Approaching High or Unacceptable Level of Risk

C.

Risk indicators are metrics used to indicate risk thresholds, i.e., it gives indication when a risk level is approaching a high or unacceptable level of risk.

The main objective of a risk indicator is to ensure tracking and reporting mechanisms that alert staff about the potential risks.

Incorrect Answers: A: A risk register is an inventory of risks and exposure associated with those risks.

Risks are commonly found in project management practices, and provide information to identify, analyze, and manage risks.

Typically a risk register contains: -> A description of the risk -> The impact should this event actually occur -> The probability of its occurrence -> Risk Score (the multiplication of Probability and Impact) -> A summary of the planned response should the event occur -> A summary of the mitigation (the actions taken in advance to reduce the probability and/or impact of the event) -> Ranking of risks by Risk Score so as to highlight the highest priority risks to all involved.

D: Return On Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments.

To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio.

The return on investment formula: ROI= (Gain from investment - Cost of investment) / Cost of investment In the above formula "gains from investment", refers to the proceeds obtained from selling the investment of interest.

The most effective method for indicating that the risk level is approaching a high or unacceptable level of risk is the use of Risk indicators (Option C).

Risk indicators are a type of metric that provides a quantitative or qualitative measure of the level of risk. These indicators are used to monitor and measure the level of risk associated with a specific activity or process. By analyzing the risk indicators, an organization can identify when the risk level is approaching a high or unacceptable level of risk.

Risk indicators can be categorized as leading or lagging indicators. Leading indicators are used to predict potential risks before they occur, while lagging indicators are used to evaluate risks after they have occurred.

Using a risk register (Option A) is an important tool for identifying, assessing, and tracking risks. However, it does not provide a clear indication of when the risk level is approaching a high or unacceptable level of risk. It is primarily a tool for documenting and managing risks.

A cause and effect diagram (Option B), also known as a fishbone diagram, is a visual tool used to identify the causes of a problem. While it can help identify potential risks, it does not provide a clear indication of when the risk level is approaching a high or unacceptable level of risk.

Return on investment (Option D) is a financial metric used to evaluate the profitability of an investment. While it is an important metric for evaluating the financial viability of a project, it is not a suitable method for indicating when the risk level is approaching a high or unacceptable level of risk.

In summary, the use of risk indicators is the most effective method for indicating when the risk level is approaching a high or unacceptable level of risk.