Question

Which of the following factors is NOT a principle of operational risk management (ORM)?

a) Risk Assessment
b) Decision Making
c) Risk Acceptance
d) Risk Avoidance

Answer 1

Risk Avoidance is not a principle of operational risk management; it is a separate strategy aimed at eliminating risks instead of managing them. ORM principles include Risk Assessment, Decision Making, and Risk Acceptance.

Step-by-step explanation:

The principle that is NOT a part of the operational risk management (ORM) is d) Risk Avoidance. The ORM consists of several core components, such as:

• Risk Assessment — the process of identifying and assessing risks to determine their potential impact.
• Decision Making — the process of choosing the best course of action after considering the outcomes of the risk assessment.
• Risk Acceptance — the informed choice to take a certain risk to achieve a desired result.

However, Risk Avoidance is more of a strategy than a principle of ORM. Rather than managing risks, avoidance aims to eliminate them entirely, which is neither always practical nor desirable in the context of ORM, where risks often need to be managed and balanced against reward.