Certified Supply Chain Professional (CSCP) Practice Exam

What is a risk category?

1. A classification based on financial impact

2. A cluster of risk causes with a label

3. A list of all identified risks in a company

4. An evaluation of risk tolerances across departments

The correct answer is: A cluster of risk causes with a label

A risk category is indeed best described as a cluster of risk causes with a label. This concept helps in organizing and classifying various types of risks that an organization might face into distinct groups based on their nature or underlying causes. By labeling these clusters, organizations can more effectively identify, assess, and manage risks. Risk categories can include various types, such as operational risks, strategic risks, financial risks, and compliance risks. Each category encompasses specific risks that have common characteristics, making it easier for teams to focus on managing risks in a structured and systematic manner. The other options, while related to risk management in some way, do not accurately define what a risk category is. For instance, defining a risk category based on financial impact would only consider one aspect of risks and wouldn't encompass the broader spectrum of risk causes. A comprehensive list of all identified risks pertains more to risk inventory than to categorization. Evaluating risk tolerances across departments is a separate process that involves understanding how much risk different parts of the organization can accept, rather than categorizing those risks themselves.