Isaca CRISC Certified in Risk and Information Systems Control Exam Dumps and Practice Test Questions Set 2 Q16 — 30
Visit here for our full Isaca CRISC exam dumps and practice test questions.
Question 16
An organization has identified a critical risk that exceeds its risk appetite. Which risk response strategy involves sharing the financial impact of the risk with a third party?
A) Risk avoidance
B) Risk transfer
C) Risk mitigation
D) Risk acceptance
Answer: B
Explanation:
Risk response strategies provide organizations with different approaches to managing identified risks based on risk appetite, cost-benefit analysis, and organizational objectives. Understanding when to apply each strategy is fundamental to effective risk management.
Risk transfer involves sharing or shifting the financial impact of a risk to a third party while the risk itself may still exist. The most common form of risk transfer is purchasing insurance policies that cover potential losses from specific risks. Other transfer mechanisms include outsourcing activities to service providers who assume certain risks, entering into contracts with indemnification clauses, or using financial instruments like derivatives to hedge against specific risks.
When organizations transfer risk, they typically pay a premium or fee to the third party in exchange for the party assuming responsibility for financial losses if the risk materializes. Insurance is the classic example where organizations pay premiums to insurance companies who agree to cover losses from events like cyberattacks, natural disasters, or liability claims. The risk event may still occur, but the financial burden is shared or transferred.
Risk transfer is particularly appropriate for risks with potentially high financial impact but relatively low likelihood. Organizations may lack the resources to absorb catastrophic losses but can afford regular premium payments. Transfer is also used when third parties have greater expertise or capability to manage specific risks effectively.
Risk avoidance eliminates risk entirely by discontinuing the activity causing the risk. Risk mitigation reduces the likelihood or impact through controls. Risk acceptance involves consciously deciding to retain the risk without additional action. Risk transfer specifically addresses the financial impact dimension by involving third parties to share financial burden while the underlying risk exposure may continue.
Question 17
Which component of the risk register provides information about the potential financial impact if a risk materializes?
A) Risk likelihood
B) Risk impact
C) Risk velocity
D) Risk appetite
Answer: B
Explanation:
The risk register is a comprehensive document that records identified risks and their characteristics to support risk management decision-making. Understanding risk register components ensures effective risk tracking and prioritization.
Risk impact describes the potential consequences or effects if a risk materializes, including financial, operational, reputational, and strategic impacts. The financial impact specifically quantifies the potential monetary loss the organization might experience if the risk event occurs. This information is critical for prioritizing risks and making informed decisions about resource allocation for risk treatment.
Impact assessment considers multiple dimensions beyond financial losses including operational disruption, customer impact, regulatory penalties, brand damage, and strategic goal achievement. However, financial impact is often emphasized because it provides quantifiable metrics for comparison and decision-making. Impact is typically rated using scales such as low, medium, high, or quantified in monetary terms.
Risk impact combined with risk likelihood determines the overall risk level or risk score. Risks with high impact require careful attention even if likelihood is lower, as single occurrences could have devastating consequences. Organizations prioritize risks based on this combined assessment, focusing resources on high-impact, high-likelihood risks first.
Risk likelihood assesses the probability of risk occurrence rather than consequences. Risk velocity measures how quickly risk impact unfolds after a trigger event. Risk appetite defines the level of risk the organization is willing to accept in pursuit of objectives. While all these elements are important for risk management, risk impact specifically provides information about potential consequences including financial effects if risks materialize.
Question 18
An organization is implementing a new enterprise resource planning system. Which type of risk assessment should be conducted during the project planning phase?
A) Operational risk assessment
B) Project risk assessment
C) Strategic risk assessment
D) Compliance risk assessment
Answer: B
Explanation:
Different types of risk assessments serve different purposes and are appropriate at different organizational levels and timeframes. Understanding when to conduct specific assessment types ensures comprehensive risk management coverage.
Project risk assessment is specifically designed to identify, analyze, and plan responses for risks associated with projects including new system implementations, business initiatives, or organizational changes. During the planning phase of an ERP implementation, project risk assessment identifies potential obstacles, resource constraints, technical challenges, organizational resistance, and other factors that could prevent successful project completion.
Project risk assessments consider risks unique to project contexts such as scope creep, resource availability, vendor dependencies, technology integration challenges, change management issues, timeline delays, and budget overruns. The assessment informs project planning by identifying areas requiring contingency plans, additional resources, or alternative approaches. Project risk assessments are typically updated throughout the project lifecycle as risks evolve.
ERP implementations present significant project risks including data migration challenges, business process disruption, user adoption issues, integration complexities with existing systems, and potential performance problems. Identifying these risks early allows project teams to develop mitigation strategies, allocate appropriate resources, and establish realistic timelines and budgets. Project risk assessment directly supports project governance and decision-making.
Operational risk assessment focuses on ongoing business operations rather than specific projects. Strategic risk assessment examines risks to long-term organizational strategy and objectives. Compliance risk assessment evaluates regulatory and legal compliance risks. While these assessments may be relevant to ERP implementation context, project risk assessment specifically addresses the unique risks associated with executing the implementation project during the planning and execution phases.
Question 19
Which key risk indicator would be most appropriate for monitoring cybersecurity risk related to unpatched systems?
A) Number of security incidents
B) Percentage of systems with outstanding patches
C) Mean time to detect threats
D) Number of failed login attempts
Answer: B
Explanation:
Key Risk Indicators are metrics that provide early warning signals about increasing risk exposure, enabling proactive risk management. Effective KRIs are measurable, relevant to specific risks, and actionable when thresholds are exceeded.
Percentage of systems with outstanding patches is the most appropriate KRI for monitoring cybersecurity risk related to unpatched systems because it directly measures the risk exposure. This metric quantifies how many systems in the environment lack current security patches, indicating vulnerability to known exploits. As the percentage increases, cybersecurity risk increases proportionally because more systems are susceptible to attacks targeting unpatched vulnerabilities.
This KRI is actionable and provides clear direction for risk response. When the percentage exceeds acceptable thresholds, it triggers remediation activities to deploy patches and reduce exposure. The metric can be tracked over time to monitor whether patch management processes are effective and whether risk exposure is trending upward or downward. Organizations typically set target thresholds such as maintaining less than 5 percent of systems with critical patches outstanding.
The KRI directly links to the underlying risk of system compromise through exploitation of known vulnerabilities. Unpatched systems represent one of the most significant cybersecurity risks as attackers actively exploit published vulnerabilities. The metric provides quantitative measurement that supports risk-based decision-making about resource allocation for patch management.
Number of security incidents is a lagging indicator showing risks that already materialized rather than predicting future risk. Mean time to detect threats measures detection capability rather than patch status. Number of failed login attempts might indicate attack attempts but doesn’t measure patch status. Percentage of systems with outstanding patches provides the most direct and predictive measurement of risk exposure from unpatched vulnerabilities.
Question 20
An organization’s risk management framework should be aligned with which of the following to ensure consistency with organizational objectives?
A) Industry best practices
B) Regulatory requirements
C) Enterprise governance framework
D) Audit recommendations
Answer: C
Explanation:
Risk management frameworks provide structured approaches to identifying, assessing, and managing risks across the organization. Proper alignment ensures risk management activities support rather than conflict with organizational direction and decision-making.
Enterprise governance framework defines how the organization is directed and controlled, including decision-making structures, accountability mechanisms, and strategic direction. Risk management framework alignment with enterprise governance ensures risk management activities support organizational objectives, integrate with strategic planning, and operate within established governance structures. This alignment creates consistency between how the organization sets direction and how it manages risks to achieving that direction.
Governance frameworks establish risk appetite, risk tolerance levels, and accountability for risk management. When risk management frameworks align with governance, risk decisions reflect organizational priorities and values. Board and executive oversight of risk management operates through governance structures, ensuring appropriate escalation and decision-making authority. Integration prevents risk management from operating in isolation or conflict with strategic initiatives.
Alignment with enterprise governance also ensures risk management resources are allocated consistent with organizational priorities. High-priority strategic objectives receive appropriate risk management attention. Risk reporting flows through governance channels to appropriate decision-makers. Risk ownership and accountability align with organizational structure and responsibility assignments established through governance.
Industry best practices provide guidance but may not reflect specific organizational context and objectives. Regulatory requirements address compliance obligations but don’t necessarily align with broader organizational strategy. Audit recommendations address specific findings but don’t provide comprehensive alignment. Enterprise governance framework provides the overarching structure ensuring risk management supports organizational objectives and integrates with strategic direction and decision-making processes.
Question 21
Which of the following is the PRIMARY purpose of conducting a root cause analysis after a risk event occurs?
A) To assign blame for the incident
B) To prevent similar incidents in the future
C) To calculate the financial impact
D) To satisfy regulatory requirements
Answer: B
Explanation:
Root cause analysis is a systematic process for identifying the fundamental reasons why risk events occurred, going beyond immediate or superficial causes to understand underlying factors. Understanding the primary purpose ensures RCA efforts focus on value creation rather than compliance activities.
Preventing similar incidents in the future is the primary purpose of root cause analysis. By identifying the fundamental causes of risk events, organizations can implement corrective actions that address underlying weaknesses rather than just treating symptoms. RCA helps organizations learn from incidents and continuously improve their risk management and control environments. This forward-looking perspective maximizes value from incident response efforts.
RCA examines multiple layers of causation including immediate causes, contributing factors, and systemic issues that allowed the incident to occur. For example, a data breach might have an immediate cause of compromised credentials, contributing factors of weak password policies and lack of multi-factor authentication, and systemic causes of inadequate security awareness training and insufficient security investment. Addressing all levels prevents recurrence.
Effective RCA involves structured methodologies like the Five Whys, fishbone diagrams, or fault tree analysis that systematically explore causal relationships. The analysis produces actionable recommendations for control improvements, process changes, or resource allocation adjustments. Implementation of these recommendations strengthens the control environment and reduces likelihood of similar future incidents.
Assigning blame is counterproductive and creates defensive cultures that inhibit learning. Calculating financial impact is important for incident response but not the primary RCA purpose. Satisfying regulatory requirements may be a secondary benefit but should not drive RCA focus. Prevention of future incidents through identification and remediation of root causes represents the primary value and purpose of root cause analysis efforts.
Question 22
An organization has outsourced its data center operations to a third-party service provider. Who retains ultimate accountability for the associated risks?
A) The third-party service provider
B) The organization’s board of directors
C) The chief information officer
D) The vendor management office
Answer: B
Explanation:
Outsourcing transfers operational responsibility for activities to external parties but does not eliminate organizational accountability for associated risks. Understanding accountability assignment is critical for governance and risk management in outsourcing relationships.
The organization’s board of directors retains ultimate accountability for risks associated with outsourced operations. While day-to-day management and operational responsibility transfer to the service provider, the board remains accountable to stakeholders for organizational performance, compliance, and risk management. The board cannot delegate this fundamental governance accountability even when operational activities are outsourced.
Board accountability for outsourced risks reflects the principle that organizations cannot outsource responsibility for their obligations to customers, regulators, and stakeholders. If the service provider experiences security breaches, service disruptions, or compliance failures, the organization faces consequences including regulatory penalties, customer impact, and reputational damage. The board must ensure appropriate oversight mechanisms exist for outsourced operations.
This accountability drives board-level responsibilities including approving outsourcing decisions, ensuring appropriate due diligence of service providers, reviewing and approving service level agreements, establishing oversight mechanisms, requiring regular risk reporting from management about outsourcing arrangements, and ensuring contingency plans exist for service provider failures. The board exercises accountability through governance oversight rather than operational management.
The third-party service provider has contractual obligations and operational responsibility but not accountability to the organization’s stakeholders. The CIO and vendor management office have management responsibilities for the relationship but not ultimate accountability. The board of directors retains ultimate accountability reflecting its governance role and responsibility to stakeholders for organizational performance including risks from outsourced operations.
Question 23
Which risk assessment approach is MOST appropriate when historical data about risk events is limited or unavailable?
A) Quantitative risk assessment
B) Qualitative risk assessment
C) Automated risk assessment
D) Continuous risk assessment
Answer: B
Explanation:
Risk assessment methodologies vary in their data requirements, precision, and applicability to different situations. Selecting appropriate assessment approaches based on available information and organizational context ensures meaningful risk analysis.
Qualitative risk assessment is most appropriate when historical data about risk events is limited or unavailable because it relies on expert judgment, experience, and subjective evaluation rather than statistical analysis of historical data. Qualitative assessments use descriptive scales like low, medium, and high to rate likelihood and impact, allowing risk evaluation even when precise quantitative data doesn’t exist. This approach is practical for emerging risks, new technologies, or unique organizational situations.
Qualitative assessment leverages knowledge from subject matter experts, industry experience, and comparative analysis with similar situations to estimate risk levels. Workshops, interviews, and surveys gather expert opinions that inform risk ratings. While less precise than quantitative methods, qualitative assessment provides valuable insights for risk prioritization and decision-making when quantitative data is unavailable.
The approach is particularly valuable for strategic risks, emerging threats, and novel situations where historical precedent doesn’t exist. Qualitative assessment can be conducted more quickly and with less resource investment than quantitative analysis. Organizations often use qualitative assessment as a first step, conducting detailed quantitative analysis for highest priority risks where investment in data gathering is justified.
Quantitative risk assessment requires historical data, probability distributions, and statistical analysis making it unsuitable when data is limited. Automated risk assessment relies on data inputs and algorithms. Continuous risk assessment refers to frequency rather than methodology. Qualitative risk assessment provides the most appropriate approach when historical data limitations prevent quantitative analysis while still enabling informed risk evaluation and prioritization.
Question 24
What is the PRIMARY benefit of integrating risk management into the project management lifecycle?
A) Reducing project costs
B) Eliminating all project risks
C) Improving project success rates
D) Simplifying project reporting
Answer: C
Explanation:
Integration of risk management with project management creates synergies that enhance project outcomes. Understanding primary benefits ensures organizations invest appropriately in integration efforts and measure relevant outcomes.
Improving project success rates is the primary benefit of integrating risk management into the project management lifecycle. Systematic identification, assessment, and management of project risks throughout planning, execution, and closure phases increases the likelihood of delivering projects on time, within budget, and meeting objectives. Risk management helps project teams anticipate problems, develop mitigation strategies, and respond effectively when issues arise.
Integration ensures risk considerations influence project decisions from initiation through closure. During planning, risk assessment informs resource allocation, timeline development, and contingency planning. During execution, ongoing risk monitoring enables early detection of emerging issues and timely response. Risk management becomes embedded in project processes rather than a separate activity, ensuring consistent attention to risk factors that could derail success.
Projects integrating risk management demonstrate higher success rates because they proactively address potential obstacles. Risk identification workshops uncover issues that might otherwise surprise project teams. Risk response planning ensures resources are available when needed. Risk monitoring provides early warning signals enabling corrective action before small issues become major problems. This proactive approach significantly improves project outcomes.
Reducing project costs may result from effective risk management but is not the primary benefit as some risk responses increase costs through additional controls or resources. Eliminating all project risks is impossible and not a realistic objective. Simplifying project reporting might be a secondary benefit but doesn’t capture the fundamental value. Improving project success rates represents the primary and most significant benefit of risk management integration into project management lifecycle.
Question 25
Which of the following BEST describes risk appetite?
A) The amount of risk an organization can absorb without significant impact
B) The amount of risk an organization is willing to accept to achieve objectives
C) The maximum loss an organization can sustain
D) The residual risk after controls are applied
Answer: B
Explanation:
Risk appetite is a foundational concept in risk management that guides decision-making about which risks to accept, avoid, mitigate, or transfer. Clear understanding of risk appetite ensures consistent risk decisions aligned with organizational strategy.
Risk appetite is the amount of risk an organization is willing to accept in pursuit of its objectives. This definition emphasizes the voluntary and strategic nature of risk-taking. Organizations consciously accept certain risks because activities carrying those risks are necessary to achieve strategic goals, generate revenue, or create value. Risk appetite reflects organizational philosophy about risk-taking and provides guidance for risk decisions across the enterprise.
Risk appetite is established by the board and senior management considering factors including strategic objectives, competitive environment, stakeholder expectations, financial capacity, and organizational culture. It is expressed through qualitative statements and quantitative measures that guide operational decisions. For example, an organization might express risk appetite as willingness to accept operational disruptions of up to four hours annually or tolerance for security incidents affecting less than one percent of customers.
Risk appetite varies by risk category reflecting different tolerances for different risk types. Organizations might have higher appetite for strategic or market risks necessary for growth but lower appetite for compliance or reputational risks. Risk appetite evolves as organizational strategy, market conditions, or capabilities change. Regular review ensures continued alignment with organizational direction.
Risk capacity describes the amount an organization can absorb without significant impact, which is different from willingness to accept. Maximum loss relates to risk tolerance thresholds. Residual risk is remaining risk after controls, distinct from appetite. Risk appetite specifically captures the amount of risk an organization willingly accepts to achieve objectives.
Question 26
An organization discovers that a key control has failed and a risk has materialized. What should be the FIRST step in the risk response process?
A) Update the risk register
B) Notify senior management
C) Contain the impact
D) Perform root cause analysis
Answer: C
Explanation:
Risk events require structured response processes that prioritize actions based on urgency and impact. Understanding proper response sequencing ensures effective incident management and minimizes damage.
Containing the impact should be the first step when a risk materializes because it limits damage and prevents the situation from worsening. Containment actions depend on the risk type but generally focus on isolating affected systems, stopping unauthorized access, preventing data loss, or halting problematic processes. Immediate containment minimizes financial loss, operational disruption, and other consequences while creating stable conditions for investigation and remediation.
For cybersecurity incidents, containment might involve isolating compromised systems from the network, disabling affected accounts, or blocking malicious traffic. For operational failures, containment might include switching to backup systems, halting production processes, or activating business continuity procedures. The specific containment actions are predetermined through incident response planning and business continuity planning.
Containment is time-critical and takes precedence over documentation, analysis, or communication activities that can occur after the immediate situation is stabilized. While these other activities are important, they should not delay containment actions that limit damage. Effective containment often makes the difference between minor incidents and catastrophic events.
Updating the risk register is important but can occur after containment. Management notification should happen promptly but after initial containment actions are underway to provide accurate situation assessment. Root cause analysis is valuable but occurs after containment and stabilization. Containing the impact represents the immediate priority when risks materialize to minimize consequences and create conditions for effective incident response and recovery.
Question 27
Which of the following is the MOST important consideration when establishing key risk indicators?
A) KRIs should be based on historical trends
B) KRIs should provide early warning of increasing risk
C) KRIs should be easy to measure
D) KRIs should cover all possible risks
Answer: B
Explanation:
Key Risk Indicators serve as monitoring mechanisms providing visibility into risk levels and trends. Understanding the most important KRI characteristic ensures organizations develop indicators that effectively support proactive risk management.
Providing early warning of increasing risk is the most important KRI consideration because early warning enables proactive risk response before risks materialize into incidents. KRIs function as leading indicators that signal when risk levels are rising beyond acceptable thresholds, allowing organizations to take corrective action. This predictive capability distinguishes KRIs from lagging indicators that measure events after they occur.
Effective KRIs detect changes in risk exposure before risk events happen. For example, increasing percentage of failed system backups signals rising business continuity risk before actual data loss occurs. Growing number of systems with critical patches outstanding indicates rising cybersecurity risk before exploitation happens. Rising employee turnover rates in critical roles signals operational risk before knowledge loss impacts operations. These forward-looking signals enable intervention.
Early warning requires KRIs to be sensitive to risk factors and changes in the risk environment. Indicators must be monitored with appropriate frequency to detect changes promptly. Thresholds and triggers must be established so deviations prompt investigation and response. The warning must provide sufficient lead time for effective risk response actions before risk events occur.
Historical trends provide context but aren’t the most critical factor. Ease of measurement is desirable but secondary to predictive value. Attempting to cover all possible risks is impractical and dilutes focus on critical risks. Early warning capability represents the most important consideration as it enables the proactive risk management that is KRI’s fundamental purpose.
Question 28
An organization is implementing a new risk management framework. Which group should have PRIMARY responsibility for ensuring the framework is effectively implemented?
A) Internal audit
B) Risk management committee
C) Executive management
D) Board of directors
Answer: C
Explanation:
Successful implementation of risk management frameworks requires clear accountability and appropriate assignment of responsibilities across governance and management levels. Understanding role distinctions ensures effective framework deployment.
Executive management has primary responsibility for ensuring effective implementation of the risk management framework. While the board provides oversight and approves the framework, executive management is responsible for operationalizing risk management across the organization. Executives allocate resources, establish processes, assign responsibilities, integrate risk management into business operations, and drive cultural change necessary for framework success.
Executive management responsibilities include developing risk management policies and procedures, establishing risk management organizational structure, appointing risk owners and risk management personnel, ensuring adequate resources and training, integrating risk management into strategic planning and decision-making, and monitoring framework effectiveness. These operational responsibilities require management authority and organizational knowledge that executives possess.
Framework implementation requires executive management to embed risk management into business processes, performance management, and organizational culture. This integration cannot be accomplished through board oversight alone or delegated to audit or risk committees. Management must champion risk management, demonstrate commitment through actions and resource allocation, and hold personnel accountable for risk management responsibilities.
The board of directors provides governance oversight and holds management accountable but doesn’t implement operational frameworks. Internal audit provides independent assurance over risk management effectiveness but doesn’t implement controls or manage risks. Risk management committees support coordination and oversight but don’t have line authority for implementation. Executive management has the authority, resources, and operational responsibility for ensuring effective framework implementation.
Question 29
Which of the following is the BEST method for validating the effectiveness of risk mitigation controls?
A) Management self-assessment
B) Control testing
C) Risk reassessment
D) Vendor certification
Answer: B
Explanation:
Validating control effectiveness ensures risk mitigation strategies actually reduce risk to intended levels. Understanding validation methods and their reliability helps organizations confirm that controls operate as designed.
Control testing is the best method for validating risk mitigation control effectiveness because it provides objective evidence about whether controls are designed appropriately and operating effectively. Testing involves examining control operation through methods including inspection, observation, inquiry, and reperformance. Tests verify that controls function as intended, are performed consistently, and achieve their risk mitigation objectives.
Control testing methodologies vary based on control type. Automated controls might be tested through examination of system configurations and processing logs. Manual controls might be tested through sampling of control performance documentation and reperformance of control procedures. Preventive controls are tested to confirm they block undesired activities. Detective controls are tested to verify they identify exceptions or anomalies.
Testing provides evidence supporting conclusions about control effectiveness with reliability depending on test design, sample sizes, and independence of testers. Independent testing by internal audit or external parties provides greater assurance than management self-testing. Regular testing detects control degradation over time and identifies when controls require updates to address evolving risks.
Management self-assessment provides valuable insights but lacks independence and may be overly optimistic. Risk reassessment evaluates risk levels but doesn’t directly validate control operation. Vendor certification addresses third-party controls but doesn’t validate organization-specific control implementation. Control testing provides the most direct and reliable evidence about whether risk mitigation controls effectively reduce risk to acceptable levels.
Question 30
An organization has identified a risk that cannot be effectively mitigated through controls and exceeds risk appetite. Which risk response is MOST appropriate?
A) Risk acceptance
B) Risk transfer
C) Risk avoidance
D) Risk reduction
Answer: C
Explanation:
Risk response selection requires matching response strategies to risk characteristics, organizational risk appetite, and available options. Understanding when different responses are appropriate ensures effective risk management decisions.
Risk avoidance is the most appropriate response when risks cannot be effectively mitigated through controls and exceed risk appetite. Avoidance eliminates risk entirely by discontinuing the activity, process, or condition creating the risk. When risks are unacceptable and cannot be reduced to acceptable levels, avoiding the risk-generating activity is the logical response.
Risk avoidance might involve decisions like not entering certain markets, discontinuing specific products or services, choosing not to adopt certain technologies, or terminating relationships with high-risk third parties. These decisions eliminate the risk but also forego potential opportunities associated with the activities. Avoidance is appropriate when risk-reward tradeoffs are unfavorable or when risk levels threaten organizational viability.
The scenario specifies controls cannot effectively mitigate the risk, eliminating risk reduction as a viable option. The risk exceeds appetite, making acceptance inappropriate as acceptance is only suitable for risks within appetite. While risk transfer could be considered, the inability to effectively mitigate suggests the risk may not be transferable or transfer costs might be prohibitive.
Risk avoidance decisions typically require senior management or board approval due to strategic implications. Avoiding activities may impact revenue, market position, or strategic objectives. Organizations must carefully weigh the costs of avoidance against risk exposure. However, when risks are severe, unmitigable, and exceed appetite, avoidance represents the prudent response protecting organizational interests and ensuring risks remain within acceptable boundaries.