Chapter 2 - Risk Management

Part A. Identification, classification and evaluation of risk - 20%

Have a go at the few chapter questions to test your undestanding of Chapter 2.

Restart the test

Need more practice right now? You can go directly to the practice kit and answer this chapter's questions:

Part A Ch2 Risk Management - 36 questions

or go directly to the complete P3 practice kit and select what you want to practice:

Complete P3 Practice Kit with 500 Q&A



      Indicative syllabus content

A.1 Evaluate the types of risk facing an organisation and recommend appropriate responses.


 (b) Evaluate the organisation’s ability to bear identified risks.
  • Quantification of risk exposures (impact if an adverse event occurs) and their expected magnitude, taking likelihood into account.
  • Risk map representation of risk exposures as a basis for risk reporting and analysis.
 (c) Recommend responses to identified risks.
  •  Enterprise risk management and its components.
  • Risk mitigation including TARA – transfer, avoid, reduce, accept.
  • Gross and net risks.
  • Assurance mapping and similar techniques for describing risks and their associated responses.
 A.2 Evaluate senior management’s responsibility for the implementation of risk management strategies and internal controls. (a) Recommend techniques that will enable the board to discharge its responsibilities with respect to managing risks. 
  •  The control environment.
  • Internal control.
  • Risk register.
(b) Advise the board on its responsibilities for reporting risks to shareholders and other stakeholders.
  • Risk reports and stakeholder responses.
D.1 Evaluate financial risks facing an organisation. (a) Evaluate financial risks facing an organisation.
  • Sources of financial risk associated with international operations.
  • Transaction, translation, economic and political risk.
  • Quantification of risk exposures, their sensitivities to change in external conditions and their expected magnitude.
  • Exposure to interest rate risks.
D.2 Evaluate alternative risk management tools. (a) Advise on the effects of economic factors that affect future cash flows.
  • Exchange rate theory and the impact of differential rates of inflation on forecast exchange rates.
  • Theory and forecasting of exchange rates (e.g. interest rate parity, purchasing power parity and the Fisher effect).
  • Value at risk.