Question

The risk that exists before management takes any steps to control the likelihood or impact of a risk is

A) Inherent risk
B) Residual risk
C) Risk appetite
D) Risk assessment

Answer 1

Inherent risk is the risk present before any management actions are taken to mitigate it, while residual risk is what remains after these actions.

Step-by-step explanation:

The risk that exists before management takes any steps to control the likelihood or impact of a risk is A) Inherent risk. Inherent risk is the exposure to potential negative outcomes that are intrinsic to an activity, process, or situation without considering any actions that management might take to mitigate that risk. On the other hand, residual risk is the risk that remains after management has taken steps to reduce the severity or likelihood of the initial risk. The term risk appetite refers to the amount of risk that an organization is willing to accept in pursuit of its objectives. Lastly, risk assessment is the overall process of identifying, analyzing, and evaluating risks.

Answer 2

Inherent risk is the risk present before any control measures are applied by management. After controls are implemented, any remaining risk is called residual risk. Risk appetite refers to the level of risk an organization is willing to accept.

Step-by-step explanation:

The risk that exists before management takes any steps to control the likelihood or impact of a risk is known as Inherent risk. Inherent risk is the risk present in a situation or environment based on current conditions before any mitigating actions are taken. This concept is important in risk management and auditing, where assessing the inherent risk is a step towards implementing controls to reduce the risk to an acceptable level. In contrast, residual risk remains after controls have been implemented. Risk appetite is the level of risk an organization is willing to accept, while risk assessment involves identifying and analyzing potential risks to minimize their impact.