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ISO 31000 Lead Risk Manager Quiz Questions and Answers

Answer :
  • They are two different but interconnected processes conducted at two different phases of risk management

Explanation :

These are two different processes. Understanding the context when establishing the framework is done at the organization-wide level with the aim of ensuring that the policies, procedures, and roles are properly established and tailored to the needs of the organization. When establishing the context of the risk management process, the aim is to ensure that an organization properly understand what it is assessing and in order to customize the risk management process. These two processes are interconnected because in most cases the information collected during the establishment of the risk management framework is also valid for the specific activities of the organization.
Answer :
  • Middle-out communication

Explanation :

One of the aims of reporting is to assist interaction with stakeholders, including those with responsibility and accountability for risk management activities. In the scenario, the management failed to provide the necessary information to the logistics and storage team about why the decision to buy materials in bulk was made. This left the logistics and storage team confused and unprepared because this practice differed from earlier practices of the organization. This case represents a failure in top-down communication.
Answer :
  • Avoid individual biases

Explanation :

The risk analysis may be influenced by any divergence of opinions, biases, perceptions of risk, and judgments. Biases may be more prominent when the risk analysis is conducted by a single person. It should be noted that although the existence of a team means that there’s a higher chance of avoiding individual biases, this does not imply that the team is free from bias because there can be group-level biases that can influence the team.
Answer :
  • Avoiding the risk

Explanation :

As stated in the training course, when the identified risks are considered to be too high, a decision can be taken to avoid them entirely by canceling an activity or set of activities or by modifying the conditions under which the business operates. In the case of The Golden Ratio, we see the latter: the management has decided to purchase materials in bulk in order to avoid buying them later with an inflated currency.
Answer :
  • Evaluate the existing risk management practices and processes, evaluate those gaps, and address them within the framework

Explanation :

The existing practices, controls, and processes should be analyzed first. This is done with the aim of analyzing gaps, for example, to determine which controls, processes, measures are efficient and which ones may need to be updated or changed. This approach ensures a smoother implementation of the risk management framework and helps the organization avoid disturbing the controls, processes, and practices that work.
Answer :
  • Ignoring the risk

Explanation :

As stated in ISO 31000, there are several options for treating risk, such as avoiding the risk by deciding not to continue with the activity that gives rise to the risk, taking the risk to pursue an opportunity, removing the risk source, changing the likelihood and consequence, sharing the risk, and retaining the risk. However, as stated in the training course, ignoring or denying the risk is simply not an option.
Answer :
  • Yes, in an adequate way that does not imply a level of certainty beyond the reality

Explanation :

Risks should be expressed in understandable terms, especially in relation to the stakeholders they are being communicated to. Those presenting the results should characterize their confidence or that of their team in the accuracy and completeness of the results. This also implies that uncertainties should be adequately communicated so that the report does not imply a level of certainty beyond the reality
Answer :
  • FALSE

Explanation :

This statement is false. In contrast the correct statement is: Potential sources of risk include at least the following: commercial relationships and obligations, legal expectations and liabilities, economic shifts and circumstances, technological innovations and upheavals, political changes and trends, natural events and forces, human frailties and tendencies, and management shortcomings and excesses.
Answer :
  • General guidance on making risk management effective

Explanation :

The principles outlined in ISO 31000 provide general guidance on the characteristics of effective and efficient risk management. The principles also communicate the value of risk management and explain its intention and purpose. The principles are developed as general statements and their influence can be seen on ISO 31000’s recommendations on the risk management framework and risk management process.
Answer :
  • Perception of risk

Explanation :

As stated in ISO 31000, the risk analysis may be influenced by any divergence of opinions, biases, perceptions of risk, and judgments. In the scenario, it can be observed that all of the members of the team have access to the same information, in this case the inflation risk. However, one member of the team, based on their assumption, perceives the inflation risk differently from the rest of the team.