Key Elements of an Effective Risk Management Program | CISM Exam
Question
A risk management program will be MOST effective when:
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A. B. C. D.D.
Effective risk management programs involve an ongoing process of identifying, assessing, and mitigating risks to an organization. The success of a risk management program can be influenced by various factors. However, among the options provided, the most effective practice for a risk management program is when business units are involved in risk assessments.
Here are the reasons why business units' involvement in risk assessments is the most effective approach:
Business unit involvement ensures that the assessments are based on real-world scenarios and specific business operations. Business units have a better understanding of their operations and risks than any third party or centralized team.
Involving business units creates a sense of ownership, accountability, and responsibility for risk management. This approach promotes a culture of risk awareness and risk management throughout the organization.
Business unit involvement enhances communication, collaboration, and cooperation among the teams involved. This ensures that risks are identified, assessed, and mitigated holistically, considering the organization's overall objectives, strategies, and priorities.
Business unit involvement supports the implementation of risk mitigation measures, ensuring that they are practical, feasible, and sustainable. This enhances the organization's resilience and ability to respond to any incidents or disruptions.
On the other hand, sustaining risk appetite for a long period may not be effective because risk appetite may change due to various factors such as market conditions, emerging threats, or changes in the organization's objectives. Conducting risk assessments periodically is also essential. However, conducting them alone may not be sufficient without the involvement of the business units, which are the front-line owners of the risks.
Conducting risk assessments by a third party may provide an independent perspective, but it may not provide a comprehensive view of the risks faced by the organization. Moreover, the third party may not have the same level of understanding of the organization's operations, risks, and culture as the internal teams.
