Question

The amount of risk a company is willing to accept in order to achieve its goals and objectives is

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

Answer 1

The term describing the amount of risk a company is willing to accept in pursuit of its objectives is 'Risk appetite'. It is determined by top management and differs from inherent and residual risks.

Step-by-step explanation:

The amount of risk a company is willing to accept in order to achieve its goals and objectives is C) Risk appetite. Risk appetite is a term used to describe the amount and type of risk that an organization is prepared to pursue, retain or take. This concept is important in risk management and is often set by the top management or board of directors of a company. It differs from inherent risk, which is the exposure to risk in absence of any actions to alter its likelihood or impact, and residual risk, which is the risk that remains after controls and other mitigation strategies are applied. Risk assessment is the overall process of identifying and analyzing potential events that may negatively impact individuals, assets, and environment (i.e., risk analysis) and making judgments on the tolerability of the risk on the basis of a risk analysis while considering influencing factors (like socio-economic or environmental).

Answer 2

The amount of risk a company is willing to accept in order to achieve its goals and objectives is termed as C) Risk appetite.

Step-by-step explanation:

Risk appetite (Option C) refers to the level of risk that an organization is willing to accept or tolerate in pursuit of its goals and objectives. It represents a strategic decision about the amount of uncertainty the organization is prepared to deal with to achieve its desired outcomes. This concept guides the organization in making informed decisions about risk-taking, allowing it to align risk management strategies with its overall business strategy.

In contrast, inherent risk (Option A) refers to the level of risk without considering risk mitigation efforts, and residual risk (Option B) is the remaining risk after risk mitigation measures have been applied. Risk assessment (Option D) is a broader process of identifying, analyzing, and evaluating risks within an organization.

Option C is the answer.