Question：------- risks are risks from which either good or harm may result.
A. Strategic risks
B. Fundamental risks
C. Speculative risks
D. Pure risks
E. Particular risks
The correct answer is: Speculative risks.
Fundamental risks are any risks that affect society in general and can't be controlled by any individual.
Particular risks are risks over which individuals have some measure of control.
Pure risks are risks from which only harm can result.
Strategic risks that relate to the fundamental and key decisions that directors take about the future of the organisation.
Question：Which of the following are measures suggested by corporate governance best practice to encourage good risk management by companies?
A. The external auditors reviewing the company's overall risk management processes
B. Disclosure of risk management processes in the accounts
C. Linking directors' remuneration to revenues
D. The board undertaking an annual review of risks
E. Boards making every effort to undertake only low-risk activities
The correct answers are: The board undertaking an annual review of risks; Disclosure of risk management processes in the accounts.
Linking directors' remuneration to revenues may encourage directors to take excessive risks, and maximise revenues at the expense of returns to shareholders.
The external auditors' work is likely to be limited to risk management processes and controls that affect the financial statements; internal auditors are more likely to have responsibility for reviewing overall risk management processes.
Boards may have to undertake high-risk activities in order to be able to make returns at a level acceptable to shareholders; it may be a necessary part of operating in their industry.
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