Suggested Answer:B🗳️
The risk response process is triggered when a risk exceeds the enterprise's risk tolerance level. The acceptable variation relative to the achievement of an objective is termed as risk tolerance. In other words, risk tolerance is the acceptable deviation from the level set by the risk appetite and business objectives. Risk tolerance is defined at the enterprise level by the board and clearly communicated to all stakeholders. A process should be in place to review and approve any exceptions to such standards. Incorrect Answers: A, C: Risk appetite level is not relevant in triggering of risk response process. Risk appetite is the amount of risk a company or other entity is willing to accept in pursuit of its mission. This is the responsibility of the board to decide risk appetite of an enterprise. When considering the risk appetite levels for the enterprise, the following two major factors should be taken into account: ✑ The enterprise's objective capacity to absorb loss, e.g., financial loss, reputation damage, etc. ✑ The culture towards risk taking-cautious or aggressive. In other words, the amount of loss the enterprise wants to accept in pursue of its objective fulfillment. D: Risk response process is triggered when the risk level increases the risk tolerance level of the enterprise, and not when it just equates the risk tolerance level.
the correct answer is A.
In risk management, the risk appetite refers to the amount of risk an organization is willing to accept in pursuit of its objectives. When the risk level exceeds this appetite, it acts as a trigger for initiating the risk response process. This is because exceeding the risk appetite indicates that the organization is facing a level of risk that it is not comfortable with, necessitating immediate action to mitigate or manage that risk.
On the other hand, risk tolerance refers to the acceptable variation in performance relative to the achievement of objectives. While it is important, the primary trigger for risk response is typically when risks exceed the organization's appetite for risk, prompting a need for a response strategy to bring the risk back within acceptable limits
Disagree with the stated answer. Correct answer is A, when risk level goes past risk appetite. Risk tolerance is the level at which a company fails if a risk crystallises.
upvoted 2 times
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