1. Which one of the following is considered a clear indication of senior managem

Question

1. Which one of the following is considered a clear indication of senior management's commitment to risk management? a. A concise risk management policy statement b. The willingness to allocate the necessary resources c· The development of risk criteria d. The review of executive summary reports on an annual basis 2. Risk management professionals can use risk maps in several ways. One application assists risk managers in determining the difference between the risk remaining after the risk manager has applied risk treatment activities and the risk present before risk treatment measures have been applied. This difference is a. Speculative risk b. Inherent risk c. Residual risk d. Optimum risk 3. Mid-State Packing Company, a meat processing company, is the largest private sector employer in Metro City. First National Bank of Metro City loans money to Mid-State Packing Company and to many of the employees of Mid-State. The problem with First National Bank of Metro City loaning money to both the business and many employees of the business is that a. Loan defaults are likely to be highly correlated b. The interest rate charged on the loans must be equal c. There will be a mismatch between the fixed-rate and variable-rate loans d. The loan durations must be the same 4· There are many benefits of risk management for a business, without risk management, senior management might be reluctant to undertake activities deemed too risky, depriving the business of potential benefits. This benefit of risk management is a. Reduction in hazard risk b. Reduction of deterrence effects of hazard risk c. Reduction of diversifiable risk d. Reduction of residual uncertainty

Explanation / Answer

Residual risk= Inherent risk – impact of risk controls.

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