Practice Test Geeks(CFC) Certified Financial Controller Practice Test
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CFC Risk Management & Insurance Flashcards

6 cards from real CFC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 6 CFC Risk Management & Insurance flashcards as text

  1. Which of the following is an example of an operational risk that a financial controller must account for?

    Answer: System failure disrupting transaction processing

    Operational risk arises from failures in internal processes, people, or systems — such as IT outages that disrupt financial transaction processing.

  2. A financial controller implements hedging strategies using derivatives to manage interest rate exposure. This is an example of which risk response?

    Answer: Risk mitigation

    Using derivatives such as interest rate swaps or caps to reduce exposure to adverse rate movements is a form of risk mitigation — it reduces the potential impact without eliminating the risk source.

  3. What is a 'captive insurance company' and why might a large corporation establish one?

    Answer: A wholly-owned insurance subsidiary that provides coverage for the parent company's risks

    A captive insurer is a subsidiary created to insure the parent company's risks, allowing the corporation to self-fund losses, retain underwriting profits, and gain tax advantages.

  4. In the context of financial risk management, what does 'credit risk' specifically refer to?

    Answer: The risk that a counterparty will fail to meet its financial obligations

    Credit risk is the potential loss resulting from a borrower, customer, or counterparty failing to fulfill contractual financial obligations.

  5. Which insurance product protects a company against losses resulting from employee dishonesty, theft, or fraud?

    Answer: Fidelity bond (crime insurance)

    A fidelity bond (or commercial crime insurance) covers direct financial losses the company suffers due to dishonest or fraudulent acts committed by employees.

  6. A financial controller conducts a business impact analysis (BIA). What is the primary purpose of this analysis?

    Answer: To identify critical business functions and quantify the financial impact of disruptions

    A BIA identifies essential business processes, determines acceptable downtime thresholds, and estimates financial losses from operational disruptions to guide continuity planning.