Certified Financial Management Specialist Practice Exam

Which term refers to the process of continuously tracking and managing risks?

1. Risk Mitigation

2. Risk Assessment

3. Monitoring Risk

4. Control Effectiveness

The correct answer is: Monitoring Risk

The process of continuously tracking and managing risks is best referred to as monitoring risk. This concept encompasses the ongoing assessment of risk levels, effectiveness of risk mitigation strategies, and overall risk environment. By actively monitoring risks, organizations can identify new risks that may arise, assess changes in existing risks, and adjust their strategies accordingly to ensure effective risk management. This continuous oversight is critical because it helps organizations respond proactively to emerging threats and minimize potential negative impacts on their objectives. Risk mitigation involves developing strategies to reduce the severity or probability of risks, but it does not inherently encapsulate the ongoing nature of tracking those risks after they have been implemented. Risk assessment is more about identifying and evaluating risks rather than the continuous process of managing them. Control effectiveness refers to how well the strategies and controls put in place are functioning, but it does not encompass the comprehensive process of ongoing risk tracking and management. Thus, monitoring risk directly aligns with the idea of continuous oversight and management of risks.