These are Exam questions and solutions as well as those that were found in assignments, study guides and practice questions. When you work through these together with explanations in your study guide, you will gain an excellent understanding of concepts, theories, techniques and methods which will ...
Question 1
Which one of the following is a benefit of effective risk and opportunity management?
1) Improved profit certainty
2) Increased shareholder value
3) Increased stakeholder confidence Correct option 3
4) Lower economic returns
Explanation
Improved cost certainty, sustainable shareholder value, increased stakeholder confidence and
higher economic returns are all benefits of effective risk and opportunity management.
Question 2
The board’s role should be to steer the corporation towards corporate governance policies that
support …
1) long-term sustainable growth in shareholder value Correct option 1
2) short-term sustainable growth in shareholder value
3) short-term sustainable growth in stakeholder value
4) long-term sustainable growth in stakeholder value
Explanation
The board’s role should be to steer the corporation towards corporate governance policies that
support long-term sustainable growth in shareholder value.
Question 3
Which one of the following statements is not considered a benefit of Enterprise Risk Management
(ERM)?
1) Minimise operational surprises and losses.
2) Enhance corporate governance.
3) Comply with relevant legal and regulatory requirements.
4) Align return appetite and strategy. Correct option 4
Explanation
Benefits of Enterprise Risk Management (ERM) include minimisation of operational surprises and
losses, enhancing corporate governance, complying with relevant legal and regulatory requirements
and aligning risk appetite and strategy. The determination of the risk appetite of a business is vital
in the ERM process because it shows how much risk the business is willing to take on.
Question 4
The King II report moved away from the … bottom-line principle to a … bottom-line principle.
1) double - triple
2) single - triple Correct option 2
3) single - double
4) double – single
1
,Explanation
The King II report moved away from the single bottom-line principle to a triple bottom-line principle.
Question 5
As of June 2010, companies listed on the JSE are expected to comply with …
1) King I
2) King II
3) King III Correct option 3
4) King IV
Explanation
As of June 2010, companies listed on the JSE are expected to comply with King III.
Question 6
King III applies to …
a) All listed companies on the JSE
b) Banks
c) Financial institutions
d) Insurance institutions
Choose the correct option.
1) a, b, c, d
2) a, b, c
3) a, b, d Correct option 3
4) a, b
Explanation
King III applies to all listed companies on the JSE, banks, financial and insurance institutions.
Question 7
In financial ratio analysis, efficiency ratios …
1) measures the degree of success of the management in achieving their primary purpose of
creating wealth for their owners
2) are also known as activity ratios correct option 2
3) examine the relationship between liquid resources held and creditors due for payment in
the near future
4) assess the returns and performance of shares held in a particular business
Explanation
In financial ratio analysis, efficiency ratios are also known as activity ratios.
Question 8
A GAP analysis …
1) is used to list all the risks that were identified on previous projects within the business
2) is a list that categorises each risk into a type of area
3) can be used to identify the main risks linked to a certain activity or project of the business
Correct option 3
2
, 4) is a structured checklist to breakdown the risks and opportunities into manageable
components
Explanation
A GAP analysis can be used to identify the main risks linked to a certain activity or project of the
business. A risk checklist is used to list all the risks that were identified on previous projects within
the business.
A risk prompt list is a list that categorises each risk into a type or area.
Risk taxonomy is a structured checklist to breakdown the risks and opportunities into manageable
components.
Question 9
Pareto analysis is used to …
1) identify those risks that will have a dramatic impact on business projects/activities and
objectives Correct option 1
2) determine the expected return of an asset in relation to its risk or risk profile
3) structure decisions, uncertain events and values of outcomes
4) identify the causes of any risk
Explanation
Pareto analysis is used to identify those risks that will have a dramatic impact on business
projects/activities and objectives.
The CAPM model is used to determine the expected return of an asset in relation to its risk or risk
profile.
Decision analysis is used to structure decisions, uncertain events and values of outcomes.
Casual analysis is used to identify the causes of any risk.
Question 10
The attitude towards risk that requires an increase in the return for an increase in the risk is known
as risk …
1) neutral
2) seeking
3) averse Correct option 3
4) impartial
Explanation
The attitude towards risk that requires an increase in the return for an increase in the risk is known
as risk averse.
Question 11
The … is a method used by a business to evaluate the effect of uncertainty on a planned activity in a
range of situations and uses random numbers to sample from a probability distribution.
1) scenario analysis
2) simulation
3) Monte Carlo Simulation Correct option 3
4) latin hypercube sampling
Explanation
The Monte Carlo simulation is a method used by a business to evaluate the effect of uncertainty on
a planned activity in a range of situations and uses random numbers to sample from a probability
distribution.
3
, Question 12
The … is used to re-create the probability distributions specified by distribution functions accurately.
1) scenario analysis
2) simulation
3) Monte Carlo Simulation
4) latin hypercube sampling Correct option 4
Explanation
The Latin Hypercube sampling is used to re-create the probability distributions specified by
distribution functions accurately.
Question 13
Which of the following are inputs for the risk treatment process?
a) Risk register
b) Industry betas
c) Description of the business risk appetite
d) Risk response actions
Choose the correct option.
1) a, d
2) a, b, d
3) a, b, c Correct option 3
4) a, b, c, d
Explanation
Inputs for the risk treatment process include the risk register, industry betas and description of the
business risk appetite. The outputs for the risk treatment process will be the risk response (i.e.
remove, reduce or transfer) actions.
Question 14
Which one of the following is a process output in the risk analysis process?
1) risk identification
2) risk recording
3) risk register Correct option 3
4) profit and loss account assessment
Explanation
Risk identification is done in the second stage of the risk management process. Risk is identified and
recorded during this stage. Risk recording is a process input in the risk analysis process. The risk
register is a process output of the risk identification and risk analysis process. One of the tools
(process inputs) used to identify risk is the analysis/assessment of the profit and loss account.
Question 15
Risk appetite can defined as ...
1) a reduction of risks by distribution
2) the amount of risk a business is prepared to tolerate at any point in time Correct option 2
3) the elimination of a risk when a negative outcome or high-risk exposure is anticipated
4) the strategy used to transfer a risk to another entity, business or organisation
Explanation
4
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