An identified high probability risk scenario involving a critical, proprietary business function has an annualized cost of control higher than the annual loss expectancy.
Which of the following is the BEST risk response?
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A. B. C. D.D.
The BEST risk response option for an identified high probability risk scenario involving a critical,
In the given scenario, we have an identified high probability risk scenario involving a critical, proprietary business function. The annualized cost of control for this risk is higher than the annual loss expectancy. Based on these details, we need to determine the BEST risk response from the options provided: Avoid, Transfer, Accept, or Mitigate.
Let's analyze each risk response option in relation to the given scenario:
A. Avoid: The risk response strategy of "Avoid" aims to eliminate the risk entirely by not engaging in the activity that poses the risk. However, in this scenario, avoiding the critical, proprietary business function may not be feasible or practical. It could disrupt essential business operations and potentially result in other adverse consequences. Therefore, "Avoid" may not be the best risk response in this case.
B. Transfer: The risk response strategy of "Transfer" involves shifting the risk to another party, typically through insurance or contracts. However, since the risk scenario involves a critical, proprietary business function, it may not be possible or advisable to transfer the risk to another party. Moreover, the annualized cost of control is already higher than the annual loss expectancy, so transferring the risk might increase the overall cost burden. Thus, "Transfer" may not be the best risk response in this situation.
C. Accept: The risk response strategy of "Accept" implies acknowledging the risk but choosing not to take any specific action to address it. This strategy is suitable when the cost of implementing controls exceeds the potential loss. In this scenario, since the annualized cost of control is higher than the annual loss expectancy, accepting the risk without implementing any specific controls might be a reasonable approach. The organization recognizes the risk, but the cost-benefit analysis suggests that the potential loss is acceptable given the higher cost of control. Therefore, "Accept" could be a viable risk response in this case.
D. Mitigate: The risk response strategy of "Mitigate" involves reducing the risk by implementing controls or measures to minimize its potential impact. However, in this scenario, the annualized cost of control is higher than the annual loss expectancy, which indicates that the cost of implementing controls would exceed the potential loss. Therefore, mitigating the risk may not be the most effective risk response option.
Based on the given information, the BEST risk response in this scenario would be to "Accept" the risk (option C). This approach acknowledges the risk but determines that the cost of implementing controls outweighs the potential loss. It is essential to consider the specific context and factors within the organization when selecting the appropriate risk response strategy.