CRMA Certification Practice Exam 2025 – Comprehensive All-in-One Resource to Master Risk Management Assurance!

Risk concentration refers to a situation where multiple risks are connected to a single source or area, leading to an increased likelihood that if one risk manifests, others may as well. This interconnectedness can create a domino effect, amplifying the overall risk exposure for an organization. By being overly reliant on one source, the organization may find itself facing significant challenges if adverse events occur within that concentrated area.

The rationale behind this is that concentration of risk reduces diversity, which is often essential for mitigating impact. Organizations aim for a diversified risk profile to cushion against unexpected events; thus, when risks cluster around a similar source, the potential for greater losses significantly increases. This makes option A the most accurate description of the effects of risk concentration. The other options, while addressing general risk concepts, do not effectively capture the essence of how risk concentration operates and its implications for an organization’s vulnerability to adverse events.