2nd Semester SY 2020-2021

AEC12 – Governance, Business Ethics, Risk Management and Internal Control

FSAQ1 – Risk Management

Questions:
1. Why is there an increased attention and emphasis on risk management for corporations these days?
2. Explain the significance of Establishing the context as a step for risk management.
3. Briefly explain and differentiate the three major categories of risks presented by Cabrera in her book.

Multiple Choice Questions:

1. The risk that refers to uncertainty about the rate of return caused by the nature of the business is
a. Business risk c. Liquidity risk
b. Default risk d. Financial risk

2. The risk associated with the uncertainty created by the inability to turn investment quickly for cash
a. Interest rate risk c. Business risk
b. Liquidity risk d. Default risk

3. The risk that the real rate of return will be less than the nominal or stated rate of return due to inflation is
referred to as
a. Purchasing power risk c. Default risk
b. Liquidity risk d. Business risk

4. Operations risk is manifested in all of the following except

a. Process stoppage c. Interest rates volatility
b. Technological obsolescence d. Management fraud

5. Financial risk is manifested in all of the following except

a. Environment risk c. Credit risks
b. Liquidity risks d. Market liquidity risks

6. Non-financial risks associated with Financial Institutions include the following except
a. Integrity risk c. Regulatory risk
b. Leadership risk d. Derivative risk

7. ISO 31000 suggests that once risks have been identified and assessed, techniques to manage the risks should be
applied. These techniques include the following except
a. Disregard c. Sharing
b. Retention d. Reduction

8. The technique of eliminating or reducing risk which could mean losing out on the potential gain is called
a. Risk avoidance c. Risk retention
b. Risk sharing d. Risk reduction

9. ___________ involves accepting the loss or benefit of gain from a risk when it occurs
a. Risk avoidance c. Risk reduction
b. Risk retention d. Risk sharing

10. Which is the first step in the enterprise-wide risk management process?
a. Implement action plans c. Develop/design action plans
b. Monitor and report risk d. Identify, source, and measure risks