Which of the following matrices is used to specify risk thresholds?
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A. B. C. D.A.
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: B, D: Estimation of risk's consequence and priority for awareness is conducted by using probability and impact matrix.
These matrices specify the mixture of probability and impact that directs to rating the risks as low, moderate, or high priority.
C: A risk scenario is a description of an event that can lay an impact on business, when and if it would occur.
Some examples of risk scenario are of: -> Having a major hardware failure -> Failed disaster recovery planning (DRP) -> Major software failure.
The matrix that is used to specify risk thresholds is the Risk indicator matrix, which is also known as the Risk tolerance matrix.
A Risk indicator matrix is a tool that helps organizations to identify, assess, and manage risks. It provides a graphical representation of the organization's risk tolerance by mapping the likelihood and impact of risks against predefined thresholds.
The Risk indicator matrix typically consists of a two-dimensional table, with the likelihood of a risk occurring on one axis and the impact of that risk on the other. The likelihood and impact scales can be defined using numerical values or descriptive categories such as low, medium, and high.
The matrix's cells are populated with risk indicators that reflect the organization's risk appetite and tolerance. These indicators can be based on specific risk scenarios, business objectives, or regulatory requirements.
By using the Risk indicator matrix, organizations can establish risk thresholds that enable them to identify, assess, and manage risks more effectively. Risk thresholds are predetermined levels of risk exposure that an organization is willing to accept, and they can be used to guide decision-making and prioritize risk management efforts.
In summary, the Risk indicator matrix is a tool that helps organizations to specify risk thresholds by mapping the likelihood and impact of risks against predefined indicators that reflect their risk appetite and tolerance. This matrix is a key component of a comprehensive risk management framework and is essential for effective risk management.