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Question 604 - IIA-CIA-Part1 discussion

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A telecommunications organization is planning to cease operations in one or the markets in which it operates due to increasing volatility and uncertainties. Which of the following risk management techniques is the organization selecting?

A.

Risk acceptance.

Answers
A.

Risk acceptance.

B.

Risk avoidance.

Answers
B.

Risk avoidance.

C.

Risk sharing.

Answers
C.

Risk sharing.

D.

Risk reduction.

Answers
D.

Risk reduction.

Suggested answer: B

Explanation:

The organization's decision to cease operations in a market due to increasing volatility and uncertainties represents a risk avoidance technique. Risk avoidance involves actions taken to eliminate the exposure to risk entirely, often by discontinuing the activities that generate the risk. In this scenario, by exiting the market, the organization avoids the potential negative impacts associated with the volatile and uncertain environment.

The IIA Standards: Standard 2120 -- Risk Management: 'The internal audit activity must evaluate the effectiveness and contribute to the improvement of risk management processes.'

COSO ERM Framework: Describes risk avoidance as a strategy where organizations opt to avoid risk by discontinuing the activities that produce the risk.

asked 03/11/2024
Henrik Persson
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