Unit 6: Risk monitoring, reporting and communication

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Questions and Answers

What is the purpose of risk monitoring and evaluation?

To prevent acceptance of risk that exceeds the risk acceptance criteria set by the business (correct)

To collect and validate business, IT, and process goals and metrics

To provide reports that are systematic and timely

To monitor processes to ensure they are performed in line with established performance metrics

What is a key requirement for effective risk monitoring and evaluation?

Setting flexible risk acceptance criteria

Gathering data from various sources in a timely and accurate manner (correct)

Creating comprehensive reports on IT performance

Aligning IT-related risk with business risk

How does risk monitoring contribute to enterprise performance management?

By ensuring alignment between IT-related risk and business risk (correct)

By providing comprehensive reports on IT performance

By evolving the goals and strategies of the enterprise

By setting performance targets for individual processes

What is the purpose of strategic planning in relation to risk consideration?

To anticipate and mitigate risks (D) Signup and view all the answers

What is a Lag Risk Indicator?

A metric that indicates a risk has been realized after an event has occurred (A) Signup and view all the answers

What is a Lead Risk Indicator?

A metric that provides an early warning of potential risk (D) Signup and view all the answers

What is the purpose of Root Cause Analysis?

To establish the origins of events and prevent problem recurrence (D) Signup and view all the answers

What should KRIs be linked to in order to be impactful?

Specific risks, business goals, and impactful (C) Signup and view all the answers

What does SMART stand for in the context of Key Risk Indicators (KRIs)?

Specific, Measurable, Attainable, Relevant, Timely (D) Signup and view all the answers

What are the benefits of using appropriate KRIs?

Early warning signals, historical context, and feedback on risk appetite (B) Signup and view all the answers

Which of the following is an example of a Key Risk Indicator (KRI)?

Percentage of risk assessments completed (A) Signup and view all the answers

What can gap analysis be used for in the context of risk management?

Identify the difference between acceptable and current risk levels (A) Signup and view all the answers

What do KRIs facilitate across the enterprise?

Clear and measurable discussions on risk and improved risk awareness (A) Signup and view all the answers

What is required for choosing the right KRIs?

Careful consideration of reliability, sensitivity, and alignment with business objectives (D) Signup and view all the answers

What should KRIs be communicated to for effective risk management?

To all relevant stakeholders (D) Signup and view all the answers

What do effective KRIs provide?

Historical context, feedback on risk appetite, early warning signals (A) Signup and view all the answers

What is the purpose of control monitoring?

To ensure compliance with enterprise policies (A) Signup and view all the answers

Which activity is considered a method of control monitoring?

Internal audit reviews (D) Signup and view all the answers

What is the main purpose of vulnerability scans?

To identify vulnerabilities proactively (A) Signup and view all the answers

What is the focus of penetration tests?

Validating vulnerability assessments (A) Signup and view all the answers

Which activity should be promptly reported and addressed in control monitoring?

Exceptions to monitored controls (B) Signup and view all the answers

What is the main focus of independent assurance activities in control monitoring?

Providing independent and objective reviews (D) Signup and view all the answers

What is the primary purpose of monitoring controls in control monitoring?

Providing assurance that controls are working correctly (B) Signup and view all the answers

What should be done as the risk environment changes in control monitoring?

Updating risk assessments and internal control systems (B) Signup and view all the answers

What is the primary purpose of KPIs in risk management?

Identify underperforming aspects of an enterprise (A) Signup and view all the answers

How do KRIs differ from KPIs in risk management?

KRIs are forward-looking signals of potential risks (A) Signup and view all the answers

Which statement accurately describes KRIs?

KRIs are forward-looking signals of potential risks (D) Signup and view all the answers

What is an example of a KRI trigger mentioned in the text?

Patching all critical patches within 30 days (D) Signup and view all the answers

What does risk management recognize about the nature of risk?

It requires continuous assessment (C) Signup and view all the answers

What is the primary purpose of vulnerability scans in the context of risk management?

To identify and assess vulnerabilities in the organization's control environment (B) Signup and view all the answers

What do effective Key Risk Indicators (KRIs) provide in risk management?

A predictive insight into potential risk events (D) Signup and view all the answers

What is the purpose of analyzing root causes from realized risk, failed controls, or processes, and missed targets over time?

To develop new indicators, trends, or correlating conditions to gain insights (C) Signup and view all the answers

Which of the following is a characteristic of lead risk indicators?

They provide an early warning that risk may soon be realized before an event has occurred (C) Signup and view all the answers

What type of metric is a lag risk indicator?

Backward-looking metric indicating risk has been realized after an event has occurred (A) Signup and view all the answers

What is the primary purpose of Key Performance Indicators (KPIs) in risk management?

To measure activity goals and process performance (B) Signup and view all the answers

What type of indicators are Key Performance Indicators (KPIs) known as?

Lagging indicators (A) Signup and view all the answers

Why are Key Performance Indicators (KPIs) used to set benchmarks for risk management goals?

To predict goal achievement (D) Signup and view all the answers

What is the primary focus of control monitoring activities?

Monitoring compliance requirements (B) Signup and view all the answers

What should Key Risk Indicators (KRIs) be linked to in order to be impactful in risk management?

Strategic planning initiatives (C) Signup and view all the answers

What is the primary focus of communication in the context of risk reporting principles?

To enable understanding by all stakeholders (C) Signup and view all the answers

Why is concise information important in risk reporting principles?

It enables decision making (B) Signup and view all the answers

What is the purpose of communicating information at the right level of aggregation for the audience?

To enable informed decisions (C) Signup and view all the answers

Why should potential problems be communicated in a timely manner in risk reporting principles?

To allow action at the appropriate moment to identify and treat the risk (C) Signup and view all the answers

What is the main purpose of vulnerability scans in the context of risk management?

To identify potential weaknesses in systems or processes (C) Signup and view all the answers

Study Notes

KPIs (Key Performance Indicators) and KRIs (Key Risk Indicators) are interconnected in risk management.
KPIs help identify underperforming aspects of an enterprise and require attention, while KRIs provide early warnings of increased risk.
KPIs are measurable standards of performance and are often based on SMART metrics, tied to business functions, quantitatively measured, and used repeatedly.
KRIs are forward-looking signals of potential risks and can trigger alerts when certain thresholds are met.
An example of KPI and KRI: the risk of unpatched systems leading to data breaches. The enterprise sets a KPI of patching all critical patches within 30 days and a KRI trigger at 25 days.
Continuous monitoring is an essential part of risk management, involving regular evaluation of selected controls, recording and evaluating events, and communicating the current risk and control status.
Control monitoring ensures that I&T-related activities support business success, with proven methods for measuring their extent.
Continuous risk and control monitoring is crucial for timely reporting and response to risk events and the development of effective risk management practices.
Risk management is an ongoing cyclical process that recognizes the dynamic nature of risk and requires continuous assessment.

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Test your knowledge on key risk indicator (KRI) attributes including effort, reliability, and sensitivity. Assess your understanding of how to select indicators based on data collection ease, correlation with risk, and representation of risk factors.