SBL Risk

Risk is best defined as:

• 1 The certainty of loss
• 2 The chance of an outcome differing from what was expected
• 3 The cost of insurance
• 4 A fall in share price

A company decides not to enter a new market because the political risk is too high. This is an example of risk:

• 1 Avoidance
• 2 Reduction
• 3 Acceptance
• 4 Transfer

Buying insurance against the loss of goods in transit is an example of risk:

• 1 Transfer
• 2 Acceptance
• 3 Avoidance
• 4 Exploitation

The expected loss of a risk with a 5 percent chance of causing a $2,000,000 loss is:

• 1 $100,000
• 2 $40,000
• 3 $2,000,000
• 4 $400,000

A risk register usually records for each risk its:

• 1 The share price effect only
• 2 The auditor's opinion
• 3 Only the cost of the response
• 4 Likelihood, impact, owner and the response

Which statement about the three lines model is correct?

• 1 Risk is the responsibility of the external auditor
• 2 The board has no part in risk oversight
• 3 Operational management owns risk, and risk and compliance functions oversee and advise it
• 4 Internal audit is responsible for managing all risks

A risk that a company will fail to meet its obligations when a customer does not pay is:

• 1 Operational risk
• 2 Credit risk
• 3 Liquidity risk
• 4 Market risk

A risk appetite statement is useful mainly because it:

• 1 Tells managers how much risk the board is willing to take in pursuit of objectives
• 2 Sets the level of insurance premiums
• 3 Replaces the audit committee
• 4 Removes the need for controls