ISO-31000-CLA GAQM ISO 31000 - Certified Lead Risk Manager Free Practice Exam Questions (2025 Updated)

According to 3, a captive insurance company is “a wholly owned subsidiary insurer that provides risk mitigation services for its parent company or related entities”. It can act as a reinsurer by accepting risks from other insurers or captives 1. It can also access reinsurance markets to transfer some of its own risks 1. It can sometimes offer greater cover than is available in the insurance market by tailoring its policies to suit its parent’s needs 3. It does not have to be located in the same country as its parent company; in fact, many captives are domiciledoffshore for tax or regulatory reasons 4.

Uncertainty leads to a changing context2. This means that uncertainty creates variability in outcomes and expectations, which may affect the objectives and scope of risk management.

According to 1, page 15-16, external risks are “those arising from events outside the organization” and marketplace risks are “those arising from changes in market conditions such as customer demand, competition, regulation”. Economic changes in different countries can affect the market conditions for an international bank’s operations.

When an operational area develops a treatment for a critical risk, the risk management professional must evaluate the impact upon other areas3. This helps to ensure that the treatment does not create new risks or adversely affect other objectives.

According to ISO/IEC Guide73 (2009), clause B., residual risk is “the level of remaining after controls have been applied”. It is sometimes called ‘retained risk’ because it represents the amount of risk that an organization decides to accept or retain after implementing its mitigation strategies 3.

A train crash and its consequences is an example of risk aggregation, which is the combined effect of multiple risks on an organisation’s objectives3. Risk aggregation can result in losses that are greater than the sum of individual losses.

According to 1, systemic risk is “the possibility that an event at the company level could trigger severe instability or collapse an entire industry or economy”. It is different from other types of risks that affect only specific parts or aspects of an organization 2.

Treatment plan provides a roadmap on how the treatment options will be deployed3. Treatment plan helps to define the objectives, scope, responsibilities, resources, timeframe, and monitoring mechanisms for implementing risk treatment actions.

Risk management is a strategic management process2. Risk management helps organizations to align their objectives, strategies, and actions with their external and internal environment.