Exam Practice Questions And Correct

Certified Risk Adviser (CRA) Certification Exam Practice Questions And Correct Answers (Verified Answers) Plus Rationales 2026 Q&A | Instant Download Pdf

• Which of the following is the primary purpose of risk management?
• To eliminate all risks
• To increase profit at any cost
• To identify, assess, and control risks
• To comply with tax regulations

Rationale: The main goal of risk management is to systematically

identify, assess, and mitigate risks to an acceptable level, not to eliminate them entirely.

• Which type of risk arises from changes in the financial market?
• Operational risk 1 / 4

• Market risk
• Liquidity risk
• Reputational risk

Rationale: Market risk refers to potential losses due to changes in

market prices, such as interest rates, stock prices, or currency exchange rates.

3. In risk assessment, the likelihood of occurrence refers to:

• The potential impact of the risk
• The probability that a risk event will occur
• The cost of mitigating the risk
• The severity of regulatory penalties

Rationale: Likelihood is the chance that a risk will happen, which is

assessed separately from the impact.

• Which of the following is an example of operational risk?
• Changes in interest rates
• Stock market volatility
• System failure in a financial institution
• Currency exchange fluctuation

Rationale: Operational risk arises from internal processes, people, or

systems, such as system failures, fraud, or human error.

• Diversification in an investment portfolio primarily reduces which type

of risk?

• Systematic risk 2 / 4

• Unsystematic risk
• Market risk
• Credit risk

Rationale: Unsystematic risk is specific to individual assets and can

be reduced through diversification; systematic risk affects the entire market and cannot be eliminated by diversification.

• The risk management process includes all of the following steps

EXCEPT:

• Risk identification
• Risk assessment
• Risk mitigation
• Profit maximization

Rationale: Profit maximization is a business objective but is not part

of the risk management process.

• Which insurance principle requires sharing of risks among many

people?

• Indemnity
• Subrogation
• Risk pooling
• Utmost good faith

Rationale: Risk pooling spreads the financial burden of losses across

a large number of policyholders. 3 / 4

8. A company purchases insurance to transfer risk. This is an example of:

• Risk retention
• Risk avoidance
• Risk transfer
• Risk mitigation

Rationale: Risk transfer involves shifting the financial impact of a risk

to a third party, such as an insurance company.

• Which type of risk is unavoidable and affects the entire market?
• Credit risk
• Systematic risk
• Operational risk
• Liquidity risk

Rationale: Systematic risk affects the entire market or economy and

cannot be eliminated through diversification.

10. The principle of indemnity in insurance means:

• The insured profits from a loss
• Premiums increase with risk
• The insured is restored to the original financial position
• The insurer can subrogate claims

Rationale: Indemnity ensures the insured is compensated for the

actual loss without profit.

• Which of the following is a financial risk?
• Fire damage
• / 4