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FRM Part I · FRM Exam Part I · Enterprise Risk Management and Future Trends

Which statement best describes why cyber risk is treated as a growing enterprise-wide concern in modern risk management?

Cyber risk is an enterprise-wide concern because one incident can create operational, financial, legal and reputational losses across the firm and its connected counterparties. It is not confined to IT, cannot be fully eliminated by insurance, and is not limited to derivatives traders.

  1. AIt affects only the IT department and has no financial consequences
  2. BIt can cause simultaneous operational, financial, legal and reputational losses across the firm and its counterpartiesCorrect
  3. CIt can be fully eliminated by purchasing insurance
  4. DIt is relevant only to firms that trade derivatives

Explanation

Cyber incidents can disrupt operations, cause financial loss, trigger legal and regulatory consequences and damage reputation, and can spread through interconnected counterparties. Insurance only transfers part of the loss and cannot eliminate it, and the risk affects all sectors.

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