Risk Management & Mitigation Flashcards
7 cards from real CB practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Risk Management & Mitigation flashcards as text
A company's accounts receivable balance has grown significantly, but sales have remained flat. Which risk does this pattern most likely signal?
Answer: Collectibility and credit risk
A rising AR balance without corresponding sales growth suggests customers are not paying on time, increasing the risk of bad debts.
Which internal control procedure is designed to detect errors in financial records after they have occurred?
Answer: Supervisory review of reports
Supervisory review of financial reports is a detective control that identifies errors or irregularities after transactions have been recorded.
A business owner wants to assess which risks pose the greatest threat to the organization. They multiply the probability of each risk by its potential financial impact. What is this technique called?
Answer: Risk prioritization matrix (expected value)
Multiplying probability by impact yields the expected value of each risk, allowing management to rank and prioritize risks for mitigation efforts.
A company decides not to enter a new international market because the regulatory and currency risks are too high. Which risk response strategy does this represent?
Answer: Risk avoidance
Risk avoidance means choosing not to engage in an activity that carries unacceptable risk, eliminating exposure entirely.
Which of the following best describes residual risk?
Answer: Risk that remains after controls have been implemented
Residual risk is the level of risk that persists after management has applied controls and other risk mitigation measures.
A company stores its accounting software passwords in a shared spreadsheet accessible to all employees. Which type of risk does this practice most directly increase?
Answer: Cybersecurity and unauthorized access risk
Sharing passwords broadly eliminates accountability and allows unauthorized individuals to access or alter financial records.
A bookkeeper is reviewing the company's insurance policies and notices that the business interruption coverage lapsed. Which risk mitigation tool has the company lost?
Answer: Risk transfer mechanism
Business interruption insurance is a risk transfer tool that compensates the company for lost income and expenses if operations are disrupted.