Which of the following is the BEST indication of an effective risk management program?
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A. B. C. D.B.
An effective risk management program is one that helps an organization to identify, assess, and mitigate potential risks to achieve its objectives. The four options given in the question are all important components of a risk management program, but one of them is the BEST indication of an effective risk management program.
A. Risk action plans are approved by senior management: This option indicates that senior management is involved in the risk management process, which is a positive sign. However, the mere approval of risk action plans by senior management does not necessarily mean that the risk management program is effective. The risk action plans need to be well-designed, and the actions taken should be effective in mitigating the risks.
B. Mitigating controls are designed and implemented: This option indicates that the organization has identified risks and designed controls to mitigate them. Mitigating controls are an essential part of a risk management program, but the mere implementation of controls does not ensure an effective risk management program. The controls should be regularly monitored and tested to ensure their effectiveness.
C. Residual risk is within the organizational risk appetite: This option indicates that the organization has assessed the risks and determined its risk appetite. Residual risk is the risk that remains after implementing mitigating controls. If the residual risk is within the organizational risk appetite, it suggests that the organization is managing its risks effectively. However, this option alone does not ensure an effective risk management program.
D. Risk is recorded and tracked in the risk register: This option indicates that the organization has a risk register in place to record and track risks. Keeping a risk register is an essential component of a risk management program, but it does not necessarily ensure that the program is effective. The risk register should be regularly reviewed, and the risks identified should be appropriately mitigated.
Based on the above explanations, the BEST indication of an effective risk management program is option C - Residual risk is within the organizational risk appetite. If the residual risk is within the organizational risk appetite, it suggests that the organization has identified and assessed the risks, designed and implemented appropriate controls, and regularly monitored the risks to ensure that they are managed effectively.