does
'avoidance' mean?
a) Taking action to enhance the risk
b) Taking action to transfer the risk
c) Taking action to eliminate the risk
d) Taking no action as the risk is acceptable
Correct Answer: c) Taking action to eliminate the risk
© 2024/2025
, Rationale: Avoidance is a risk response strategy that involves
taking actions to remove the risk entirely.
6. Fill-in-the-Blank: ___________ risk refers to the uncertainty
surrounding changes in the value of assets due to market
fluctuations.
Correct Answer: Market
Rationale: Market risk is the potential for investors to experience
losses due to factors that affect the overall performance of the
financial markets.
7. True/False: A 'black swan' event is a predictable, high-frequency
occurrence with moderate impact.
Correct Answer: False
Rationale: A 'black swan' event is an unpredictable event that is
beyond what is normally expected of a situation and has potentially
severe consequences.
8. Multiple Response: Which of the following are objectives of
Enterprise Risk Management?
a) Enhancing risk response decisions
b) Minimizing operational surprises and losses
c) Reducing performance variability
d) Eliminating risk entirely
© 2024/2025
