Chartered Institute of Management Accountants (CGMA) · Advanced Management Accounting
CIMA P2 Risk and control: practice questions with answers
3 free exam-style questions on Risk and control for CIMA P2 Advanced Management Accounting. Try each one, then open the answer to read the explanation. Fincora has 30 original questions on this syllabus area.
Question 1
Which of the following is one of the five components of COSO's Enterprise Risk Management: Integrating with Strategy and Performance (2017) framework?
- A Control activities
- B Event identification
- C Risk financing
- D Review and revision
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Answer: D. The five components of COSO ERM (2017) are:
1. Governance and culture
2. Strategy and objective-setting
3. Performance
4. Review and revision
5. Information, communication and reporting
The framework is supported by 20 principles and stresses that risk management should be integrated with strategy-setting and performance management rather than run as a separate compliance exercise.
Question 2
Which of the following shows the main stages of the risk management process in the correct order?
- A Assess risks, identify risks, monitor and report, decide on risk responses
- B Decide on risk responses, identify risks, assess risks, monitor and report
- C Identify risks, decide on risk responses, monitor and report, assess risks
- D Identify risks, assess risks, decide on risk responses, monitor and report
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Answer: D. A typical risk management process:
1. Identify risks (e.g. through brainstorming, PESTEL analysis, risk workshops)
2. Assess risks: likelihood and impact, often shown on a risk map
3. Respond: choose a response, for example using TARA (transfer, avoid, reduce, accept)
4. Monitor and report: review whether responses are working and report to the board, then repeat the cycle as risks change
Question 3
Which of the following is a speculative risk for Brindle Outdoor, a camping-equipment retailer?
- A Launching an own-brand range of tents, which could earn more or less than forecast
- B A fire destroying the main warehouse
- C Theft of stock by employees
- D A claim from a customer injured by a faulty product
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Answer: A. - Pure risk: the only possible outcomes are a loss or no loss (for example fire, theft, injury claims). Such risks are often insurable.
- Speculative risk: outcomes may be a gain or a loss (for example launching a product, entering a new market, investing). Organisations take on speculative risks deliberately in pursuit of returns.
Recognising the upside as well as the downside of speculative risks is central to risk management linked to strategy.
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