The Most Important Parameter for Selecting Appropriate Risk Response

A.

The cost of the response, which is applied so as to reduce risk within tolerance levels, is one of the most important parameter.

By considering the cost of response, it is decided whether or not benefits of applying response is greater than accepting the risk; and according to this analysis it is decided whether the certain response should be applied or not.

For example, if risk transfer response is applied by using insurance, then cost would be the cost of insurance.

Incorrect Answers: B: This parameter is considered after analyzing the cost of response, which will further decide the level of sophistication of risk response.

The enterprise's capability to implement the response means that if the risk management process is mature then the risk response is more C: This is one of the parameters that is considered but is not as important as considering cost of response.

The importance of the risk is determined by the combination of likelihood and magnitude levels along with its position on the risk map.

D: Efficiency of response can only be analyzed after applying the response.

So it is the latter stage in selection of response.

When selecting an appropriate risk response, several factors need to be considered to ensure an effective and efficient response. These factors may vary depending on the nature and context of the risk, as well as the organization's objectives and resources.

Out of the four options provided, the most important parameter while selecting appropriate risk response is the importance of the risk (option C).

The importance of the risk refers to the significance of the potential impact that the risk poses to the organization's objectives. The impact could be financial, reputational, legal, or operational, among others. In other words, the importance of the risk reflects how critical it is to manage the risk to avoid negative consequences for the organization.

When determining the appropriate risk response, the importance of the risk should be the primary consideration. This is because the response strategy should be commensurate with the potential impact of the risk. Therefore, a high-risk with a severe impact should warrant a more significant response, while a low-risk with minimal impact may only require monitoring.

While cost of response (option A), capability to implement response (option B), and efficiency of response (option D) are important considerations in selecting an appropriate risk response, they are secondary to the importance of the risk.

The cost of response considers the financial resources required to implement the response, while the capability to implement response refers to the organization's ability to carry out the response strategy effectively. The efficiency of response considers the effectiveness of the response in mitigating the risk and achieving the desired outcome.

Therefore, while these factors should not be ignored, they should be secondary to the importance of the risk. An appropriate response should aim to minimize the impact of the risk on the organization's objectives, regardless of the cost, capability, or efficiency of the response.

In summary, the importance of the risk is the most critical parameter while selecting an appropriate risk response. This parameter should guide the selection of a response strategy that is commensurate with the potential impact of the risk to the organization's objectives. The cost of response, capability to implement response, and efficiency of response are secondary factors that should also be considered.