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Enterprise Risk Management Concepts
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Enterprise Risk Management Concepts
Enterprise Risk Management Concepts
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1
Question
What is Loss Distribution Approach (LDA) used for in operational risk?
Answer
Model total exposure from frequency and severity of events
2
Question
What does Monte Carlo Simulation do in risk assessment?
Answer
Simulates thousands of outcomes to assess uncertainty
3
Question
What is a Risk Matrix used for?
Answer
Plot risks by likelihood and impact to prioritize mitigation
4
Question
What is a Risk Control Self-Assessment (RCSA)?
Answer
Internal process where units assess their risks and controls
5
Question
What does a Heat Map visualize in risk management?
Answer
Risk exposure using color coding for severity and urgency
6
Question
What is Failure Modes and Effects Analysis (FMEA) used for?
Answer
Identify potential failure points and consequences, prioritize by severity, occurrence, detectability
7
Question
What is Bow-Tie Analysis used to visualize?
Answer
Causes and consequences to show risk pathways and controls
8
Question
What is the Five Whys technique used for?
Answer
Root cause analysis by repeatedly asking why
9
Question
What is Scenario Analysis in risk management?
Answer
Explores plausible future events to assess resilience under uncertainty
10
Question
What is a Risk Register?
Answer
Centralized log of risks with descriptions, triggers, likelihood, impact, actions, ownership, status
11
Question
What does the Risk Assessment Technique Selection Matrix help with?
Answer
Choose tools based on purpose and complexity
12
Question
What is the psychometric paradigm in risk perception?
Answer
Dread risk vs. risk type; perceived vs. actual unknown risk
13
Question
What does Affect Heuristic describe?
Answer
Judging risk based on feelings rather than data
14
Question
What is the Risk Communication Gap?
Answer
Experts focus on data; public cares about fairness and trust
15
Question
What does 'VUCA' stand for in risk management context?
Answer
Volatile, Uncertain, Complex, Ambiguous
16
Question
What is Enterprise Risk Management (ERM) used for?
Answer
Navigate outcome uncertainty by defining tolerances and responses
17
Question
What is the fundamental idea behind ancient divination in risk?
Answer
Belief that gods determined outcomes and guidance was sought
18
Question
What does outcome uncertainty refer to?
Answer
Unpredictability of results of actions or events
19
Question
How did ancient omens influence decisions?
Answer
Guided strategy, tactics, and contingency planning
20
Question
What is the modern view of risk forecasts regarding uncertainty?
Answer
Forecasts do not erase uncertainty but inform action
21
Question
What role do risk indicators (KRI) play in Bow-Tie analysis?
Answer
Identify indicators to prevent/mitigate risk events
22
Question
What is a qualitative risk matrix primarily used for?
Answer
Prioritize risk; subjective response scoring
23
Question
What characterizes a quantitative risk matrix?
Answer
Structured scoring; numerical evaluation of risk levels
24
Question
What is a key limitation of heat maps?
Answer
Static view of exposure
25
Question
Which risk assessment tool is most decentralized?
Answer
RCSA (Risk Control Self-Assessment)
26
Question
What is the core concept of scenario analysis in ERM?
Answer
Stress testing using multiple plausible futures
27
Question
What is the main purpose of a risk register in ERM?
Answer
Track risk lifecycle and actions across the organization
28
Question
What is a major distinction between qualitative and quantitative tools in risk assessment?
Answer
Qualitative: descriptive; Quantitative: numerical/structured
29
Question
What does the concept of ‘risk perception’ combine?
Answer
Analytical data and emotional narratives
30
Question
How does the Affect Heuristic influence risk judgments?
Answer
Feelings shape perceived risk levels