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CIMA P3 Exam Dumps

Risk Management

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Total Questions : 339
Update Date : May 20, 2024
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CIMA P3 Sample Questions

Question # 1

Which ONE of the following correctly describes risk categorisation/classification?(i) Interest rate risk and foreign exchange risk are externally driven whilst risks related to suppliers,M&As and cash flows are internally driven.(ii) Risks related to R&D and regulatory authorities are externally driven whilst risks involved withintellectual capital and changes in customer preferences are internally driven.(iii) Risks related to natural events are externally driven whilst those related to accounting control andIT systems are internally driven.

A. (i) and (iii) only. 
B. (ii) only. 
C. (iii) only. 
D. None of the above. 

Question # 2

Which TWO of the following shows incorrect classification of risks?

A. Abnormal wastes arising during production due to low quality stuff or lower grade labor being used is an example of operational risk
B. Malfunctioning of an IT system and hence the leak of confidential data is a strategic risk
C. Risks related to consumer rights protection and improved health and safety would be classified as strategic risks.
D. A company’s driver committing a breach of law (e.g. speeding or parking in an inappropriate place) would be classified as a hazard risk.

Question # 3

Which ONE of the following correctly describes the three lines of defence in relation to assurance mapping? 

A. ‘Management controls’ are the first line of defence, followed by ‘operational controls’, and the third line of defence is ‘independent assurance’.
B. ‘Operational controls’ are the first line of defence, followed by ‘management controls’, and ‘independent assurance’ is a  third line of defence.
C. The correct sequence for the three lines of defence is: ‘independent assurance’, ‘operational controls’ and, finally, ‘management controls’.
D. None of the above correctly describes the three lines of defence. 

Question # 4

Which ONE of the following is correct? 

A. Risk and uncertainty are two different but related words and can be used interchangeably. The only difference between them is that risk refers to more severe cases. 
B. There is an inherent relation between risk and reward, suggesting that risky ventures would be expected to yield higher gains and low-risk ventures, lower gains. 
C. Understanding and assessing risks involves quantifying them, usually with the aid of sensitivity analysis and statistical techniques such as simulation to ensure the outcome is always as per expectations or better

Question # 5

Which ONE of the following is FALSE? 

A. Risk quantification helps in understanding and assessing the nature and severity of risks. Using probabilities gives an idea regarding the chances of arising losses.
B. Risk rating is a simple technique that can be based on probability, e.g. there is a 70% chance of risk materializing. 
C. Expected values are defined by CIMA official terminology as: ’means of calculating the average outcome by assigning probabilities to different outcomes’.

Question # 6

Which ONE of the following is NOT TRUE for contingency planning in relation to loss control? 

A. Contingency planning is about minimising losses through prior planning for information needs after an adverse event like a burglary or vandalism occurs.
B. Contingency planning also involves handing over respective responsibilities formally to a competent authority. 
C. Contingency planning also involves testing a demo with proper supervision to ensure any needful changes are incorporated in a timely manner.
D. Contingency planning is only relevant to loss-making activities and, as such, is not involved in profitable projects. 

Question # 7

Which TWO of the following correctly describe the relation between risks and accounting ratios? (i) Most organisations operate at a debt ratio (total debts/total assets) in excess of the generally acceptable 50% benchmark, but an important factor to consider here is the trend in this ratio over time. (ii) Interest cover ratio implies the amount of profits available after tax in comparison to interest charges for the period under consideration. (iii) Higher gearing ratio endangers dividend payouts to shareholders and, at the same time, may offer difficulty in securing further debts. (iv) The Quick ratio, also known as the Acid Test ratio, is a measure of the liquidity position of an organisation and is calculated by comparing the current assets to current liabilities. 

A. (i) and (ii) only. 
B. (iii) and (iv) only. 
C. (i) and (iv) only. 
D. (i) and (iii) only. 

Question # 8

Proper attention to loss controls is an important activity that can lead to damage being minimised. Which TWO of the following are TRUE?

A. Installing fire alarms will prove helpful in minimising losses resulting from fires and would be classified as a physiological aspect of loss control. 
B. Raising awareness regarding risks and holding people accountable for carelessness is a useful loss control technique and would be classified as a physiological aspect of loss control. 
C. Installing anti-burglar alarms can prove helpful in loss control in the event of burglary and would be classified as a physical aspect of loss control.  
D. Having escape stairways will help minimise losses in the event of fire and would be classified as physiological aspect of loss control.

Question # 9

Which TWO of the following are correct in relation to risks faced by an organisation dealing in foreign currency?

A. Translation risk refers to fall/rise in value of assets/liabilities dealt with in foreign currency when restated at the year-end prevailing rate
B. Transaction, translation and economic risks are all classes of currency risks and will not be faced by organisations dealing in domestic currency only (assuming the company has only a local presence).
C. An organisation that has secured the majority of its debt at a floating (variable) rate will face the same level of interest rate risk as faced by an organisation with mostly fixed rate debt

Question # 10

Which ONE of the following is NOT TRUE regarding CIMA’s risk management cycle and IFAC’s risk architecture and enterprise risk management?

A. CIMA’s risk management cycle and IFAC’s risk architecture are two different models dealing with risk response strategy only
B. CIMA’s risk management cycle and IFAC’s risk architecture are two closely linked models, with IFAC’s architecture model also involving the way an organisation implements real time risk management.

Question # 11

Which ONE of the following is NOT TRUE regarding risks faced by an organisation? 

A. It is important that customers, being important stakeholders, know about the events happening within the organisation. Poor communication with them may lead to distrust regarding ethical aspects of the organisation’s activities.
B. Poor branding and marketing tactics for a new product would be classed as an economic risk
C. An example of financial risk would be: choosing the wrong option between alternatives when investment decisions are made.

Question # 12

Which TWO of the following are NOT advantages of hedging? 

A. Hedging is a way to help reduce exposure to interest rate risk. 
B. Hedging enhances risk levels, thereby increasing expected profits. 
C. Hedging is a way to help avoid exposure to fluctuations in foreign exchange rates. 
D. Hedging is a way to ensure costs remain within acceptable limits and profit levels are surpassed. 

Question # 13

Which ONE of the following is NOT a method of risk measurement? 

A. Expected Values. 
B. Risk mapping. 
C. Variance analysis. 

Question # 14

Which ONE of the following is NOT TRUE regarding Adams' risk thermostat? 

A. Through the risk thermostat, Adams linked perceptions of risk, influence on risk-taking and results of risk-taking
B. Adams argued that different organisations will have different attitudes to risk, broad categories being Individualists, Egalitarians, Fatalists and Pluralists.
C. The major tags used in Adams’ thermostat were perceived danger, rewards, accidents and propensity to take risks.
D. Fatalists were defined as those who have no control of their own lives and hence it is useless to talk about risk management with them. 

Question # 15

With CIMA’s risk management cycle in mind, which ONE of the following would be the responsibility of an organisation’s risk manager?

A. Deciding on the number of non-executive directors on the risk assessment board. 
B. Deciding on the risk response strategy, i.e. whether to accept, reduce, avoid or transfer risk. 
C. Establishing internal controls to ensure that a proper screening process is in place for early detection of risks.

Question # 16

Enterprise risk management provides a coherent framework for organisations to deal with risk based on the following categories. Which ONE of the following is correct?

A. Strategic, operational, downside risks and upside risks. 
B. Strategic, operational, physical and physiological risk. 
C. Accept, transfer, reduce and avoid risks. 
D. Strategic, operational, reporting and compliance.

Question # 17

Which ONE of the following descriptions is NOT correct about different types of risk? 

A. Using an obsolete IT system would be classed as strategic risk in the long run since it can jeopardise an organisation’s ability to compete well.
B. Pure risk is one that can be controlled somewhat and may be upside or downside depending upon the risk management policy of the company.