QUESTION: 5

Which of the following is the MAIN objective of governance?

Creating controls throughout the entire organization
Creating risk awareness at all levels of the organization
Creating value through investments for the organization

Answer(s): C

Explanation:

Governance is primarily concerned with ensuring that an organization achieves its objectives, operates efficiently, and adds value to its stakeholders. The main objective of governance is to create value through investments for the organization. This encompasses making strategic decisions that align with the organization's goals, ensuring that resources are used effectively, and that the organization's activities are sustainable and provide long-term benefits.
While creating controls and risk awareness are essential aspects of governance, they serve the broader goal of value creation through strategic investments. This concept is aligned with principles found in corporate governance frameworks and standards such as ISO/IEC 38500 and COBIT (Control Objectives for Information and Related Technologies).

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QUESTION: 6

Which of the following is MOST likely to promote ethical and open communication of risk management activities at the executive level?

Recommending risk tolerance levels to the business
Expressing risk results in financial terms
Increasing the frequency of risk status reports

Answer(s): B

Explanation:

Expressing risk results in financial terms is most likely to promote ethical and open communication of risk management activities at the executive level. This is because financial metrics are universally understood and can clearly illustrate the impact of risks on the organization. By translating risk into financial terms, executives can more easily comprehend the severity and potential consequences of various risks, facilitating informed decision-making and fostering transparency. It also allows for a common language between different departments and stakeholders, enhancing clarity and reducing misunderstandings. This practice is emphasized in frameworks like ISO 31000 and is a key aspect of effective risk communication.

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QUESTION: 7

Which of the following MUST be established in order to manage l&T-related risk throughout the enterprise?

An enterprise risk governance committee
The enterprise risk universe
Industry best practices for risk management

Answer(s): A

Explanation:

To manage IT-related risk throughout the enterprise, it is crucial to establish an enterprise risk governance committee. This committee provides oversight and direction for the risk management activities across the organization. It ensures that risks are identified, assessed, and managed in alignment with the organization's risk appetite and strategy. The committee typically includes senior executives and stakeholders who can influence policy and resource allocation. This structure supports a comprehensive approach to risk management, integrating risk considerations into decision-making processes. This requirement is in line with guidance from frameworks such as COBIT and ISO 27001, which emphasize governance structures for effective risk management.

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QUESTION: 8

To establish an enterprise risk appetite, an organization should:

normalize risk taxonomy across the organization.
aggregate risk statements for all lines of business.
establish risk tolerance for each business unit.

Answer(s): C

Explanation:

To establish an enterprise risk appetite, it is essential for an organization to establish risk tolerance for each business unit. Risk tolerance defines the specific level of risk that each business unit is willing to accept in pursuit of its objectives. This approach ensures that risk management is tailored to the unique context and operational realities of different parts of the organization, enabling a more precise and effective risk management strategy. Normalizing risk taxonomy and aggregating risk statements are important steps in the broader risk management process but establishing risk tolerance is fundamental for defining risk appetite at the unit level. This concept is supported by standards such as ISO 31000 and frameworks like COSO ERM (Enterprise Risk Management).

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