CAM Risk Assessment & Mitigation 3 — Questions and Answers
Question 1: A global client informs their account manager that political instability in a key operating country may disrupt their supply chain. This is an example of:
- Market risk
- Geopolitical risk (Correct answer)
- Credit risk
- Operational risk
Correct answer: Geopolitical risk
Geopolitical risk refers to potential disruptions caused by political events, instability, or policy changes in specific regions.
Question 2: Which mitigation technique involves spreading account exposure across multiple industries, geographies, or client segments?
- Hedging
- Diversification (Correct answer)
- Contingency planning
- Risk avoidance
Correct answer: Diversification
Diversification reduces concentration risk by ensuring no single factor—industry, geography, or client—dominates the portfolio.
Question 3: An account manager is asked to accept a new contract clause that limits liability to 10% of annual contract value. What risk consideration is MOST relevant?
- Whether the clause affects pricing negotiation leverage
- Whether the cap adequately covers potential losses from service failures (Correct answer)
- Whether the clause violates GDPR regulations
- Whether the client's NPS score justifies the concession
Correct answer: Whether the cap adequately covers potential losses from service failures
Liability caps must be evaluated against the potential financial exposure from service failures to ensure the limit is commercially acceptable.
Question 4: In the context of account risk, what is 'churn risk'?
- The risk of accounts payable exceeding accounts receivable
- The probability that a client will discontinue the relationship or switch to a competitor (Correct answer)
- The risk of a data breach affecting client records
- The risk of regulatory non-compliance in a client's sector
Correct answer: The probability that a client will discontinue the relationship or switch to a competitor
Churn risk measures the likelihood that a client will end their contract or reduce engagement, directly impacting recurring revenue.
Question 5: A client has recently been acquired by a competitor of your company. Which risk response strategy is MOST appropriate?
- Immediately terminate the contract to avoid conflict of interest
- Conduct a strategic risk review and escalate to senior leadership for relationship guidance (Correct answer)
- Reduce service levels until the acquisition is finalized
- Transfer the account to the competitor's account team without review
Correct answer: Conduct a strategic risk review and escalate to senior leadership for relationship guidance
An acquisition by a competitor creates significant relationship and conflict-of-interest risk that requires senior leadership involvement and a strategic reassessment.
Question 6: Which leading indicator is MOST useful for early detection of deteriorating account health?
- Historical revenue over the past five years
- Declining product usage metrics and reduced stakeholder engagement (Correct answer)
- The client's industry market share
- The original contract signature date
Correct answer: Declining product usage metrics and reduced stakeholder engagement
Declining usage and reduced engagement are early warning signals that a client's commitment is weakening before it shows up in renewal metrics.
Question 7: What is the PRIMARY purpose of a Business Impact Analysis (BIA) in account risk management?
- To evaluate a client's creditworthiness before contract signing
- To identify critical account functions and quantify the impact of disruptions on business continuity (Correct answer)
- To assess competitive pricing relative to market benchmarks
- To document client satisfaction survey results
Correct answer: To identify critical account functions and quantify the impact of disruptions on business continuity
A BIA identifies which account-related functions are critical and estimates the financial and operational consequences of their disruption.
CAM Risk Assessment & Mitigation 3
A global client informs their account manager that political instability in a key operating country may disrupt their supply chain.
This is an example of: