Risk Management Vocabulary Quiz
12 multiple-choice questions on risk management vocabulary: mitigation, contingency, due diligence, exposure, risk appetite, hedging, residual risk and more. B2 level.
This quiz focuses on how the target vocabulary for Risk Management is actually used in context at B2 level, rather than testing bare definitions. Correct answers you will need to identify include terms such as mitigation, register, residual, due and appetite, each embedded in a full example sentence so you have to judge meaning from context, not just recognise an isolated word.
Working through all 12 questions and checking the explanations in the FAQ below is a quick way to spot any terms you are still unsure of. Revisiting the quiz again after a day or two, rather than only once, is one of the most reliable ways to move new vocabulary from passive recognition into words you can use confidently yourself in speaking and writing.
Keep building your risk management vocabulary.
Risk Management Vocabulary — FAQ
What is 'risk mitigation'?
Risk mitigation means taking action to reduce the likelihood or impact of a risk. For example, installing fire sprinklers mitigates the risk of fire damage. Mitigation is one of four main responses to risk (alongside avoidance, transfer and acceptance).
What is a 'contingency plan'?
A contingency plan is a backup plan of action prepared in advance for when a specific risk event occurs. It sets out what the organisation will do if the primary plan fails or an unexpected event disrupts operations. For example, a business might have a contingency plan for a key supplier failing, including a list of alternative suppliers.
What is 'due diligence'?
Due diligence is the careful investigation and verification of information before making a business decision, such as an acquisition or a partnership. It involves reviewing financial records, legal documents and operational risks. 'Failure to carry out due diligence' means a buyer did not check carefully enough before committing.
What does 'risk exposure' mean?
Risk exposure refers to the potential loss or negative impact that an organisation faces from a particular risk. It is expressed as a combination of the likelihood of the risk occurring and the severity of its impact. For example, 'our exposure to currency risk is high because 60% of our revenue is in US dollars.'
What is 'risk appetite'?
Risk appetite is the amount and type of risk that an organisation is willing to accept in pursuit of its objectives. A high-risk-appetite company is willing to take on significant uncertainty for the chance of high reward; a low-risk-appetite company prefers cautious, predictable strategies. Setting a risk appetite is a key governance decision made at board level.
What is 'hedging' in risk management?
Hedging is a strategy used to reduce financial risk by taking an offsetting position. For example, a UK company earning revenue in US dollars might buy a currency forward contract to lock in an exchange rate, protecting against the risk of the pound strengthening. Hedging limits downside loss but also reduces upside potential.
What is 'residual risk'?
Residual risk is the level of risk that remains after all controls and mitigation measures have been applied. It is the risk an organisation accepts, having done everything reasonable to reduce it. Residual risk is compared against the organisation's risk appetite to decide whether further action is needed.
What is 'liability' in a business context?
Liability refers to a legal or financial obligation to pay a debt, compensate for harm or fulfil a contract. In accounting, liabilities are amounts owed by a business. In risk management, 'limiting liability' means taking steps (such as insurance or contractual caps) to reduce the legal or financial consequences if something goes wrong.
What is the difference between 'risk' and 'uncertainty'?
In risk management, 'risk' usually refers to situations where possible outcomes and their probabilities are known or can be estimated. 'Uncertainty' refers to situations where outcomes or probabilities are unknown, making calculation very difficult. Risk can be managed with models and data, while uncertainty requires scenario planning and resilience-building.
What is a 'risk register'?
A risk register is a document used to record identified risks, their likelihood and impact, the controls in place and the residual risk. It is a central tool in risk management, reviewed regularly by management and auditors, ensuring that responsibilities for managing each risk are clearly assigned.