QUESTION: 5

You are the risk official in Bluewell Inc. You are supposed to prioritize several risks. A risk has a rating for occurrence, severity, and detection as 4, 5, and 6, respectively. What Risk Priority Number (RPN) you would give to it?

Answer(s): A

Explanation:

Steps involving in calculating risk priority number are as follows:
-Identify potential failure effects
-Identify potential causes
-Establish links between each identified potential cause
-Identify potential failure modes
-Assess severity, occurrence and detection
-Perform score assessments by using a scale of 1 -10 (low to high rating) to score these assessments.
-Compute the RPN for a particular failure mode as Severity multiplied by occurrence and detection.
RPN = Severity * Occurrence * Detection
Hence,
RPN = 4 * 5 * 6
= 120
Incorrect Answers:
B, C, D: These are not RPN for given values of severity, occurrence, and detection.

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QUESTION: 6

Which of the following is the MOST important use of KRIs?

Providing a backward-looking view on risk events that have occurred
Providing an early warning signal
Providing an indication of the enterprise's risk appetite and tolerance
Enabling the documentation and analysis of trends

Answer(s): B

Explanation:

Key Risk Indicators are the prime monitoring indicators of the enterprise. KRIs are highly relevant and possess a high probability of predicting or indicating important risk. KRIs help in avoiding excessively large number of risk indicators to manage and report that a large enterprise may have.

As KRIs are the indicators of risk, hence its most important function is to effectively give an early warning signal that a high risk is emerging to enable management to take proactive action before the risk actually becomes a loss.

Incorrect Answers:
A: This is one of the important functions of KRIs which can help management to improve but is not as important as giving early warning.

C: KRIs provide an indication of the enterprise's risk appetite and tolerance through metric setting, but this is not as important as giving early warning.

D: This is not as important as giving early warning.

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QUESTION: 7

Which of the following role carriers will decide the Key Risk Indicator of the enterprise? Each correct answer represents a part of the solution. Choose two.

Business leaders
Senior management
Human resource
Chief financial officer

Answer(s): A,B

Explanation:

An enterprise may have hundreds of risk indicators such as logs, alarms and reports. The CRISC will usually need to work with senior management and business leaders to determine which risk indicators will be monitored on a regular basis and be recognized as KRIs.

Incorrect Answers:
C, D: Chief financial officer and human resource only overview common risk view, but are not involved in risk based decisions.

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QUESTION: 8

What are the requirements for creating risk scenarios? Each correct answer represents a part of the solution. Choose three.

Determination of cause and effect
Determination of the value of business process at risk
Potential threats and vulnerabilities that could cause loss
Determination of the value of an asset

Answer(s): B,C,D

Explanation:

Creating a scenario requires determination of the value of an asset or a business process at risk and the potential threats and vulnerabilities that could cause loss. The risk scenario should be assessed for relevance and realism, and then entered into the risk register if found to be relevant.

In practice following steps are involved in risk scenario development:
First determine manageable set of scenarios, which include:
- Frequently occurring scenarios in the industry or product area.
- Scenarios representing threat sources that are increasing in count or severity level.
- Scenarios involving legal and regulatory requirements applicable to the business.
After determining manageable risk scenarios, perform a validation against the business objectives of the entity.
Based on this validation, refine the selected scenarios and then detail them to a level in line with the criticality of the entity.
Lower down the number of scenarios to a manageable set. Manageable does not signify a fixed number, but should be in line with the overall importance and criticality of the unit.
Risk factors kept in a register so that they can be reevaluated in the next iteration and included for detailed analysis if they have become relevant at that time.
Risk factors kept in a register so that they can be reevaluated in the next iteration and included for detailed analysis if they have become relevant at that time.
Include an unspecified event in the scenarios, that is, address an incident not covered by other scenarios.

Incorrect Answers:
A: Cause-and-effect analysis is a predictive or diagnostic analytical tool used to explore the root causes or factors that contribute to positive or negative effects or outcomes. It is used during the process of exposing risk factors

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