Risk Responses for Negative Risk Events

D.

Among the given choices only Acceptance response is used for negative risk events.

Risk acceptance means that no action is taken relative to a particular risk; loss is accepted if it occurs.

If an enterprise adopts a risk acceptance, it should carefully consider who can accept the risk.

Risk should be accepted only by senior management in relationship with senior management and the board.

There are two alternatives to the acceptance strategy, passive and active.

-> Passive acceptance means that enterprise has made no plan to avoid or mitigate the risk but willing to accept the consequences of the risk.

-> Active acceptance is the second strategy and might include developing contingency plans and reserves to deal with risks.

Incorrect Answers: A, B, C: These all are used to deal with opportunities or positive risks, and not with negative risks.

The four common risk responses are:

1. Accept the risk
2. Avoid the risk
3. Mitigate the risk
4. Transfer the risk

Out of these four risk responses, the one that is used for negative risk events is "Accept the risk."

Accepting the risk means acknowledging the risk and not taking any action to mitigate it. This may be appropriate when the cost of mitigating the risk is greater than the potential loss from the risk event. It may also be appropriate when the risk is very low, the organization has a high risk tolerance, or when the risk is outside the organization's control.

The other risk responses are:

1. Avoid the risk: This risk response involves taking action to eliminate the risk entirely. This may be appropriate when the risk is too great or when there is an alternative course of action that does not involve the risk.

2. Mitigate the risk: This risk response involves taking action to reduce the likelihood or impact of the risk event. This may involve implementing controls, improving processes, or training staff.

3. Transfer the risk: This risk response involves shifting the risk to another party, such as an insurance company or a third-party service provider.

In contrast to "Accept the risk," the other three responses - Avoid, Mitigate, and Transfer - are typically used for positive risk events, which are also known as opportunities.

Regarding the other options mentioned in the question:

1. Share: Sharing the risk involves distributing the risk among multiple parties, such as partners or suppliers. This can be a useful risk response when the cost of mitigation is high and the risk is too great for one party to bear alone.

2. Enhance: Enhancing the risk involves taking action to increase the likelihood or impact of a positive risk event, such as an opportunity. This may involve investing in new technology, hiring additional staff, or increasing marketing efforts.

3. Exploit: Exploiting the risk involves taking advantage of a positive risk event, such as an opportunity, to maximize its potential benefits. This may involve investing resources or taking calculated risks to capitalize on the opportunity.

Therefore, the correct answer to the given question is option D: Accept.