CRMA - Certification in Risk Management Assurance Risk Management Governance Questions and Answers

Question 1

Which of the following BEST describes the primary role of the board of directors in risk management governance?

Accepted Answer

To establish the organization's risk appetite and provide oversight of the risk management framework.

Answer

To directly manage and mitigate all identified enterprise risks.

Answer

To design and implement specific risk control activities for business units.

Answer

To conduct the annual risk assessment and report findings to senior management.

Question 2

In the context of the 'Three Lines Model' for risk governance, which function is considered part of the second line?

Accepted Answer

The compliance and enterprise risk management (ERM) functions.

Answer

Business unit management that owns and manages day-to-day risks.

Answer

The internal audit function providing independent assurance.

Answer

External auditors providing a statutory financial statement opinion.

Question 3

A company's sales team is compensated based solely on achieving high revenue targets, with no consideration for the creditworthiness of new clients. This has led to a significant increase in customer defaults and bad debt. This situation indicates a failure in which key aspect of risk management governance?

Accepted Answer

Aligning performance incentives and strategy with risk appetite.

Answer

Risk identification processes.

Answer

Risk response and control implementation.

Answer

Risk monitoring and reporting.

Question 4

According to The Institute of Internal Auditors (IIA) standards, what is the primary role of the internal audit activity in risk management governance?

Accepted Answer

To provide objective assurance on the effectiveness of risk management processes.

Answer

To set the organization's risk appetite on behalf of the board.

Answer

To make the final decisions on how to respond to identified risks.

Answer

To take ownership of and manage the enterprise risk management (ERM) framework.

Question 5

An organization's board states that it is "willing to accept a moderate level of risk in pursuit of its strategic growth objectives." Management then specifies that any new project investment must not expose the company to a potential loss of more than 5% of its capital reserves. The 5% limit is an example of:

Accepted Answer

Risk tolerance

Answer

Risk capacity

Answer

Inherent risk

Answer

A key risk indicator (KRI)

Question 6

An effective risk management governance framework includes all of the following components EXCEPT:

Accepted Answer

Guaranteed prevention of all future risk-related losses.

Answer

Clearly defined roles and responsibilities for risk management.

Answer

A formal risk appetite statement approved by the board.

Answer

Established processes for risk communication and reporting to stakeholders.