Which of the following statements is true regarding the importance of risk management?

Question

Options

• ARisk management ensures the ability to eliminate potential hazards to the organization.
• BRisk management includes consideration of potential opportunities for the organization.
• CRisk management aids with the establishment of appropriate key performance indicators.
• DRisk management increases employees' commitment and belief in strategic goals.

• A
  14% (3)
• B
  5% (1)
• C
  77% (17)
• D
  5% (1)

Explanation

Risk management directly informs what an organization needs to monitor and control, making it foundational to establishing key performance indicators (KPIs) - the metrics that signal whether risk exposure is within acceptable thresholds. Without identifying risks first, there's no basis for knowing which performance areas require measurement.

Why the distractors are wrong:

• A is incorrect because risk management reduces or mitigates risk - it cannot eliminate hazards entirely. "Ensures elimination" is an absolute claim no risk framework supports.
• B is a common trap: while some modern frameworks (e.g., COSO ERM) acknowledge opportunity, traditional risk management is primarily focused on threats, and "includes consideration of potential opportunities" overstates its scope in most exam contexts.
• D conflates risk management with organizational culture or change management; employee commitment to strategic goals is driven by leadership and HR practices, not risk processes.

Memory tip: Link risk management to measurement - "you manage what you measure." Risk management tells you what's at stake, and KPIs tell you whether it's under control. The two are inherently linked: Risk → KPI → Monitor.

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