Which best describes effective and efficient risk control measures?

Which best describes effective and efficient risk control measures?

• A. They increase employee satisfaction while reducing the level of risk.
• B. They eliminate risk without requiring the organization to make outlays of cash.
• C. They are the least expensive measures of all possible effective that achieve an organization's risk management goals.
• D. They reduce risk to a level that is acceptable to the organization's management.

Answer: (D)

The key idea is balancing risk reduction with cost, aiming for a level of risk that management is willing to accept. Effective controls actually lower the chance or impact of a loss, while efficient controls achieve that reduction at a reasonable cost. In practice, organizations don’t usually eliminate all risk or spend arbitrarily little; they seek a residual risk level that aligns with their risk tolerance and cost‑benefit considerations. Therefore, the best description is reducing risk to a level acceptable to management.

The key idea is balancing risk reduction with cost, aiming for a level of risk that management is willing to accept. Effective controls actually lower the chance or impact of a loss, while efficient controls achieve that reduction at a reasonable cost. In practice, organizations don’t usually eliminate all risk or spend arbitrarily little; they seek a residual risk level that aligns with their risk tolerance and cost‑benefit considerations. Therefore, the best description is reducing risk to a level acceptable to management.