Free Canadian Risk Management CRM54 — Risk Management Principles and Practices Practice Questions

Sample Practice Questions

Try these 10 sample questions from the Canadian Risk Management CRM54 — Risk Management Principles and Practices practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

1. 1Which description best reflects risk in modern organizational risk management?

   1. A.The effect of uncertainty on objectivesCorrect answer: A
   2. B.The amount of insured property damage
   3. C.The cost of every existing business problem
   4. D.The probability of financial loss alone

   Explanation: The guide states: "the effect of uncertainty on objectives" Risk concerns how uncertainty affects objectives; it may involve threats or opportunities. Loss amounts, existing problems and probability alone each omit part of that concept.

   Reference: Treasury Board Secretariat — Guide to Integrated Risk Management — 2.1 Key Concepts — Risk

2. 2A firm wants to describe its use of ISO 31000 accurately. Which statement is appropriate?

   1. A.ISO 31000 sets requirements for management-system certification.
   2. B.ISO 31000 is a certification standard for individual practitioners.
   3. C.ISO 31000 provides guidance rather than certifiable requirements.Correct answer: C
   4. D.ISO 31000 sets product-certification requirements for risk software.

   Explanation: The source states: "ISO 31000 provides good practice guidelines but is not a certifiable risk management standard." ISO 31000 provides risk management guidance. The other choices confuse it with certifiable management-system requirements, personal credentials or product certification.

   Reference: ISO — ISO 31000:2018 Risk management guidelines — FAQ — Does ISO 31000 lead to risk management certification?

3. 3Which item is a hazard rather than the harm resulting from it?

   1. A.A worker's fracture after a fall
   2. B.A wet floor that can cause a fallCorrect answer: B
   3. C.A repair bill after equipment damage
   4. D.Revenue lost during a shutdown

   Explanation: The source states: "A hazard is any source of potential damage, harm or adverse health effects on something or someone." The wet floor is a potential source of harm. The fracture, repair bill and lost revenue are consequences or losses.

   Reference: CCOHS — Hazard and Risk: General — What is a hazard?

4. 4A portfolio team loses transaction records after its processing system fails. Which risk source is most directly illustrated?

   1. A.Credit risk from a borrower default
   2. B.Market risk from changing prices
   3. C.Operational risk from system failureCorrect answer: C
   4. D.Asset liquidity risk from thin trading

   Explanation: The source states: "issues related to technology, process, people, legal, or other operational processes" The immediate source is a failure of the team's system and process. Borrower default, market-price changes and inability to sell assets are different sources of financial exposure.

   Reference: Department of Finance Canada — Statement of Investment Policy for the Government of Canada — 5.3 Operational risk

5. 5In designing risk management, how does the overall approach differ from the risk management process?

   1. A.The approach covers only insurance; the process covers only investment.
   2. B.The approach assesses likelihood; the process assesses impact.
   3. C.The approach supplies the framework; the process supplies linked steps.Correct answer: C
   4. D.The approach is used by staff; the process is reserved for auditors.

   Explanation: The guide states: "the risk management approach See footnote 1, which provides the overall framework for the management of risk within an organization, and the risk management process, which provides the organization with a specific set of steps for managing risks in a consistent manner." The framework establishes the overall setting and support; the process operationalizes linked risk activities. The other options invent divisions by risk type, assessment dimension or user.

   Reference: Treasury Board Secretariat — Guide to Integrated Risk Management — 3 Integrated Risk Management — Overview

6. 6A risk scoring method defines its rating as likelihood score multiplied by consequence score. If likelihood is 3 and consequence is 4, what is the rating?

   1. A.12Correct answer: A
   2. B.7
   3. C.1.33
   4. D.64

   Explanation: The source states: "The product of these two variables is the Risk Rating" The specified rating is 3 × 4 = 12 score units. Adding gives 7, dividing gives about 1.33, and exponentiating gives 64; none applies the stated product rule. The score is not a probability or dollar loss.

   Reference: British Columbia — Risk Management Guideline — 3.5.1 Risk Rating, p. 19

7. 7A company stops offering an activity because it does not accept the associated risk. Which response does stopping that activity illustrate?

   1. A.Risk transfer
   2. B.Risk avoidanceCorrect answer: B
   3. C.Risk monitoring
   4. D.Risk retention

   Explanation: The source states: "Risk avoidance is the term given to the elimination of risk by ceasing the associated activity" Ceasing the activity avoids that exposure. Transfer reallocates loss, retention accepts it, and monitoring observes it; none describes stopping the activity.

   Reference: British Columbia — Risk Management Guideline — 3.7 Treat Risk, p. 22

8. 8Which change primarily represents increasing data volume in a sensor-based risk system?

   1. A.A higher rate of readings arriving each second
   2. B.A larger mix of image and text data formats
   3. C.A growing number of stored sensor readingsCorrect answer: C
   4. D.A lower accuracy of the recorded measurements

   Explanation: The source states: "Volume refers to the size of the dataset." More stored readings increase dataset size. A higher arrival rate describes velocity, mixed formats describe variety, and reduced accuracy impairs veracity.

   Reference: NIST — Big Data Interoperability Framework, Volume 1: Definitions — 2 Terms and Definitions — Volume

9. 9A project will receive C$12,100 one year from today. Using a 10% annual discount rate, what is the present value of that receipt?

   1. A.C$1,210
   2. B.C$12,100
   3. C.C$13,310
   4. D.C$11,000Correct answer: D

   Explanation: The guide states: "the future cash flow is discounted to equate its value to cash flows received today." For one year, PV = future cash flow/(1+r). C$12,100/1.10 = C$11,000, with no rounding needed. C$1,210 takes 10% of the receipt, C$12,100 ignores discounting, and C$13,310 compounds it forward.

   Reference: NIST — Guide to Investment Analysis — 2.3 Present Value, p. 7, Equation 1

10. 10A supplier's operating conditions change significantly after a risk response was approved. What should monitoring examine in relation to that response?

    1. A.Confirm only that the original response received the required approval.
    2. B.Retain the original rating because approval fixed the response's relevance.
    3. C.Examine whether changed conditions affect the response's continuing relevance.Correct answer: C
    4. D.Review implementation costs without reassessing the risk being managed.

    Explanation: The guide states: "the impact of changing circumstances on existing risk responses is considered." Changed conditions may alter whether a response remains relevant. Approval checks or cost reviews alone do not reassess that fit, and past approval does not freeze a risk rating or response relevance.

    Reference: Treasury Board Secretariat — Guide to Integrated Risk Management — 4.6 Defining the Risk Management Process — Risk Monitoring