If a risk assessment shows a risk that exceeds management's acceptance level, what is the best way to address it?

If a risk assessment shows a risk that exceeds management's acceptance level, what is the best way to address it?

• A. Quickly bring the risk within acceptable limits
• B. Recommend mitigating controls based on cost-benefit
• C. Recommend revising the acceptance levels
• D. Perform calculations to revalidate controls

Answer: (B)

When a risk assessment indicates that a risk exceeds management's acceptance level, the most effective approach is to recommend mitigating controls based on a cost-benefit analysis. This method prioritizes solutions that provide the best balance between the costs involved and the benefits of risk reduction. By focusing on mitigating controls in relation to their cost-effectiveness, organizations can implement strategies that are not only practical but also align with their overall risk appetite and resource constraints. This careful assessment ensures that resources are allocated efficiently, maximizing the impact on risk reduction while maintaining financial viability. Additionally, this approach enables management to make informed decisions about which controls to implement based on their potential to effectively lower the risk to an acceptable level. It considers the context of the organization’s risk tolerance and helps in justifying investments in risk mitigation efforts. In contrast, simply trying to quickly bring the risk within acceptable limits may lead to rushed decisions that do not adequately consider the long-term implications or resource requirements. Revising acceptance levels might overlook the inherent risks that management initially deemed unacceptable and can indicate a failure to address underlying issues. Performing calculations to revalidate controls can be useful for understanding efficacy but does not directly contribute to resolving the risk that exceeds acceptance levels without first determining appropriate mitigation strategies.

When a risk assessment indicates that a risk exceeds management's acceptance level, the most effective approach is to recommend mitigating controls based on a cost-benefit analysis. This method prioritizes solutions that provide the best balance between the costs involved and the benefits of risk reduction.

By focusing on mitigating controls in relation to their cost-effectiveness, organizations can implement strategies that are not only practical but also align with their overall risk appetite and resource constraints. This careful assessment ensures that resources are allocated efficiently, maximizing the impact on risk reduction while maintaining financial viability.

Additionally, this approach enables management to make informed decisions about which controls to implement based on their potential to effectively lower the risk to an acceptable level. It considers the context of the organization’s risk tolerance and helps in justifying investments in risk mitigation efforts.

In contrast, simply trying to quickly bring the risk within acceptable limits may lead to rushed decisions that do not adequately consider the long-term implications or resource requirements. Revising acceptance levels might overlook the inherent risks that management initially deemed unacceptable and can indicate a failure to address underlying issues. Performing calculations to revalidate controls can be useful for understanding efficacy but does not directly contribute to resolving the risk that exceeds acceptance levels without first determining appropriate mitigation strategies.