ACCA Strategic Professional · Strategic Business Leader · Managing, monitoring and mitigating risk
Brightwater Energy plc's audit committee reviews its risk management. The risk process has been run by a risk team, but business unit heads treat risk registers as a once-a-year exercise and no one monitors whether risk responses operate. The board wants the most appropriate improvement consistent with good risk frameworks. Which action best addresses the weakness?
The best action is to embed risk ownership in business units and introduce regular monitoring and board reporting of risk responses and key risk indicators. Frameworks treat risk management as continuous and integrated. Insurance, annual reports or reliance on external audit do not remedy weak ownership and monitoring.
- AEmbed risk ownership in business units, with regular monitoring and reporting of risk responses and key risk indicators to the boardCorrect
- BReplace the risk register with a single annual external report on risk
- CTransfer all risks to insurers so monitoring is unnecessary
- DRemove the risk team and rely solely on external audit to detect risk issues
Explanation
Good frameworks require risk management to be embedded, owned by management, and continuously monitored and reviewed with reporting to the board. Insurance covers only some risks and does not remove the need to monitor; external audit is not a substitute for management's monitoring.
Did you get it right without looking?
One question tells you little. A timed set on Managing, monitoring and mitigating risk shows your real accuracy, how long you take and where you lose marks.
More Managing, monitoring and mitigating risk questions
- Marlow Freight's board wants to make sure that risk is managed day to day by those who run each depot, rather than being seen as a task for …
- Kallis Energy's board has set a risk appetite and now wants management to apply it in practice. Management has identified a project whose ex…
- Lantern Foods operates a single factory that produces all of its chilled ready meals. The board is concerned that a fire could stop producti…
- Brindle Foods' board wants an independent assessment of whether its internal control system is operating effectively. The internal audit fun…
- Kestrel Retail has a minor risk that its store loyalty app will be briefly unavailable. Analysis shows low likelihood and low impact, and th…
- Marlow Bank has lent heavily to a property developer. The developer's sales have collapsed and it has told the bank that it will miss its ne…