IC86 Mock Test Sample 16
Risk management involves identifying, analyzing, controlling, and financing risks that may affect business operations, assets, people, and profits. Organizations use techniques such as risk avoidance, reduction, transfer, and retention to minimize losses and ensure continuity. Enterprise Risk Management (ERM) helps companies identify opportunities, improve decision-making, and reduce uncertainty. Risks may arise from environmental, financial, social, operational, or legal factors. Tools like HAZOP studies, flow charts, surveys, and statistical analysis help in risk identification. Insurance, finite risk products, CAT bonds, and securitization are alternative risk financing methods. Effective risk management supports growth, stability, profitability, and protection against catastrophic events.
Q1. Ambition Ltd wants to establish a risk management system. Which is NOT a benefit of risk management system?
a. Enhances risk response decisions
b. Insures organizational shares of all major risks
c. Helps organisation seize opportunities
d. Improves risk awareness
Q2. An already implemented risk management programme needs constant monitoring to _______.
a. Increase profits
b. Adjust for changes
c. Ensure expected performance
d. Eliminate all risks
Q3. An oil spill is a high-severity, low-frequency event. Which product is useful for insuring such risks?
a. Risk Retention Groups
b. Credit Securitisation
c. CAT Bonds
d. Weather Derivatives
Q4. Arrange the phases of disaster in the correct chronological order.
a. Crisis → Emergency → Recovery → Restoration
b. Recovery → Crisis → Restoration → Emergency
c. Emergency → Recovery → Crisis → Restoration
d. Restoration → Emergency → Crisis → Recovery
Q5. Installing surveillance cameras and magnetic tags is an example of ________.
a. Risk avoidance
b. Loss control
c. Risk retention
d. Risk acceptance
Q6. As per ERM, which are strategies to respond to risks?
a. Acceptance of risks
b. Avoidance of risks
c. Taking alternative actions
d. All of the above
Q7. Increase in tax liability due to government policy is which kind of risk?
a. Liability Risk
b. Personal Risk
c. Property Risk
d. Social Risk
Q8. Risk associated with individuals comes under which type of risk?
a. Market Risk
b. Fundamental Risk
c. Particular Risk
d. Liability Risk
Q9. The Total Average Cost of Capital (TACC) formula includes ________.
a. Cost of debt only
b. Cost of equity only
c. Cost of insurance only
d. Cost of debt, equity and insurance
Q10. Business continuity plans should be updated when ________.
a. Contractors change
b. Location changes
c. Resources change
d. All of the above
Q11. Maintaining specified asset allocation is an example of managing ________.
a. Operational Risk
b. Strategic Risk
c. Financial Risk
d. Social Risk
Q12. In the Risk Matrix, low likelihood and low cost of damage means ________.
a. Prevent the risk
b. Plan contingency
c. Accept the risk
d. Transfer the risk
Q13. Low likelihood but high cost of damage requires ________.
a. Control the risk
b. Plan contingency
c. Reduce the risk
d. Both contingency planning and risk reduction
Q14. Before managing a risk, it must be examined in terms of ________.
a. Frequency
b. Severity
c. Probability perception
d. All of the above
Q15. Arrange the industrial disasters in correct sequence.
a. Triangle Factory Fire → Minamata Disaster → Bhopal Gas Tragedy
b. Bhopal Gas Tragedy → Triangle Factory Fire → Minamata Disaster
c. Minamata Disaster → Bhopal Gas Tragedy → Triangle Factory Fire
d. Triangle Factory Fire → Bhopal Gas Tragedy → Minamata Disaster
Q16. Business risks can be categorized into ________.
a. Directly controllable risks
b. Partially manageable risks
c. Risks not under management control
d. All of the above
Q17. CAT bonds, weather derivatives and finite risk products are examples of ________.
a. Insurance companies
b. Insurance products
c. Alternatives to insurance products
d. Risk retention groups
Q18. Probability of occurrence can be measured as ________.
a. Fraction
b. Percentage
c. Decimal
d. All of the above
Q19. Study and enquiry method helps in risk identification through ________.
a. Annual reports and agreements
b. Site information
c. Analysis of accounts
d. All of the above
Q20. UK listed companies evaluate internal controls under the Hampel Committee’s ________.
a. Dual Code
b. Combined Code
c. Single Code
d. Multi Code
