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

Norvik Airlines is considering launching a route to a country with a rising risk of political unrest. The board assesses the risk as high likelihood and high impact, and concludes that no affordable control or insurance would bring the exposure within its risk appetite. Which TARA response is most appropriate?

Avoid is the best response. The risk is high in both likelihood and impact, and no affordable control or insurance brings it within appetite. The sensible course is to withdraw from the proposal and not launch the route, rather than accept, reduce or transfer an exposure that remains unacceptable.

AAccept the risk and monitor it
BAvoid the risk by not launching the routeCorrect
CTransfer the risk through a joint venture with a local partner
DReduce the risk through staff security training

Explanation

For high likelihood and high impact risks that cannot be brought within appetite at reasonable cost, the appropriate response is Avoid, meaning not entering the activity. Reduce and Transfer were already ruled out as inadequate by the facts. Accepting a high-high exposure would breach appetite.

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