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ACCA Strategic Professional · Strategic Business Leader · Managing, monitoring and mitigating risk

Kestrel Retail has a minor risk that its store loyalty app will be briefly unavailable. Analysis shows low likelihood and low impact, and the cost of redundant servers would exceed the expected loss many times over. Which statement best describes the appropriate TARA response and the associated governance action?

Accept is appropriate. With low likelihood, low impact and control costs far exceeding the expected loss, the company should knowingly retain the risk. Good governance requires recording the decision in the risk register and monitoring it periodically, rather than ignoring it or spending uneconomically on controls.

  1. AAvoid, by closing the app, and record it in the risk register
  2. BAccept, retaining the risk knowingly and monitoring it periodically through the risk registerCorrect
  3. CTransfer, by outsourcing all IT to remove accountability
  4. DReduce, by investing in full redundancy regardless of cost

Explanation

Where likelihood and impact are low and control costs exceed benefits, the risk is Accepted. Acceptance should be a conscious, documented decision within appetite, with ongoing monitoring, not neglect. Outsourcing does not remove board accountability and full redundancy is uneconomic.

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