CRISC · Question #132
Which of the following BEST enables a risk practitioner to understand management's approach to organizational risk?
The correct answer is B. Risk appetite and risk tolerance. Understanding management's approach to organizational risk is best achieved by knowing their defined risk appetite and risk tolerance. These statements explicitly communicate the level of risk the organization is willing to accept and the acceptable deviation.
Question
Which of the following BEST enables a risk practitioner to understand management's approach to organizational risk?
Options
- AOrganizational structure and job descriptions
- BRisk appetite and risk tolerance
- CIndustry best practices for risk management
- DPrior year's risk assessment results
How the community answered
(37 responses)- A3% (1)
- B92% (34)
- D5% (2)
Why each option
Understanding management's approach to organizational risk is best achieved by knowing their defined risk appetite and risk tolerance. These statements explicitly communicate the level of risk the organization is willing to accept and the acceptable deviation.
Organizational structure and job descriptions describe roles and responsibilities, but do not directly convey management's overall philosophy or thresholds for risk.
Risk appetite explicitly defines the level of risk an organization is willing to take to achieve its strategic objectives, while risk tolerance specifies the acceptable deviation from that appetite. Together, these provide a clear framework for understanding management's philosophy and boundaries regarding risk-taking and mitigation.
Industry best practices inform risk management but do not necessarily reflect the specific, unique approach or stance of an organization's management.
Prior year's risk assessment results highlight past risks and control effectiveness, but don't explicitly define management's current or future overarching risk strategy or willingness to accept risk.
Concept tested: Risk appetite and risk tolerance understanding
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