Question 1

Choose from the following list the best definition of strategic risk.

Accepted Answer

Strategic risk arises when a business strategy becomes less effective over time and fails to achieve the desired goals, potentially harming the company's competitive position or market share. This type of risk is inherent in the decision-making process regarding the direction and goals of an organization.

Question 2

In September 2000, the CEO of Blockbuster was given the option to purchase Netflix for $50 million. At the time, Netflix was losing money and worried about bankruptcy. The Blockbuster CEO turned down the opportunity. This is an example of what type of risk?

Accepted Answer

Strategic risk involves decisions made by a company's leadership that can potentially harm the company's future or cause it to miss out on opportunities. In this case, the Blockbuster CEO's decision not to purchase Netflix, which later grew to become a major competitor, is an example of a missed strategic opportunity, thus representing strategic risk.

Question 3

Choose from the following list the best definition of physical risk.

Accepted Answer

Physical risk typically refers to the potential for harm or damage to physical assets or operations due to external factors such as adverse weather conditions, criminal activities, or other forms of physical damage.

Question 4

While ________ is the easiest to understand, it is one of the most important types of risk a company identifies because the impact is usually high.

Accepted Answer

Physical risk is often straightforward to understand as it involves tangible threats to a company's assets or personnel, and its impact can be significant, affecting safety and operations directly.

Question 5

Choose from the following list the best definition of a risk inventory.

Accepted Answer

A risk inventory is essentially a comprehensive list that includes all the risks a business is aware of, allowing for better risk management and mitigation strategies.

Question 6

Founded in 1852, Wells Fargo is one of the largest banks in the United States. When internal fraud at Wells Fargo was exposed to the public in September 2016, what type of risk was increased at Wells Fargo due to this fraud?

Accepted Answer

The exposure of internal fraud at Wells Fargo in 2016 significantly increased its reputational risk, as the public's trust and perception of the bank were severely damaged.

Question 7

Choose the best definition of risk severity from the list below.

Accepted Answer

It is the likelihood of risks occurring and the potential impact on the company.

Question 8

Choose the best definition of likelihood from the list below.

Accepted Answer

Likelihood, in the context of risk management, refers to the estimated probability that a given risk will occur. This estimation helps in understanding and preparing for potential risks by assessing how probable they are to happen.

Question 9

Choose the best definition of impact from the list below.

Accepted Answer

Impact, in the context of risk management, refers to the estimation of damage or negative effects that could result if a particular risk materializes. It assesses the severity of the consequences associated with a risk event.

Question 10

Complete the following sentence: "Companies use different methods to calculate likelihood, but likelihood is always ranked on a

Accepted Answer

Likelihood is often ranked on a sliding scale to accommodate the varying degrees of probability or risk, allowing for more nuanced assessments.

Question 11

Complete this sentence: "In different industries, likelihood can be described as

Accepted Answer

Likelihood in various industries is often described as "probability," which refers to the chance or likelihood that a particular event will occur.

Question 12

What is the abbreviation for Medium High?

Accepted Answer

The abbreviation for Medium High is MH.

Question 13

What is the abbreviation for High?

Accepted Answer

The abbreviation for "High" is "H."

Question 14

What is the abbreviation for Medium Low?

Accepted Answer

The abbreviation for Medium Low is ML.

Question 15

What is the abbreviation for Low?

Accepted Answer

The abbreviation for "Low" is "L".

Question 16

What is the abbreviation for Medium?

Accepted Answer

The abbreviation for Medium in contexts such as clothing sizes is "M".

Question 17

What is the risk calculation if a company assigns a likelihood of 4 to a particular risk and an impact of 3 to the risk?

Accepted Answer

The risk calculation is typically done by multiplying the likelihood of the risk by its impact. In this case, 4 (likelihood) * 3 (impact) = 12.

Question 18

What is the risk calculation if a company assigns a likelihood of 1 to a particular risk and an impact of 5 to the risk?

Accepted Answer

The risk calculation is typically done by multiplying the likelihood of the risk occurring by the impact of the risk, so 1 (likelihood) * 5 (impact) = 5.

Question 19

If a company identifies four risks with a risk score as follows: $\begin{array}{|l|c|}
\hline \text{ Risk } &\text{  Risk Score} \
\hline\text{  An oven fire may result in the destruction of a store.} & 5 \
\hline \text{ A cybersecurity attack may result in the theft of customer data.} & 15 \
\hline\text{ A store employee getting sick may result in them backing out of their shift} \
\text{ last minute.} & 4 \
\hline\text{  An employee stealing from a cash register may result in loss of cash.} & 6 \
\hline
\end{array}$

Accepted Answer

The cybersecurity attack has the highest risk score of 15, indicating it is the most significant risk among the listed options.

Question 20

If a company identifies four risks with a risk score: 
$\begin{array}{|l|c|}
\hline \text{ Risk } &\text{  Risk Score} \
\hline\text{  An oven fire may result in the destruction of a store.} & 5 \
\hline \text{ A cybersecurity attack may result in the theft of customer data.} & 15 \
\hline\text{ A store employee getting sick may result in them backing out of their shift} \
\text{ last minute.} & 4 \
\hline\text{  An employee stealing from a cash register may result in loss of cash.} & 6 \
\hline
\end{array}$

Accepted Answer

The answer of If a company identifies four risks with...

Quiz 2: Risks and Risk Assessments