Acceptable risk for an enterprise occurs when what is within tolerance levels?

Acceptable risk for an enterprise occurs when what is within tolerance levels?

• A. Transferred risk
• B. Control risk
• C. Inherent risk
• D. Residual risk

Answer: (D)

Acceptable risk for an enterprise is best defined by residual risk, which is the amount of risk that remains after controls and mitigation measures have been implemented. This is crucial because effective risk management involves identifying, assessing, and reducing risks to a level that is considered acceptable by the organization's risk appetite or tolerance levels. Residual risk highlights the complementary nature of risk treatment options: while some risks can be entirely eliminated or transferred, others will persist post-mitigation efforts. The goal is to ensure that this remaining risk is still within acceptable limits, allowing the enterprise to proceed with its objectives without compromising its overall risk posture. In contrast, transferred risk refers to risk that has been shifted to another party, such as through insurance or outsourcing. Control risk pertains to the possibility that controls might not be effective in reducing risk to an acceptable level. Inherent risk is the level of risk that exists before any measures are put in place. Thus, only residual risk takes into account the effectiveness of those measures and aligns directly with the concept of risk tolerance within an organization.

Acceptable risk for an enterprise is best defined by residual risk, which is the amount of risk that remains after controls and mitigation measures have been implemented. This is crucial because effective risk management involves identifying, assessing, and reducing risks to a level that is considered acceptable by the organization's risk appetite or tolerance levels.

Residual risk highlights the complementary nature of risk treatment options: while some risks can be entirely eliminated or transferred, others will persist post-mitigation efforts. The goal is to ensure that this remaining risk is still within acceptable limits, allowing the enterprise to proceed with its objectives without compromising its overall risk posture.

In contrast, transferred risk refers to risk that has been shifted to another party, such as through insurance or outsourcing. Control risk pertains to the possibility that controls might not be effective in reducing risk to an acceptable level. Inherent risk is the level of risk that exists before any measures are put in place. Thus, only residual risk takes into account the effectiveness of those measures and aligns directly with the concept of risk tolerance within an organization.