Question

Which of the following are components of risk?

1) Detection risk
2) Positive Risk
3) Inherent Risk
4) Residual Risk
5) Control Risk

Answer 1

The components of risk are detection risk, inherent risk, control risk, and residual risk. Positive risk is not a recognized term in the context of risk management.

Step-by-step explanation:

The components of risk listed below are applicable in the context of financial risk management:

1. Detection risk: This refers to the risk that an auditor or investor may fail to identify material errors or irregularities in financial statements.
2. Inherent risk: This represents the level of risk associated with a particular asset or investment based on its nature, without considering any risk mitigation efforts.
3. Control risk: This relates to the risk that a company's internal controls may not effectively prevent or detect errors or fraud.
4. Residual risk: This is the risk that remains after implementing risk mitigation measures and represents the level of risk that an organization or investor is willing to accept.

Positive risk is not a recognized term in the context of risk management but some may use it to represent opportunities that may result in positive outcomes. However, it is not commonly included as a component of risk.