The Primary Reason for Implementing a Risk Management Program
Question
Which of the following is the PRIMARY reason for implementing a risk management program?
Answers
Explanations
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A. B. C. D.B.
The key reason for performing risk management is that it is part of management's due diligence.
The elimination of all risk is not possible.
Satisfying audit and regulatory requirements is of secondary importance.
A risk management program may or may not increase the return on investment (ROD.
The primary reason for implementing a risk management program is to enable an organization to identify, assess, and mitigate potential risks that may impact its operations, assets, and reputation. A risk management program provides a systematic approach to managing risks, and it helps an organization to make informed decisions about risk treatment options, such as risk avoidance, risk mitigation, risk sharing, or risk acceptance.
Option A, "Allows the organization to eliminate risk," is not a realistic goal of a risk management program because it is impossible to eliminate all risks. Risks can be reduced or mitigated, but they cannot be completely eliminated.
Option B, "Is a necessary part of management's due diligence," is partially correct. Management has a responsibility to manage risk, but a risk management program is not only necessary for due diligence but for the organization's overall success.
Option C, "Satisfies audit and regulatory requirements," is not the primary reason for implementing a risk management program. While compliance with regulations and standards may be a driver for implementing a risk management program, the primary reason is to manage risks effectively.
Option D, "Assists in incrementing the return on investment (ROD)," is not the primary reason for implementing a risk management program, although it can be a beneficial outcome of effective risk management. By identifying and mitigating risks, an organization can avoid or minimize losses and improve its financial performance.
In summary, the primary reason for implementing a risk management program is to help an organization manage its risks effectively to ensure its success and resilience.
