Question

The Chief Executive Officer (CEO) of a company has considered implementing a cost-saving measure that might result in new risk to the company.

When deciding whether to implement this measure, which of the following would be the BEST course of action to manage the organization's risk?

A. Present the detailed risk resulting from the change to the companyג€™s board of directors
B. Pilot new mitigations that cost less than the total amount saved by the change
C. Modify policies and standards to discourage future changes that increase risk
D. Capture the risk in a prioritized register that is shared routinely with the CEO

Answer 1

A. Present the detailed risk resulting from the change to the companyג€™s board of directors.

The CEO should present the new risk to the company's board of directors as they have the responsibility to ensure decisions align with shareholder's interests and can provide proper oversight for risk management.

Step-by-step explanation:

When a CEO considers implementing a cost-saving measure that could introduce new risk to the company, the BEST course of action to manage the organization's risk would be to present the detailed risk resulting from the change to the company's board of directors. This approach aligns with the board's responsibility to ensure the firm is run in the interests of the shareholders. Not only does the board have the authority to make high-level risk management decisions, but it also serves as a check on the executives' power.

Presenting the risk to the board can facilitate a comprehensive review, allowing for a balanced decision that considers the potential savings against the likelihood and impact of the new risks. Additionally, the board can provide oversight in formulating and implementing any required risk mitigation strategies, which is essential when considering changes that may affect the company's overall risk profile.