Risk Management

Question 1

What is the difference between risk and uncertainty?

Answer 1

Risk can be assessed based on past data

Uncertainty arises when there is a lack of past data

Question 2

Symmetrical risk describes the idea that an outcome may be better or worse than expected, which definition describes which outcome?

a) Downside risk

b) Upside risk

Answer 2

a) Downside risk - the risk that things will go wrong

b) Upside risk - the risk that things will go right
Opportunity

Question 3

How do you calculate gross risk?

Answer 3

Gross risk = probability x impact

Question 4

What are the four key risk concepts?

Answer 4

Exposure

Volatility

Impact

Probability

Different combinations of these factors -> differing business responses

Question 5

Match the key term to the definition:

a) Risk
b) Uncertainty

1. A lack of information
2. Failure to predict future outcomes
3. The variation in an outcome

Answer 5

a3
b1