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CRISC Practice Exam 3
Take your exam preparation to the next level with fully simulated online practice tests designed to replicate the real exam experience. These exams feature realistic questions, timed conditions, and detailed explanations to help you assess your knowledge, identify weak areas, and build confidence before test day.
1. A healthcare provider has identified inherent risks associated with unauthorized access to sensitive patient records. After deploying encryption, access logging, and regular audits, the residual risk is deemed acceptable. However, during routine monitoring, it is discovered that staff members are sharing login credentials, increasing the current risk beyond acceptable levels. What should the healthcare provider do to manage this situation?
The Correct Answer is B. (A) While increasing audit frequency is important, it does not directly address the root cause of credential sharing. (B) The healthcare provider must immediately address the root cause of the increased current risk by implementing stricter access control policies, such as prohibiting the sharing of credentials, and retraining staff on the importance of security practices. (C) Encryption alone does not prevent unauthorized access if credentials are shared. (D) Recalculating the residual risk would not resolve the policy violation. Therefore, enforcing stricter policies and staff retraining is necessary to reduce current risk.
(A) While increasing audit frequency is important, it does not directly address the root cause of credential sharing. (B) The healthcare provider must immediately address the root cause of the increased current risk by implementing stricter access control policies, such as prohibiting the sharing of credentials, and retraining staff on the importance of security practices. (C) Encryption alone does not prevent unauthorized access if credentials are shared. (D) Recalculating the residual risk would not resolve the policy violation. Therefore, enforcing stricter policies and staff retraining is necessary to reduce current risk.
2. Your organization is deploying a new customer-facing web application. During the risk assessment, you identify that the application is at risk for SQL injection attacks, which could lead to data breaches. As the risk manager, which IT component would be most critical in mitigating the risk of SQL injection attacks?
The Correct Answer is A. Input validation controls (A) are the most critical IT component for mitigating the risk of SQL injection attacks. SQL injection exploits occur when an attacker is able to insert malicious SQL statements into an input field, allowing unauthorized access to the database. By implementing strong input validation, such as sanitizing and validating user inputs before they interact with the database, the risk of injection attacks can be significantly reduced. Firewalls (B) protect against network-level threats but do not prevent application-layer attacks like SQL injection. Antivirus software (C) is not designed to address these types of attacks. Load balancing systems (D) manage traffic but do not mitigate risks related to input vulnerabilities in the web application.
Input validation controls (A) are the most critical IT component for mitigating the risk of SQL injection attacks. SQL injection exploits occur when an attacker is able to insert malicious SQL statements into an input field, allowing unauthorized access to the database. By implementing strong input validation, such as sanitizing and validating user inputs before they interact with the database, the risk of injection attacks can be significantly reduced. Firewalls (B) protect against network-level threats but do not prevent application-layer attacks like SQL injection. Antivirus software (C) is not designed to address these types of attacks. Load balancing systems (D) manage traffic but do not mitigate risks related to input vulnerabilities in the web application.
3. Your organization has experienced a recent spike in power outages due to severe weather events. As part of maintaining enterprise resiliency, you are tasked with ensuring that the company's IT systems can continue functioning during these outages. What is the most critical step to mitigate the impact of power disruptions on your operations?
The Correct Answer is C. Implementing an uninterruptible power supply (UPS) system (C) for critical infrastructure is the most critical step in mitigating the impact of power outages on IT systems. A UPS ensures that essential systems remain operational during power interruptions, providing immediate backup power until generators or alternative power sources are activated. While regular testing of backup generators (A) is important, a UPS offers immediate protection. Redundant internet service providers (B) address network availability but not power issues. Relocating the data center (D) might reduce weather-related risks but is not an immediate or feasible solution for power disruptions.
Implementing an uninterruptible power supply (UPS) system (C) for critical infrastructure is the most critical step in mitigating the impact of power outages on IT systems. A UPS ensures that essential systems remain operational during power interruptions, providing immediate backup power until generators or alternative power sources are activated. While regular testing of backup generators (A) is important, a UPS offers immediate protection. Redundant internet service providers (B) address network availability but not power issues. Relocating the data center (D) might reduce weather-related risks but is not an immediate or feasible solution for power disruptions.
4. A multinational corporation has noticed a decline in customer satisfaction due to slow response times in its customer service department. The business process review revealed that outdated workflows and disconnected systems across regions were contributing to the inefficiency. How can the company use this review to improve enterprise effectiveness?
The Correct Answer is A. Implementing standardized workflows across all regions (A) ensures consistency and efficiency, directly addressing the issue of disconnected systems and outdated processes. This approach creates uniformity, reduces redundancies, and improves the overall customer experience. Additional training (B) may help, but it does not solve the systemic issues caused by inconsistent processes. Allowing regions to continue using different systems (C) would perpetuate inefficiencies, and outsourcing (D) might result in a loss of control over service quality. Standardization improves effectiveness by aligning processes with business objectives.
Implementing standardized workflows across all regions (A) ensures consistency and efficiency, directly addressing the issue of disconnected systems and outdated processes. This approach creates uniformity, reduces redundancies, and improves the overall customer experience. Additional training (B) may help, but it does not solve the systemic issues caused by inconsistent processes. Allowing regions to continue using different systems (C) would perpetuate inefficiencies, and outsourcing (D) might result in a loss of control over service quality. Standardization improves effectiveness by aligning processes with business objectives.
5. A large retail company is assessing potential threats to their e-commerce platform. They decide to use the Attack Trees method to model possible security attacks. During the process, the team identifies a scenario where an attacker might exploit an unpatched web server to inject malicious code. What is the key advantage of using the Attack Trees method in this context?
The Correct Answer is A. (A) Attack Trees are particularly effective for breaking down complex attack strategies into manageable and understandable steps, helping security teams understand how an attacker might reach their goal by exploiting vulnerabilities. (B) Attack Trees are not specifically designed for compliance threat identification but rather focus on attack strategies. (C) While useful in understanding attack vectors, Attack Trees do not inherently provide detailed financial impact analysis. (D) Attack Trees offer structured insight into attack paths but are not necessarily the fastest method; they prioritize depth over speed. Therefore, decomposing attacks into manageable steps is the key advantage in this scenario.
(A) Attack Trees are particularly effective for breaking down complex attack strategies into manageable and understandable steps, helping security teams understand how an attacker might reach their goal by exploiting vulnerabilities. (B) Attack Trees are not specifically designed for compliance threat identification but rather focus on attack strategies. (C) While useful in understanding attack vectors, Attack Trees do not inherently provide detailed financial impact analysis. (D) Attack Trees offer structured insight into attack paths but are not necessarily the fastest method; they prioritize depth over speed. Therefore, decomposing attacks into manageable steps is the key advantage in this scenario.
6. A multinational corporation is preparing to launch a new product line that involves significant investment in R&D and marketing. The Chief Risk Officer (CRO) has identified the potential risk of economic downturns that could reduce customer demand, negatively impacting sales. The executive team is divided on whether to mitigate the risk by diversifying product offerings or to focus on market penetration. What is the most important risk factor to analyze when advising the team?
The Correct Answer is D. The financial resilience of the company (D) is the most important factor because it directly impacts the enterprise’s ability to endure the effects of reduced demand caused by an economic downturn. While probability analysis (A) and sales projections (B) are essential, they do not address the company's capacity to handle the risk. Strategic alignment (C) is also crucial, but it doesn’t provide the same level of insight into the company’s ability to mitigate financial losses. Analyzing financial resilience offers the clearest picture of whether the company can absorb the risk or needs to take mitigating actions.
The financial resilience of the company (D) is the most important factor because it directly impacts the enterprise’s ability to endure the effects of reduced demand caused by an economic downturn. While probability analysis (A) and sales projections (B) are essential, they do not address the company's capacity to handle the risk. Strategic alignment (C) is also crucial, but it doesn’t provide the same level of insight into the company’s ability to mitigate financial losses. Analyzing financial resilience offers the clearest picture of whether the company can absorb the risk or needs to take mitigating actions.
7. A manufacturing company is establishing metrics to monitor operational risks, such as equipment failure rates, production downtime, and maintenance schedule adherence. What is the most important factor to consider when defining the thresholds for these metrics?
The Correct Answer is B. Aligning thresholds with the company’s risk tolerance and operational capacity (B) ensures that the metrics reflect realistic expectations and support decision-making based on the organization’s specific context. Setting thresholds based on industry standards (A) can be a useful reference but should not override internal risk tolerance. Zero equipment failures (C) is an unrealistic goal, and striving for it may lead to inefficiencies. Focusing solely on critical production lines (D) may overlook risks in other areas that could also affect operations. The thresholds must be relevant to the company’s specific risk appetite and capacity to manage operational risks.
Aligning thresholds with the company’s risk tolerance and operational capacity (B) ensures that the metrics reflect realistic expectations and support decision-making based on the organization’s specific context. Setting thresholds based on industry standards (A) can be a useful reference but should not override internal risk tolerance. Zero equipment failures (C) is an unrealistic goal, and striving for it may lead to inefficiencies. Focusing solely on critical production lines (D) may overlook risks in other areas that could also affect operations. The thresholds must be relevant to the company’s specific risk appetite and capacity to manage operational risks.
8. A global technology company is using its risk register to manage risks associated with its research and development (R&D) projects. The risk team identifies a scenario where intellectual property (IP) theft from a competitor could occur due to weak internal controls over data access. What is the most appropriate way to manage this risk in the risk register?
The Correct Answer is A. (A) Documenting the risk and assessing its severity are the first steps. Implementing stricter access controls, such as role-based access or multi-factor authentication, helps reduce the likelihood of IP theft. (B) Accepting the risk without adequate mitigation is not advisable, especially with sensitive IP. (C) Implementing encryption is useful, but it does not remove the risk entirely. The risk should still be monitored in the register. (D) Outsourcing may not be feasible for IP management, as internal controls are often critical. Therefore, documenting and implementing access controls is the best course of action.
(A) Documenting the risk and assessing its severity are the first steps. Implementing stricter access controls, such as role-based access or multi-factor authentication, helps reduce the likelihood of IP theft. (B) Accepting the risk without adequate mitigation is not advisable, especially with sensitive IP. (C) Implementing encryption is useful, but it does not remove the risk entirely. The risk should still be monitored in the register. (D) Outsourcing may not be feasible for IP management, as internal controls are often critical. Therefore, documenting and implementing access controls is the best course of action.
9. A logistics company is adopting autonomous vehicles to optimize its delivery operations. As the risk manager, you must assess the security risks related to this emerging technology. What should be the top priority to ensure the security of the autonomous vehicle systems?
The Correct Answer is B. The top priority should be protecting the vehicle’s control systems from cyberattacks (B). Autonomous vehicles are highly dependent on software and sensors, making them vulnerable to cyberattacks that could disrupt operations or lead to physical harm. Implementing strong cybersecurity measures, such as encryption, intrusion detection systems, and secure communications, is critical. While compliance (A), data backups (C), and performance tests (D) are important, they do not directly address the risk of cyberattacks on the control systems of autonomous vehicles.
The top priority should be protecting the vehicle’s control systems from cyberattacks (B). Autonomous vehicles are highly dependent on software and sensors, making them vulnerable to cyberattacks that could disrupt operations or lead to physical harm. Implementing strong cybersecurity measures, such as encryption, intrusion detection systems, and secure communications, is critical. While compliance (A), data backups (C), and performance tests (D) are important, they do not directly address the risk of cyberattacks on the control systems of autonomous vehicles.
10. A multinational corporation has a risk-averse culture where employees are hesitant to take initiative or report potential risks due to fear of reprisal. The Chief Risk Officer (CRO) wants to encourage more proactive risk management practices across all departments. What should be the CRO’s primary focus to address this cultural barrier?
The Correct Answer is B. The CRO should focus on creating a risk-awareness program (B) that encourages employees to report risks without fear of negative consequences. A risk-averse culture often leads to underreporting of risks, which can undermine the organization’s risk management efforts. Establishing a zero-tolerance policy for risk-taking (A) would likely worsen the existing culture. Regular risk assessments (C) are useful, but enforcing them through accountability mechanisms alone may further suppress proactive risk identification. Outsourcing risk management (D) does not address the internal cultural issues and may lead to further disconnect between employees and the risk management process.
The CRO should focus on creating a risk-awareness program (B) that encourages employees to report risks without fear of negative consequences. A risk-averse culture often leads to underreporting of risks, which can undermine the organization’s risk management efforts. Establishing a zero-tolerance policy for risk-taking (A) would likely worsen the existing culture. Regular risk assessments (C) are useful, but enforcing them through accountability mechanisms alone may further suppress proactive risk identification. Outsourcing risk management (D) does not address the internal cultural issues and may lead to further disconnect between employees and the risk management process.
11. An energy company is diversifying its portfolio by investing in renewable energy projects, aligning with its strategic objective to reduce carbon emissions by 30% over the next decade. The Chief Risk Officer (CRO) is tasked with ensuring that risk management supports this objective. Which of the following actions should the CRO prioritize?
The Correct Answer is B. The CRO should prioritize developing a risk management strategy (B) that identifies the unique risks associated with renewable energy projects, such as regulatory changes, technological advancements, and market volatility. This approach aligns risk management with the strategic objective of reducing carbon emissions. Focusing solely on traditional energy risks (A) would not support the company’s diversification efforts, and delaying investments (C) could hinder progress toward the strategic goal. While outsourcing risk management (D) may provide expertise, the company should retain internal oversight to ensure alignment with its broader strategic objectives.
The CRO should prioritize developing a risk management strategy (B) that identifies the unique risks associated with renewable energy projects, such as regulatory changes, technological advancements, and market volatility. This approach aligns risk management with the strategic objective of reducing carbon emissions. Focusing solely on traditional energy risks (A) would not support the company’s diversification efforts, and delaying investments (C) could hinder progress toward the strategic goal. While outsourcing risk management (D) may provide expertise, the company should retain internal oversight to ensure alignment with its broader strategic objectives.
12. A healthcare organization is using the OCTAVE (Operationally Critical Threat, Asset, and Vulnerability Evaluation) method to analyze risks to its patient data systems. The team identifies several vulnerabilities in their IT infrastructure that could lead to unauthorized access to sensitive data. What is the primary benefit of using the OCTAVE method in this scenario?
The Correct Answer is A. (A) OCTAVE emphasizes evaluating risks based on the organization’s most critical assets, vulnerabilities, and threats. This enables the healthcare organization to prioritize its security efforts based on what is most important and at risk. (B) OCTAVE is more qualitative than quantitative and does not focus on financial estimation. (C) OCTAVE does not prescribe specific controls but helps in identifying areas where controls are necessary. (D) While the method may help achieve compliance, its primary goal is risk assessment based on critical assets, not regulatory adherence. Therefore, assessing critical assets and vulnerabilities is the primary benefit of OCTAVE.
(A) OCTAVE emphasizes evaluating risks based on the organization’s most critical assets, vulnerabilities, and threats. This enables the healthcare organization to prioritize its security efforts based on what is most important and at risk. (B) OCTAVE is more qualitative than quantitative and does not focus on financial estimation. (C) OCTAVE does not prescribe specific controls but helps in identifying areas where controls are necessary. (D) While the method may help achieve compliance, its primary goal is risk assessment based on critical assets, not regulatory adherence. Therefore, assessing critical assets and vulnerabilities is the primary benefit of OCTAVE.
13. A retail company has partnered with a third-party logistics provider to handle its supply chain operations. During a risk assessment, the company identifies that the logistics provider lacks adequate cybersecurity measures, which could expose the retail company to data breaches. What is the best way for the retail company to manage this third-party risk?
The Correct Answer is A. The best way to manage the third-party risk is to require the logistics provider to undergo regular cybersecurity audits (A). This ensures that the provider is improving its security posture over time and provides the retail company with transparency. Simply updating the SLA (B) might not ensure that adequate security measures are in place. Terminating the partnership (C) could be unnecessary if the provider is willing to improve its security. Accepting the risk (D) without ensuring the provider enhances its cybersecurity would leave the company exposed to potential breaches, even with stronger internal controls.
The best way to manage the third-party risk is to require the logistics provider to undergo regular cybersecurity audits (A). This ensures that the provider is improving its security posture over time and provides the retail company with transparency. Simply updating the SLA (B) might not ensure that adequate security measures are in place. Terminating the partnership (C) could be unnecessary if the provider is willing to improve its security. Accepting the risk (D) without ensuring the provider enhances its cybersecurity would leave the company exposed to potential breaches, even with stronger internal controls.
14. Your organization relies heavily on IT systems for business continuity and has just experienced a major power failure at a primary data center, disrupting critical operations. As the risk manager, what is the best solution to reduce the operational risk of future outages?
The Correct Answer is B. Implementing a fully redundant data center in a geographically distant location (B) is the most effective way to reduce the risk of operational disruptions due to localized outages, such as power failures. This ensures that services can failover to a backup site, maintaining business continuity. A disaster recovery plan (A) is important but reactive. Increasing UPS capacity (C) may help for short-term outages but won’t protect against larger issues like regional power failures. Power failure drills (D) improve preparedness but don’t mitigate the root cause of the risk.
Implementing a fully redundant data center in a geographically distant location (B) is the most effective way to reduce the risk of operational disruptions due to localized outages, such as power failures. This ensures that services can failover to a backup site, maintaining business continuity. A disaster recovery plan (A) is important but reactive. Increasing UPS capacity (C) may help for short-term outages but won’t protect against larger issues like regional power failures. Power failure drills (D) improve preparedness but don’t mitigate the root cause of the risk.
15. A large retail company is entering the implementation phase of a new e-commerce platform. The project manager wants to ensure that security risks are mitigated during the deployment of the platform. What should be the primary focus to manage these risks during this phase?
The Correct Answer is B. During the implementation phase, conducting security configuration audits and vulnerability scans (B) is critical to identifying and addressing security weaknesses before the platform goes live. This ensures that misconfigurations or vulnerabilities are caught early, reducing the risk of exploitation. Training on incident response (A) and ensuring third-party compliance (D) are important but not as immediate as securing the platform before launch. Backing up data (C) is essential for disaster recovery but does not directly mitigate security risks during implementation.
During the implementation phase, conducting security configuration audits and vulnerability scans (B) is critical to identifying and addressing security weaknesses before the platform goes live. This ensures that misconfigurations or vulnerabilities are caught early, reducing the risk of exploitation. Training on incident response (A) and ensuring third-party compliance (D) are important but not as immediate as securing the platform before launch. Backing up data (C) is essential for disaster recovery but does not directly mitigate security risks during implementation.
16. An e-commerce company is developing a new set of standards for data privacy in response to increasing customer concerns and upcoming data protection regulations. The Chief Privacy Officer (CPO) is tasked with creating these standards while ensuring that the company’s data handling processes remain efficient. What should the CPO focus on to ensure that the standards are practical and enforceable across the business?
The Correct Answer is B. The CPO should collaborate with key business units (B) to ensure that the standards meet regulatory requirements while aligning with the company’s business processes. This approach ensures that the standards are both practical and enforceable. Creating highly restrictive standards (A) may lead to inefficiencies and resistance from operational teams. Outsourcing the creation of the standards (C) without internal input might result in a lack of alignment with company operations. Focusing solely on the strictest regulations (D) without considering regional variations may result in unnecessary complexity. Practical standards that support business objectives are critical for success.
The CPO should collaborate with key business units (B) to ensure that the standards meet regulatory requirements while aligning with the company’s business processes. This approach ensures that the standards are both practical and enforceable. Creating highly restrictive standards (A) may lead to inefficiencies and resistance from operational teams. Outsourcing the creation of the standards (C) without internal input might result in a lack of alignment with company operations. Focusing solely on the strictest regulations (D) without considering regional variations may result in unnecessary complexity. Practical standards that support business objectives are critical for success.
17. An energy company collects different types of risk data from its industrial control systems (ICS) to monitor for operational risks. These include system health metrics, incident reports, cybersecurity alerts, and maintenance schedules. Which type of risk data would be most critical to monitor for identifying risks related to equipment failure?
The Correct Answer is D. System health metrics (D) are most critical for identifying risks related to equipment failure, as they provide real-time data on the operational status of critical systems, such as temperature, pressure, and performance levels. Monitoring this data helps detect early signs of equipment degradation or failure. Cybersecurity alerts (A) are important for identifying external threats but are not directly related to equipment performance. Maintenance schedules (B) help ensure regular servicing but do not indicate immediate equipment health. Incident reports (C) provide a record of past failures but are reactive rather than predictive. System health metrics allow for proactive identification and mitigation of equipment failure risks.
System health metrics (D) are most critical for identifying risks related to equipment failure, as they provide real-time data on the operational status of critical systems, such as temperature, pressure, and performance levels. Monitoring this data helps detect early signs of equipment degradation or failure. Cybersecurity alerts (A) are important for identifying external threats but are not directly related to equipment performance. Maintenance schedules (B) help ensure regular servicing but do not indicate immediate equipment health. Incident reports (C) provide a record of past failures but are reactive rather than predictive. System health metrics allow for proactive identification and mitigation of equipment failure risks.
18. A government agency is assessing the risks related to data sharing across multiple departments. Which risk should be prioritized in the sharing phase of the data life cycle to prevent unauthorized access to classified information?
The Correct Answer is B. The most effective way to mitigate the risk of unauthorized access to classified information during the data sharing phase is to implement role-based access controls (RBAC) (B). RBAC ensures that only authorized personnel have access to specific data, minimizing the risk of accidental or intentional misuse of sensitive information. Monitoring network traffic (A) helps detect anomalies but does not prevent unauthorized access. Security awareness training (C) is valuable but doesn’t provide a direct control over data sharing permissions. Encrypting email communications (D) protects data in transit but does not address broader access control concerns.
The most effective way to mitigate the risk of unauthorized access to classified information during the data sharing phase is to implement role-based access controls (RBAC) (B). RBAC ensures that only authorized personnel have access to specific data, minimizing the risk of accidental or intentional misuse of sensitive information. Monitoring network traffic (A) helps detect anomalies but does not prevent unauthorized access. Security awareness training (C) is valuable but doesn’t provide a direct control over data sharing permissions. Encrypting email communications (D) protects data in transit but does not address broader access control concerns.
19. A healthcare organization is performing a qualitative risk analysis for its patient data management system. During the process, the risk management team is asked to prioritize risks such as unauthorized access to patient records, system downtime, and compliance failures. How should the team prioritize these risks?
The Correct Answer is B. (A) Calculating financial impact is part of quantitative risk analysis, not qualitative. (B) In qualitative risk analysis, risks are prioritized based on their likelihood and impact, often using a risk matrix to visually represent risk levels. This allows the team to focus on high-probability, high-impact risks. (C) Assigning numerical values for loss estimation is a quantitative approach, which is not the method being used here. (D) Determining regulatory penalties is important but does not encompass all identified risks. Therefore, the correct method is using a risk matrix to prioritize based on likelihood and impact.
(A) Calculating financial impact is part of quantitative risk analysis, not qualitative. (B) In qualitative risk analysis, risks are prioritized based on their likelihood and impact, often using a risk matrix to visually represent risk levels. This allows the team to focus on high-probability, high-impact risks. (C) Assigning numerical values for loss estimation is a quantitative approach, which is not the method being used here. (D) Determining regulatory penalties is important but does not encompass all identified risks. Therefore, the correct method is using a risk matrix to prioritize based on likelihood and impact.
20. An international company is working to improve its information security controls. The company wants to use a well-established framework that emphasizes protecting information assets, ensuring confidentiality, integrity, and availability, and aligning with global best practices. Which framework would be the most appropriate for the company to leverage?
The Correct Answer is B. The NIST Cybersecurity Framework (B) is specifically designed to help organizations manage and reduce cybersecurity risk, focusing on the protection of information assets by ensuring confidentiality, integrity, and availability. ITIL (A) focuses on IT service management rather than security controls. PRINCE2 (C) is a project management methodology, not a security framework, and Six Sigma (D) is a process improvement methodology that doesn't address security concerns. NIST is globally recognized for its comprehensive approach to cybersecurity, making it the best choice for designing security controls.
The NIST Cybersecurity Framework (B) is specifically designed to help organizations manage and reduce cybersecurity risk, focusing on the protection of information assets by ensuring confidentiality, integrity, and availability. ITIL (A) focuses on IT service management rather than security controls. PRINCE2 (C) is a project management methodology, not a security framework, and Six Sigma (D) is a process improvement methodology that doesn't address security concerns. NIST is globally recognized for its comprehensive approach to cybersecurity, making it the best choice for designing security controls.
21. A global insurance company is adopting a risk management framework that integrates internal controls with business strategy and governance. The company wants a framework that addresses both operational and financial risks while focusing on enterprise-wide risk management. Which framework should the company adopt?
The Correct Answer is C. COSO ERM (C) is the most appropriate framework for the insurance company, as it provides a comprehensive approach to enterprise-wide risk management, integrating internal controls with business strategy and governance, and addressing both operational and financial risks. ISO 31000 (A) is a general risk management framework, but it doesn’t specifically focus on the integration of internal controls with business strategy in the same way as COSO ERM. NIST SP 800-37 (B) is focused on managing risk within information systems and is more technical in nature. COBIT 2019 (D) is an IT governance framework but does not specifically address enterprise risk management in the same depth as COSO ERM.
COSO ERM (C) is the most appropriate framework for the insurance company, as it provides a comprehensive approach to enterprise-wide risk management, integrating internal controls with business strategy and governance, and addressing both operational and financial risks. ISO 31000 (A) is a general risk management framework, but it doesn’t specifically focus on the integration of internal controls with business strategy in the same way as COSO ERM. NIST SP 800-37 (B) is focused on managing risk within information systems and is more technical in nature. COBIT 2019 (D) is an IT governance framework but does not specifically address enterprise risk management in the same depth as COSO ERM.
22. A tech company relies on a third-party software vendor to provide critical updates for its enterprise systems. Recently, the vendor experienced a security breach that led to unauthorized access to the update distribution system, potentially compromising the integrity of future software updates. What is the best way for the tech company to address this risk originating from the third-party vendor?
The Correct Answer is C. Accepting the risk (A) would not be advisable given the potential for future breaches to compromise software updates. Avoiding the risk (B) by discontinuing the use of the vendor could disrupt critical enterprise system operations and result in significant costs. Transferring the risk (D) through cyber insurance only addresses financial losses and does not ensure the integrity of software updates. The best approach is to mitigate the risk (C) by requiring the vendor to enhance its security controls and undergo regular audits, which directly reduces the risk of future breaches and ensures software integrity.
Accepting the risk (A) would not be advisable given the potential for future breaches to compromise software updates. Avoiding the risk (B) by discontinuing the use of the vendor could disrupt critical enterprise system operations and result in significant costs. Transferring the risk (D) through cyber insurance only addresses financial losses and does not ensure the integrity of software updates. The best approach is to mitigate the risk (C) by requiring the vendor to enhance its security controls and undergo regular audits, which directly reduces the risk of future breaches and ensures software integrity.
23. A government agency has set a goal to fully integrate its IT risk management framework with its enterprise risk management (ERM) processes. Currently, the IT risk management activities are siloed, with no regular communication or coordination with the ERM team. What should be the first step in assessing the gap between the current IT risk environment and the desired fully integrated state?
The Correct Answer is C. Conducting stakeholder interviews (C) is the most effective way to assess the gap between the current siloed state and the desired integrated state. This helps identify the specific communication and process barriers that are preventing full integration. Accepting the siloed approach (A) would go against the agency’s goal of integration. Immediately starting integration (B) without identifying gaps could lead to operational challenges. Outsourcing the integration (D) may help with implementation but should only occur after the internal assessment is complete. Identifying communication and process gaps ensures a smoother path toward integration.
Conducting stakeholder interviews (C) is the most effective way to assess the gap between the current siloed state and the desired integrated state. This helps identify the specific communication and process barriers that are preventing full integration. Accepting the siloed approach (A) would go against the agency’s goal of integration. Immediately starting integration (B) without identifying gaps could lead to operational challenges. Outsourcing the integration (D) may help with implementation but should only occur after the internal assessment is complete. Identifying communication and process gaps ensures a smoother path toward integration.
24. A financial services firm is conducting an analysis of the risk and control data from its IT systems to evaluate the effectiveness of controls against cyber threats. The initial data set reveals that certain controls, such as intrusion detection, show significantly different performance levels across multiple geographic regions. What should be the risk manager’s next step in validating the control data before making conclusions?
The Correct Answer is A. The risk manager should investigate the regional differences (A) to determine whether they are due to local conditions (e.g., varying threat landscapes) or inaccuracies in reporting or implementation. Aggregating the data and using an average benchmark (B) would mask important regional differences. Disregarding outliers (C) may lead to ignoring critical issues in certain regions. Conducting a root cause analysis on all controls (D) may not be necessary if controls in some regions are performing consistently. By investigating the root cause of regional variations, the risk manager ensures accurate validation and analysis of the control data.
The risk manager should investigate the regional differences (A) to determine whether they are due to local conditions (e.g., varying threat landscapes) or inaccuracies in reporting or implementation. Aggregating the data and using an average benchmark (B) would mask important regional differences. Disregarding outliers (C) may lead to ignoring critical issues in certain regions. Conducting a root cause analysis on all controls (D) may not be necessary if controls in some regions are performing consistently. By investigating the root cause of regional variations, the risk manager ensures accurate validation and analysis of the control data.
25. A technology company developed a business continuity plan (BCP) as a key element of its risk treatment plan to address potential disruptions in IT services. The risk manager must validate that the BCP has been properly executed. Which action would provide the most effective validation?
The Correct Answer is C. The most effective way to validate the execution of the BCP is to conduct a full disaster recovery simulation (C). This ensures that the plan works as intended in a real-world scenario. Reviewing documentation (A) and interviewing personnel (B) are useful steps but do not fully test the operational effectiveness of the plan. Accepting confirmation from the IT department (D) without conducting a test may leave gaps in understanding whether the plan can be executed during an actual disruption. Simulations provide a practical validation of the BCP’s readiness.
The most effective way to validate the execution of the BCP is to conduct a full disaster recovery simulation (C). This ensures that the plan works as intended in a real-world scenario. Reviewing documentation (A) and interviewing personnel (B) are useful steps but do not fully test the operational effectiveness of the plan. Accepting confirmation from the IT department (D) without conducting a test may leave gaps in understanding whether the plan can be executed during an actual disruption. Simulations provide a practical validation of the BCP’s readiness.
26. A multinational manufacturing company is reviewing its intellectual property (IP) portfolio, which includes patents, trademarks, and proprietary designs. The Chief Innovation Officer (CIO) believes the patents are the most valuable, while the Chief Risk Officer (CRO) emphasizes that proprietary designs are crucial due to their contribution to the company’s competitive advantage. How should the company approach the valuation of these intellectual property assets?
The Correct Answer is C. The company should evaluate the contribution of each IP asset to its overall business strategy and long-term success (C). Patents (A) have legal and financial value, but proprietary designs (B) may provide a unique competitive advantage that cannot be easily replicated. A market comparison approach (D) might offer insights but may not fully reflect the strategic importance of the company’s IP portfolio. By focusing on how each asset supports long-term goals, the company ensures that it appropriately values its intellectual property for risk management and decision-making purposes.
The company should evaluate the contribution of each IP asset to its overall business strategy and long-term success (C). Patents (A) have legal and financial value, but proprietary designs (B) may provide a unique competitive advantage that cannot be easily replicated. A market comparison approach (D) might offer insights but may not fully reflect the strategic importance of the company’s IP portfolio. By focusing on how each asset supports long-term goals, the company ensures that it appropriately values its intellectual property for risk management and decision-making purposes.
27. A global retail company is conducting a business impact analysis (BIA) for its supply chain management system to understand the financial and operational consequences of system failures. Simultaneously, the company is performing a risk assessment to identify vulnerabilities in the system. How can the company leverage the results of both the BIA and risk assessment for better risk management?
The Correct Answer is C. (A) Identifying responsible vendors is part of vendor management, not the direct use of BIA and risk assessment results. (B) While regulatory compliance is important, the question focuses on risk management, not policy updates. (C) The BIA results highlight which operational areas are most critical to the business, and the risk assessment identifies vulnerabilities in those systems. Combining these results allows the company to focus on risks that have the greatest potential to disrupt business operations. (D) Audits may follow, but the immediate benefit is aligning the BIA findings with the risk assessment to prioritize risks with the most operational impact.
(A) Identifying responsible vendors is part of vendor management, not the direct use of BIA and risk assessment results. (B) While regulatory compliance is important, the question focuses on risk management, not policy updates. (C) The BIA results highlight which operational areas are most critical to the business, and the risk assessment identifies vulnerabilities in those systems. Combining these results allows the company to focus on risks that have the greatest potential to disrupt business operations. (D) Audits may follow, but the immediate benefit is aligning the BIA findings with the risk assessment to prioritize risks with the most operational impact.
28. A technology company is developing a control framework for its cloud services. To ensure its controls align with industry standards and effectively manage risk, the company decides to use the CSA (Cloud Security Alliance) Cloud Controls Matrix. What is the primary benefit of using this framework for cloud services?
The Correct Answer is B. The CSA Cloud Controls Matrix (B) is specifically designed to provide a comprehensive set of security controls for cloud services. It aligns cloud security with regulatory frameworks such as ISO/IEC 27001 and other industry best practices, making it an ideal choice for managing cloud security risks. The framework does not focus on on-premise data centers (A) or project management (C), and it is not limited to the software development lifecycle (D). Its primary benefit is in helping organizations secure their cloud environments by aligning controls with widely accepted regulatory and security standards.
The CSA Cloud Controls Matrix (B) is specifically designed to provide a comprehensive set of security controls for cloud services. It aligns cloud security with regulatory frameworks such as ISO/IEC 27001 and other industry best practices, making it an ideal choice for managing cloud security risks. The framework does not focus on on-premise data centers (A) or project management (C), and it is not limited to the software development lifecycle (D). Its primary benefit is in helping organizations secure their cloud environments by aligning controls with widely accepted regulatory and security standards.
29. A retail organization is reviewing its risk management strategy after a significant supply chain disruption affected its operations. The Chief Operating Officer (COO) notes that the company has a moderate risk appetite for operational risks but appears to have exceeded its risk tolerance for supply chain disruptions. How should the company adjust its risk tolerance to better align with its risk appetite for operational risks?
The Correct Answer is C. The company should review and strengthen its supply chain risk tolerance (C) to ensure that future disruptions are managed within the company’s overall operational risk appetite. This ensures that the company can tolerate some operational risks but keeps them within acceptable limits. Increasing the risk tolerance (A) without addressing the underlying vulnerabilities would expose the company to future disruptions. Lowering the risk appetite (B) would unnecessarily restrict the company’s operational flexibility. Removing risk tolerance limits (D) would lead to uncontrolled risk exposure, which is not aligned with sound risk management practices.
The company should review and strengthen its supply chain risk tolerance (C) to ensure that future disruptions are managed within the company’s overall operational risk appetite. This ensures that the company can tolerate some operational risks but keeps them within acceptable limits. Increasing the risk tolerance (A) without addressing the underlying vulnerabilities would expose the company to future disruptions. Lowering the risk appetite (B) would unnecessarily restrict the company’s operational flexibility. Removing risk tolerance limits (D) would lead to uncontrolled risk exposure, which is not aligned with sound risk management practices.
30. An e-commerce company is conducting an IT risk assessment as part of a major software development project. During the process, they have identified risks related to third-party payment processors and potential API failures, which could disrupt payment processing. The company needs to evaluate the impact of these risks on both customer satisfaction and revenue. What is the best course of action to assess these risks?
The Correct Answer is A. (A) Identifying the potential impact and likelihood of third-party service failures is the key step in this phase of risk assessment. Understanding the financial and operational effects of API failures on customer satisfaction and revenue allows the company to prioritize these risks. (B) Engaging legal counsel may be important for addressing contract issues, but it is not the primary focus of the risk assessment process. (C) Penetration testing is useful for identifying security vulnerabilities but does not help evaluate impact and likelihood. (D) A communication plan is part of incident response, not risk assessment. Therefore, focusing on impact and likelihood is the appropriate next step.
(A) Identifying the potential impact and likelihood of third-party service failures is the key step in this phase of risk assessment. Understanding the financial and operational effects of API failures on customer satisfaction and revenue allows the company to prioritize these risks. (B) Engaging legal counsel may be important for addressing contract issues, but it is not the primary focus of the risk assessment process. (C) Penetration testing is useful for identifying security vulnerabilities but does not help evaluate impact and likelihood. (D) A communication plan is part of incident response, not risk assessment. Therefore, focusing on impact and likelihood is the appropriate next step.
31. A financial institution has identified a risk of employees sending sensitive customer data through unsecured email channels. The institution decides to implement an email encryption solution to protect the data in transit. How should this control be categorized relative to the risk response?
The Correct Answer is B. Email encryption is a preventive control (B) because it ensures that sensitive data is protected from unauthorized access while in transit, preventing data breaches. Corrective controls (A) come into play after a breach to minimize damage, whereas detective controls (C) identify breaches after they have occurred. Deterrent controls (D) are designed to discourage actions but do not directly prevent or detect issues. By implementing encryption, the institution is actively preventing the risk of sensitive data exposure during email transmission.
Email encryption is a preventive control (B) because it ensures that sensitive data is protected from unauthorized access while in transit, preventing data breaches. Corrective controls (A) come into play after a breach to minimize damage, whereas detective controls (C) identify breaches after they have occurred. Deterrent controls (D) are designed to discourage actions but do not directly prevent or detect issues. By implementing encryption, the institution is actively preventing the risk of sensitive data exposure during email transmission.
32. An e-commerce company is using Key Performance Indicators (KPIs) to track the effectiveness of its cybersecurity controls. One KPI measures the average time to respond to a security incident. Over the past year, the response time has increased significantly. What action should the company take to improve this metric?
The Correct Answer is B. Reviewing and streamlining the incident response process (B) is the most effective way to improve the average time to respond to incidents. This approach focuses on identifying and removing inefficiencies in the current process, which will directly reduce response times. Increasing the size of the cybersecurity team (A) may help but could be costly and may not address process inefficiencies. Lowering the threshold for reporting incidents (C) would increase the volume of reported incidents and potentially slow response times further. Training employees (D) is important but addresses the detection phase rather than the response phase of incidents.
Reviewing and streamlining the incident response process (B) is the most effective way to improve the average time to respond to incidents. This approach focuses on identifying and removing inefficiencies in the current process, which will directly reduce response times. Increasing the size of the cybersecurity team (A) may help but could be costly and may not address process inefficiencies. Lowering the threshold for reporting incidents (C) would increase the volume of reported incidents and potentially slow response times further. Training employees (D) is important but addresses the detection phase rather than the response phase of incidents.
33. A financial services company is considering implementing blockchain technology to enhance transaction transparency and security. However, the risk management team identifies potential vulnerabilities in integrating blockchain with the company’s legacy systems. What should the company prioritize to effectively evaluate the risks and opportunities of this emerging technology?
The Correct Answer is B. Jumping straight into implementation (A) without assessing risks could lead to unforeseen vulnerabilities. Accepting the risks (C) without proper evaluation could expose the company to security issues, while outsourcing (D) does not address the need for a thorough internal evaluation. The best approach is to conduct a detailed risk assessment (B), focusing on the integration points between the blockchain and legacy systems, to identify vulnerabilities, address security concerns, and ensure smooth implementation while evaluating the opportunities presented by blockchain technology.
Jumping straight into implementation (A) without assessing risks could lead to unforeseen vulnerabilities. Accepting the risks (C) without proper evaluation could expose the company to security issues, while outsourcing (D) does not address the need for a thorough internal evaluation. The best approach is to conduct a detailed risk assessment (B), focusing on the integration points between the blockchain and legacy systems, to identify vulnerabilities, address security concerns, and ensure smooth implementation while evaluating the opportunities presented by blockchain technology.
34. A software development project is nearing completion when the project manager informs you, the risk manager, that critical security testing was overlooked during development. This could delay the project’s launch. What should be your primary focus to address this issue?
The Correct Answer is B. Performing an expedited but comprehensive security assessment (B) ensures that critical security vulnerabilities are identified and addressed before the launch, minimizing the risk of security breaches. Focusing on high-risk areas allows the assessment to be completed within a shortened timeframe. Postponing the security testing until after launch (A) introduces unacceptable security risks. Delaying the launch indefinitely (C) is unnecessarily drastic without first assessing the situation. Reassigning resources from other testing activities (D) may compromise the quality of the overall testing process.
Performing an expedited but comprehensive security assessment (B) ensures that critical security vulnerabilities are identified and addressed before the launch, minimizing the risk of security breaches. Focusing on high-risk areas allows the assessment to be completed within a shortened timeframe. Postponing the security testing until after launch (A) introduces unacceptable security risks. Delaying the launch indefinitely (C) is unnecessarily drastic without first assessing the situation. Reassigning resources from other testing activities (D) may compromise the quality of the overall testing process.
35. A retail company is evaluating the adoption of quantum computing for advanced data analytics to gain a competitive edge. However, the risk management team is concerned about the potential security risks posed by quantum computing, particularly its ability to break current encryption standards. How should the company proceed in evaluating the threats and opportunities associated with quantum computing?
The Correct Answer is C. Avoiding quantum computing (A) may cause the company to fall behind competitors. Accepting the risks (B) without addressing encryption vulnerabilities is not advisable, and purchasing insurance (D) transfers the financial risk but does not protect against data breaches. The best approach is to conduct a threat analysis (C) focused on understanding how quantum computing could affect encryption standards and data security. This allows the company to identify and mitigate potential vulnerabilities while assessing the opportunities provided by quantum computing in advanced data analytics.
Avoiding quantum computing (A) may cause the company to fall behind competitors. Accepting the risks (B) without addressing encryption vulnerabilities is not advisable, and purchasing insurance (D) transfers the financial risk but does not protect against data breaches. The best approach is to conduct a threat analysis (C) focused on understanding how quantum computing could affect encryption standards and data security. This allows the company to identify and mitigate potential vulnerabilities while assessing the opportunities provided by quantum computing in advanced data analytics.
36. A global retail company discovers during a vulnerability analysis that its password policies are outdated, allowing weak passwords for employee access to sensitive customer data. The control deficiency poses a significant risk of unauthorized access. What immediate action should the company take to address this control deficiency?
The Correct Answer is B. (A) Phishing awareness training is important but unrelated to the specific control deficiency regarding password strength. (B) The control deficiency lies in weak password policies, and the most immediate action is to update the password policy to enforce stronger requirements, such as password length, complexity, and expiration. This reduces the risk of unauthorized access. (C) A firewall can enhance network security but does not directly address weak passwords. (D) Conducting an audit is valuable but does not address the root problem of weak password policies. Therefore, updating the password policy is the correct action to mitigate this control deficiency.
(A) Phishing awareness training is important but unrelated to the specific control deficiency regarding password strength. (B) The control deficiency lies in weak password policies, and the most immediate action is to update the password policy to enforce stronger requirements, such as password length, complexity, and expiration. This reduces the risk of unauthorized access. (C) A firewall can enhance network security but does not directly address weak passwords. (D) Conducting an audit is valuable but does not address the root problem of weak password policies. Therefore, updating the password policy is the correct action to mitigate this control deficiency.
37. A global pharmaceutical company is creating a new governance structure to support its risk management strategy. The company’s leadership wants to ensure that roles and responsibilities related to risk management are clearly defined at all levels. What is the most critical factor in ensuring the success of this governance structure?
The Correct Answer is B. The most critical factor is clearly defining the roles and responsibilities of the board, senior leadership, and business units (B). This ensures that each group understands its role in managing and overseeing risks, leading to better coordination and accountability. Having the board make all decisions (A) could slow down decision-making and reduce agility. Giving full authority to the CRO (C) without collaboration with other departments can lead to a lack of alignment between risk management and business operations. Outsourcing the entire process (D) removes internal ownership and may lead to a lack of engagement in managing risks effectively.
The most critical factor is clearly defining the roles and responsibilities of the board, senior leadership, and business units (B). This ensures that each group understands its role in managing and overseeing risks, leading to better coordination and accountability. Having the board make all decisions (A) could slow down decision-making and reduce agility. Giving full authority to the CRO (C) without collaboration with other departments can lead to a lack of alignment between risk management and business operations. Outsourcing the entire process (D) removes internal ownership and may lead to a lack of engagement in managing risks effectively.
38. A manufacturing company is assessing risks related to its supply chain management system and decides to adopt the FAIR (Factor Analysis of Information Risk) model to quantify its IT risks. What is the primary advantage of using the FAIR framework for this risk assessment?
The Correct Answer is B. (A) FAIR is not focused on technical controls but on risk quantification. (B) FAIR (Factor Analysis of Information Risk) is a framework designed to quantify risk in financial terms, which allows organizations to make informed decisions based on the financial impact of IT risks. This makes it particularly useful for risk assessments that need to translate IT risks into business terms. (C) While FAIR supports categorization, its primary strength lies in its quantitative approach, not simply labeling risks as high, medium, or low. (D) FAIR is not a compliance framework but a risk analysis framework. Therefore, the key benefit is its ability to provide a quantitative, financially oriented risk assessment.
(A) FAIR is not focused on technical controls but on risk quantification. (B) FAIR (Factor Analysis of Information Risk) is a framework designed to quantify risk in financial terms, which allows organizations to make informed decisions based on the financial impact of IT risks. This makes it particularly useful for risk assessments that need to translate IT risks into business terms. (C) While FAIR supports categorization, its primary strength lies in its quantitative approach, not simply labeling risks as high, medium, or low. (D) FAIR is not a compliance framework but a risk analysis framework. Therefore, the key benefit is its ability to provide a quantitative, financially oriented risk assessment.
39. During a project to implement a new customer management system, a significant data privacy risk is identified. The risk team assigns a high likelihood and impact to the risk, and it requires immediate mitigation. The project manager claims that risk mitigation is outside the scope of the project and should be handled by the Information Security department. However, the Information Security manager insists that the risk ownership lies with the project manager as it directly impacts the project’s outcomes. Who is most accountable for the ownership of the identified risk?
The Correct Answer is B. Risk ownership in projects typically lies with the person who is responsible for achieving project objectives—in this case, the project manager (B). Even though the Information Security Manager (C) can provide guidance and support in addressing security concerns, the project manager has accountability for managing risks that impact project success. The CIO (A) generally oversees IT strategy and may not directly manage individual project risks unless they are escalated. The Risk Management Committee (D) typically oversees broader enterprise risks and provides governance but does not own project-specific risks. Therefore, the project manager is responsible for ensuring the identified risk is addressed as part of the project's risk management processes.
Risk ownership in projects typically lies with the person who is responsible for achieving project objectives—in this case, the project manager (B). Even though the Information Security Manager (C) can provide guidance and support in addressing security concerns, the project manager has accountability for managing risks that impact project success. The CIO (A) generally oversees IT strategy and may not directly manage individual project risks unless they are escalated. The Risk Management Committee (D) typically oversees broader enterprise risks and provides governance but does not own project-specific risks. Therefore, the project manager is responsible for ensuring the identified risk is addressed as part of the project's risk management processes.
40. A technology firm is aggregating vulnerability data from its various products to perform a company-wide risk assessment. During the data collection phase, the risk team notices that some products consistently report fewer vulnerabilities than others, raising concerns about underreporting. How should the team validate the vulnerability data to ensure it reflects the true risk exposure?
The Correct Answer is A. Investigating the processes (A) used by each product team to report vulnerabilities helps identify potential underreporting or inconsistencies in the data collection process. It ensures that the data reflects the true risk exposure across all products. Focusing on products with higher reports (B) ignores the risk that some products may be underreporting. Automatically flagging products with fewer reports (C) could lead to unnecessary testing without understanding the underlying cause of the differences. Relying on historical trends (D) does not address potential changes in the reporting processes that could affect current data accuracy.
Investigating the processes (A) used by each product team to report vulnerabilities helps identify potential underreporting or inconsistencies in the data collection process. It ensures that the data reflects the true risk exposure across all products. Focusing on products with higher reports (B) ignores the risk that some products may be underreporting. Automatically flagging products with fewer reports (C) could lead to unnecessary testing without understanding the underlying cause of the differences. Relying on historical trends (D) does not address potential changes in the reporting processes that could affect current data accuracy.
41. A financial services firm conducts regular stress testing on its portfolio to assess its resilience under various market conditions. The variability in market factors, such as interest rates and currency fluctuations, introduces significant unpredictability in the outcomes. The firm needs to adjust its risk response to account for the variability in the stress test results. What is the most appropriate action?
The Correct Answer is C. Accepting the variability (A) without adjustments would fail to provide meaningful insights into market risks. Avoiding variability by investing in low-risk assets (B) could limit potential returns and is not aligned with a comprehensive risk management strategy. While financial derivatives (D) can hedge against some market risks, they do not address the need for a more robust analysis of variability. Monte Carlo simulations (C) provide a powerful method to model a wide range of possible outcomes and help the firm better understand and respond to market variability in stress test results.
Accepting the variability (A) without adjustments would fail to provide meaningful insights into market risks. Avoiding variability by investing in low-risk assets (B) could limit potential returns and is not aligned with a comprehensive risk management strategy. While financial derivatives (D) can hedge against some market risks, they do not address the need for a more robust analysis of variability. Monte Carlo simulations (C) provide a powerful method to model a wide range of possible outcomes and help the firm better understand and respond to market variability in stress test results.
42. A software company is expanding into new markets, and the executive team is responsible for executing the expansion strategy. The board of directors is primarily concerned with ensuring that the new markets align with the company’s risk tolerance and long-term objectives. The CEO and COO have divided responsibilities for day-to-day management of operations in these new markets. Which of the following actions by the board reflects its governance role?
The Correct Answer is B. Setting strategic risk tolerance levels (B) is a clear governance function because it involves defining the boundaries within which the management team operates. It ensures that the expansion aligns with the enterprise’s long-term objectives and risk appetite. Reviewing financial reports (A) is more of an oversight responsibility but falls under performance management rather than governance. Directing the CEO to adjust strategies (C) is a management task, while ensuring compliance (D) is part of the operational execution and is not directly related to setting strategic direction or oversight. Governance focuses on high-level strategy, such as setting risk tolerances and ensuring strategic alignment.
Setting strategic risk tolerance levels (B) is a clear governance function because it involves defining the boundaries within which the management team operates. It ensures that the expansion aligns with the enterprise’s long-term objectives and risk appetite. Reviewing financial reports (A) is more of an oversight responsibility but falls under performance management rather than governance. Directing the CEO to adjust strategies (C) is a management task, while ensuring compliance (D) is part of the operational execution and is not directly related to setting strategic direction or oversight. Governance focuses on high-level strategy, such as setting risk tolerances and ensuring strategic alignment.
43. Your organization has implemented multi-factor authentication (MFA) across all critical systems. However, recent phishing attacks have successfully bypassed MFA protections by tricking users into sharing their credentials. What addition to the security awareness training program would best address this threat?
The Correct Answer is B. The best way to address phishing attacks that bypass MFA is by training employees to recognize phishing attempts and never share MFA codes (B). Phishing attacks often trick users into providing their credentials and MFA codes, which undermines the security provided by MFA. While implementing hardware tokens (C) could improve security, it does not address the root issue of users being deceived. Password resets (A) and logging out (D) are good practices but do not directly mitigate phishing risks related to MFA.
The best way to address phishing attacks that bypass MFA is by training employees to recognize phishing attempts and never share MFA codes (B). Phishing attacks often trick users into providing their credentials and MFA codes, which undermines the security provided by MFA. While implementing hardware tokens (C) could improve security, it does not address the root issue of users being deceived. Password resets (A) and logging out (D) are good practices but do not directly mitigate phishing risks related to MFA.
44. A financial institution is conducting a risk assessment to evaluate its exposure to operational risks in its payment processing system. To do so, the risk management team decides to develop risk scenarios that include potential failures of the payment gateway, system outages, and fraudulent transactions. What is the primary benefit of developing detailed risk scenarios in this context?
The Correct Answer is A. (A) Developing detailed risk scenarios enables the risk management team to predict the potential impact and likelihood of specific risks, such as system outages or fraudulent transactions, which helps prioritize mitigation efforts. (B) While compliance is important, risk scenarios are not primarily focused on compliance; they focus on identifying and analyzing potential risks. (C) Identifying the root cause of a system failure is part of incident analysis but not the main benefit of creating risk scenarios. (D) Developing risk scenarios can indirectly support the effectiveness of fraud detection systems, but the main purpose is to understand the broader risk landscape. Therefore, the ability to anticipate impact and likelihood is the primary benefit.
(A) Developing detailed risk scenarios enables the risk management team to predict the potential impact and likelihood of specific risks, such as system outages or fraudulent transactions, which helps prioritize mitigation efforts. (B) While compliance is important, risk scenarios are not primarily focused on compliance; they focus on identifying and analyzing potential risks. (C) Identifying the root cause of a system failure is part of incident analysis but not the main benefit of creating risk scenarios. (D) Developing risk scenarios can indirectly support the effectiveness of fraud detection systems, but the main purpose is to understand the broader risk landscape. Therefore, the ability to anticipate impact and likelihood is the primary benefit.
45. An e-commerce company has recently suffered a cyberattack that brought down its online store for 12 hours. As part of the business continuity review, the CEO asks the risk manager to focus on improving the company’s resilience to minimize future disruptions. What is the most effective strategy to enhance the company's resilience in case of similar incidents?
The Correct Answer is A. Implementing a geographically distributed disaster recovery (A) site allows the company to quickly switch operations to a backup location in the event of an incident, ensuring business continuity with minimal downtime. This approach provides resilience against disruptions like cyberattacks. While increasing the IT support team (B), improving endpoint security (C), and conducting security training (D) are valuable actions, the most direct way to ensure rapid recovery and minimize downtime is through a robust disaster recovery strategy.
Implementing a geographically distributed disaster recovery (A) site allows the company to quickly switch operations to a backup location in the event of an incident, ensuring business continuity with minimal downtime. This approach provides resilience against disruptions like cyberattacks. While increasing the IT support team (B), improving endpoint security (C), and conducting security training (D) are valuable actions, the most direct way to ensure rapid recovery and minimize downtime is through a robust disaster recovery strategy.
46. A global insurance company is reviewing its risk management framework to improve resilience against emerging risks such as cyber threats and regulatory changes. The Chief Risk Officer (CRO) suggests adopting COBIT 2019 to strengthen IT governance and align risk management with business goals. How should the company integrate COBIT 2019 into its enterprise risk management (ERM) practices to enhance risk governance?
The Correct Answer is B. Aligning COBIT 2019 with the ERM framework (B) ensures that IT risk management is integrated with enterprise-wide risk governance, allowing IT-related risks to be managed in the context of overall business goals. COBIT 2019 focuses on IT governance but can also be aligned with broader ERM practices to create a cohesive approach to managing risks across the enterprise. Using COBIT solely for IT risk (A) would create silos, and focusing only on compliance (C) would not address the strategic alignment of IT risks with business objectives. Implementing COBIT only for IT operations (D) may miss the opportunity to integrate IT governance into the broader ERM context.
Aligning COBIT 2019 with the ERM framework (B) ensures that IT risk management is integrated with enterprise-wide risk governance, allowing IT-related risks to be managed in the context of overall business goals. COBIT 2019 focuses on IT governance but can also be aligned with broader ERM practices to create a cohesive approach to managing risks across the enterprise. Using COBIT solely for IT risk (A) would create silos, and focusing only on compliance (C) would not address the strategic alignment of IT risks with business objectives. Implementing COBIT only for IT operations (D) may miss the opportunity to integrate IT governance into the broader ERM context.
47. A healthcare provider has assigned the IT security team as the control owner for monitoring data access to its electronic health record (EHR) systems. However, the compliance officer is the risk owner for ensuring that patient data is handled according to regulatory requirements. During an audit, a data access violation is detected. What should be the compliance officer's role in addressing this violation?
The Correct Answer is C. The compliance officer, as the risk owner, is responsible for reviewing the effectiveness of the controls (C) and ensuring that corrective actions are taken. While the IT security team is responsible for implementing and maintaining the controls, the risk owner (compliance officer) must ensure that these controls are functioning properly and that the risk is managed in line with regulatory requirements. Directly fixing the violation (A) is not their role. Delegating responsibility entirely to the IT team (B) would result in the risk owner failing in their accountability. Simply informing senior management (D) without taking further action is insufficient in this case.
The compliance officer, as the risk owner, is responsible for reviewing the effectiveness of the controls (C) and ensuring that corrective actions are taken. While the IT security team is responsible for implementing and maintaining the controls, the risk owner (compliance officer) must ensure that these controls are functioning properly and that the risk is managed in line with regulatory requirements. Directly fixing the violation (A) is not their role. Delegating responsibility entirely to the IT team (B) would result in the risk owner failing in their accountability. Simply informing senior management (D) without taking further action is insufficient in this case.
48. A multinational company is conducting a risk assessment on its newly developed mobile application, which will be deployed across several countries. Several security risks are identified, including the potential for unauthorized access to customer data. The application development team suggests that the IT department should own these risks, as they manage the infrastructure. However, the IT Director insists that the Application Development Team should take responsibility since they are the ones developing and implementing the application. Who should take ownership of these risks?
The Correct Answer is A. The Application Development Team (A) should take ownership of the security risks associated with the mobile application, as they are directly responsible for developing and implementing the application. The IT Director (B) manages the overall infrastructure but not the specific application-related risks. The CISO (C) oversees security strategy and policies but does not own risks related to individual applications unless escalated. The Risk Management Team (D) provides guidance on managing risks but does not own specific operational risks. Therefore, the Application Development Team must own and manage the security risks related to their development.
The Application Development Team (A) should take ownership of the security risks associated with the mobile application, as they are directly responsible for developing and implementing the application. The IT Director (B) manages the overall infrastructure but not the specific application-related risks. The CISO (C) oversees security strategy and policies but does not own risks related to individual applications unless escalated. The Risk Management Team (D) provides guidance on managing risks but does not own specific operational risks. Therefore, the Application Development Team must own and manage the security risks related to their development.
49. A technology company is conducting a Business Impact Analysis (BIA) for its research and development (R&D) systems. The BIA highlights that a prolonged system outage could delay product launches, resulting in missed market opportunities and significant financial losses. What should be the main focus of the company’s recovery strategy based on the BIA results?
The Correct Answer is A. (A) The BIA has revealed that system outages could delay product launches and cause financial harm. The recovery strategy should focus on restoring R&D systems quickly to prevent such delays. (B) Encryption is important for data security but does not address the recovery of systems critical for product development. (C) Hiring more developers may help long-term timelines but does not solve the immediate issue of system recovery. (D) Communicating with investors is a secondary step; the priority is minimizing downtime. Therefore, focusing on quick system restoration is key to avoiding delays in product launches.
(A) The BIA has revealed that system outages could delay product launches and cause financial harm. The recovery strategy should focus on restoring R&D systems quickly to prevent such delays. (B) Encryption is important for data security but does not address the recovery of systems critical for product development. (C) Hiring more developers may help long-term timelines but does not solve the immediate issue of system recovery. (D) Communicating with investors is a secondary step; the priority is minimizing downtime. Therefore, focusing on quick system restoration is key to avoiding delays in product launches.
50. An international company outsources its customer service operations to a third-party provider based in another country. A recent risk assessment reveals that the third party does not comply with the company's cybersecurity standards, posing a risk to customer data security. The third-party provider argues that their own local security regulations are sufficient. How should the company address the risk presented by the third-party provider?
The Correct Answer is C. Accepting the risk (A) would not align with the company’s responsibility to protect customer data, as local regulations may not meet the company’s standards. Avoiding the risk (B) by bringing operations in-house could disrupt business processes and increase costs. Transferring the risk (D) may provide financial compensation but doesn’t address the core issue of data protection. The best approach is to mitigate the risk (C) by enforcing a security audit, which ensures that the third-party provider complies with the company’s higher cybersecurity standards, reducing the risk to customer data.
Accepting the risk (A) would not align with the company’s responsibility to protect customer data, as local regulations may not meet the company’s standards. Avoiding the risk (B) by bringing operations in-house could disrupt business processes and increase costs. Transferring the risk (D) may provide financial compensation but doesn’t address the core issue of data protection. The best approach is to mitigate the risk (C) by enforcing a security audit, which ensures that the third-party provider complies with the company’s higher cybersecurity standards, reducing the risk to customer data.
51. An e-commerce company is launching a new service that involves processing large amounts of customer data. The company’s risk management team is tasked with creating a risk profile for the new service, considering the potential for data breaches, compliance risks, and reputation damage. Which of the following best describes the type of risk profile the company should adopt for this initiative?
The Correct Answer is A. The appropriate risk profile for this scenario is the inherent risk profile (A), as it focuses on identifying and assessing the risks associated with the new service before controls are implemented. Understanding the inherent risks allows the company to design appropriate controls to mitigate them. The residual risk profile (B) assesses risk after controls are in place, which would be a later step in the process. A low-risk profile (C) would not accurately reflect the potential risks involved with data breaches and compliance. A quantitative risk profile (D) would focus on financial costs but does not address the comprehensive risks involved in the initiative.
The appropriate risk profile for this scenario is the inherent risk profile (A), as it focuses on identifying and assessing the risks associated with the new service before controls are implemented. Understanding the inherent risks allows the company to design appropriate controls to mitigate them. The residual risk profile (B) assesses risk after controls are in place, which would be a later step in the process. A low-risk profile (C) would not accurately reflect the potential risks involved with data breaches and compliance. A quantitative risk profile (D) would focus on financial costs but does not address the comprehensive risks involved in the initiative.
52. An organization is implementing TOGAF (The Open Group Architecture Framework) to align its IT and business strategies. As the risk manager, you are tasked with identifying potential risks in the Architecture Development Method (ADM) phases. Which phase is most critical for identifying security and risk management requirements?
The Correct Answer is B. The Architecture Vision phase (B) is crucial for identifying the high-level security and risk management requirements early in the enterprise architecture development process. This phase helps define the scope of the architecture, setting the foundation for aligning security objectives with business goals. Migration Planning (A) and Implementation Governance (C) focus on later stages, such as managing the deployment of the architecture. Business Architecture (D) primarily concerns the organization’s processes and operations but does not directly focus on security and risk identification.
The Architecture Vision phase (B) is crucial for identifying the high-level security and risk management requirements early in the enterprise architecture development process. This phase helps define the scope of the architecture, setting the foundation for aligning security objectives with business goals. Migration Planning (A) and Implementation Governance (C) focus on later stages, such as managing the deployment of the architecture. Business Architecture (D) primarily concerns the organization’s processes and operations but does not directly focus on security and risk identification.
53. A multinational tech company is using a third-party service provider for its data processing needs. The inherent risk of data loss due to a service provider failure is classified as high. After implementing contractual agreements, service level agreements (SLAs), and regular audits, the residual risk is classified as low. What does the classification of residual risk as “low” mean for the company?
The Correct Answer is A. (A) Residual risk being classified as low indicates that the company has mitigated the risk to a level it finds acceptable, in line with its risk appetite. (B) Risk is rarely, if ever, fully eliminated. (C) While third-party service providers play a role, the company still retains responsibility for managing its own risks. (D) Inherent risk does not change; it represents the risk before controls are applied, whereas residual risk reflects the remaining risk after mitigation. Therefore, a "low" residual risk means the risk is at a level that the company is comfortable managing.
(A) Residual risk being classified as low indicates that the company has mitigated the risk to a level it finds acceptable, in line with its risk appetite. (B) Risk is rarely, if ever, fully eliminated. (C) While third-party service providers play a role, the company still retains responsibility for managing its own risks. (D) Inherent risk does not change; it represents the risk before controls are applied, whereas residual risk reflects the remaining risk after mitigation. Therefore, a "low" residual risk means the risk is at a level that the company is comfortable managing.
54. An organization needs to ensure its enterprise architecture is flexible enough to handle evolving compliance requirements and regulatory changes. As the risk manager, you are asked to recommend a framework that integrates governance, risk management, and compliance (GRC) principles while providing a structured methodology for adapting to changes. Which framework would be the most suitable for this organization?
The Correct Answer is A. COBIT (A) is the most suitable framework in this context because it integrates governance, risk management, and compliance (GRC) principles. COBIT provides a comprehensive set of best practices for IT governance and management, helping organizations align business and IT goals while addressing compliance and regulatory requirements. TOGAF (C), while excellent for managing enterprise architecture, does not focus as deeply on GRC. ITIL (B) is focused on IT service management rather than enterprise architecture or governance. The Zachman Framework (D) offers a classification system but lacks the detailed processes and focus on GRC that COBIT provides.
COBIT (A) is the most suitable framework in this context because it integrates governance, risk management, and compliance (GRC) principles. COBIT provides a comprehensive set of best practices for IT governance and management, helping organizations align business and IT goals while addressing compliance and regulatory requirements. TOGAF (C), while excellent for managing enterprise architecture, does not focus as deeply on GRC. ITIL (B) is focused on IT service management rather than enterprise architecture or governance. The Zachman Framework (D) offers a classification system but lacks the detailed processes and focus on GRC that COBIT provides.
55. A technology company is implementing a new data analytics platform that will process personal data from millions of users. To comply with global data privacy regulations, the company needs to ensure that personal data is not retained longer than necessary. Which action should be prioritized to manage this risk?
The Correct Answer is B. The most critical action is to implement an automated data deletion policy (B) that ensures personal data is deleted once it is no longer needed, in line with data retention schedules. This helps comply with privacy regulations like GDPR, which mandate that data should not be retained longer than necessary. Encryption (A) and employee training (C) are important but do not directly address retention. Backing up data (D) before deletion is a good practice, but retention policies take priority to ensure compliance with privacy regulations.
The most critical action is to implement an automated data deletion policy (B) that ensures personal data is deleted once it is no longer needed, in line with data retention schedules. This helps comply with privacy regulations like GDPR, which mandate that data should not be retained longer than necessary. Encryption (A) and employee training (C) are important but do not directly address retention. Backing up data (D) before deletion is a good practice, but retention policies take priority to ensure compliance with privacy regulations.
56. Your organization has just deployed a new system. As the risk manager, you are responsible for ensuring that security measures continue to function effectively in the operational phase of the SDLC. What is the most critical task to focus on to maintain security during the system's operation?
The Correct Answer is B. During the operational phase, implementing continuous monitoring (B) is the most critical task to ensure that the system remains secure. Continuous monitoring allows the organization to detect and respond to security incidents in real time, ensuring that any emerging threats or vulnerabilities are addressed quickly. Regular penetration tests (A) are important but are typically scheduled at intervals, whereas continuous monitoring provides ongoing protection. Developing new features (C) is not related to security, and ensuring documentation is complete (D) is important for record-keeping but not directly tied to maintaining security.
During the operational phase, implementing continuous monitoring (B) is the most critical task to ensure that the system remains secure. Continuous monitoring allows the organization to detect and respond to security incidents in real time, ensuring that any emerging threats or vulnerabilities are addressed quickly. Regular penetration tests (A) are important but are typically scheduled at intervals, whereas continuous monitoring provides ongoing protection. Developing new features (C) is not related to security, and ensuring documentation is complete (D) is important for record-keeping but not directly tied to maintaining security.
57. Your organization handles sensitive customer data and is required to comply with GDPR. The IT team has implemented a data encryption policy, but you, as the risk manager, need to verify compliance with GDPR using an appropriate security framework. Which framework should you leverage to ensure that data protection policies meet GDPR requirements?
The Correct Answer is B. ISO/IEC 27701 (B) is a privacy extension to ISO/IEC 27001, specifically designed for managing personally identifiable information (PII) and ensuring compliance with privacy regulations like GDPR. It provides detailed guidance on how to establish, implement, maintain, and improve a Privacy Information Management System (PIMS). COBIT (A) and NIST (C) focus more broadly on governance and cybersecurity but do not specifically address privacy regulations like GDPR. ITIL (D) is focused on IT service management rather than privacy compliance.
ISO/IEC 27701 (B) is a privacy extension to ISO/IEC 27001, specifically designed for managing personally identifiable information (PII) and ensuring compliance with privacy regulations like GDPR. It provides detailed guidance on how to establish, implement, maintain, and improve a Privacy Information Management System (PIMS). COBIT (A) and NIST (C) focus more broadly on governance and cybersecurity but do not specifically address privacy regulations like GDPR. ITIL (D) is focused on IT service management rather than privacy compliance.
58. A financial services company is implementing a bring-your-own-device (BYOD) policy to allow employees to access company data using personal devices. Which factor presents the most significant risk to enterprise security in this scenario?
The Correct Answer is B. The most significant risk in a BYOD scenario is the uncontrolled access to sensitive company data (B). Personal devices often lack the same security controls as corporate devices, making them more vulnerable to malware, unauthorized access, or data breaches. This risk is exacerbated by the fact that employees may not follow best security practices on personal devices. Varying technical proficiency (A) and the cost of support (C) are operational challenges, while tracking productivity (D) is unrelated to security. The main concern is ensuring that personal devices accessing corporate data are adequately protected.
The most significant risk in a BYOD scenario is the uncontrolled access to sensitive company data (B). Personal devices often lack the same security controls as corporate devices, making them more vulnerable to malware, unauthorized access, or data breaches. This risk is exacerbated by the fact that employees may not follow best security practices on personal devices. Varying technical proficiency (A) and the cost of support (C) are operational challenges, while tracking productivity (D) is unrelated to security. The main concern is ensuring that personal devices accessing corporate data are adequately protected.
59. In a multinational manufacturing company, the Chief Operating Officer (COO) is focused on operational efficiency, while the Chief Risk Officer (CRO) is developing a risk management strategy for supply chain risks. The procurement department reports delays from a key supplier, raising concerns about potential production halts. What is the primary responsibility of the COO in managing this supply chain risk?
The Correct Answer is B. The COO’s primary responsibility (B) is to work with the procurement team to develop operational contingency plans, such as identifying alternative suppliers. This is because the COO is directly responsible for maintaining operational efficiency and ensuring that production continues uninterrupted. Escalating the risk to the board (A) is not a first-line operational responsibility, and assigning the risk management strategy to the CRO (D) would be incorrect as the CRO’s role is more about overseeing risk strategies rather than day-to-day operational decisions. Involving the CFO (C) may be necessary but is not the primary role of the COO in this context.
The COO’s primary responsibility (B) is to work with the procurement team to develop operational contingency plans, such as identifying alternative suppliers. This is because the COO is directly responsible for maintaining operational efficiency and ensuring that production continues uninterrupted. Escalating the risk to the board (A) is not a first-line operational responsibility, and assigning the risk management strategy to the CRO (D) would be incorrect as the CRO’s role is more about overseeing risk strategies rather than day-to-day operational decisions. Involving the CFO (C) may be necessary but is not the primary role of the COO in this context.
60. An enterprise is implementing a new enterprise resource planning (ERP) system across multiple regions. As part of the risk identification process, the project manager has identified geopolitical risks, such as changes in regional laws and economic instability, which may affect system implementation. What is the most appropriate way for the risk team to identify additional regional risks that could impact the project?
The Correct Answer is B. (A) Surveys with employees may capture some operational risks, but they are unlikely to reveal comprehensive legal or geopolitical risks. (B) Engaging with local legal and compliance experts is the most appropriate step, as these experts will have in-depth knowledge of the local regulatory environment and potential legal issues that could arise in each region. This ensures that all region-specific risks are identified accurately. (C) Reviewing financial reports might help assess economic risks but would miss legal or compliance-related risks. (D) Analyzing competitor performance could give insight into industry-specific challenges, but it does not directly help identify local risks related to law and compliance.
(A) Surveys with employees may capture some operational risks, but they are unlikely to reveal comprehensive legal or geopolitical risks. (B) Engaging with local legal and compliance experts is the most appropriate step, as these experts will have in-depth knowledge of the local regulatory environment and potential legal issues that could arise in each region. This ensures that all region-specific risks are identified accurately. (C) Reviewing financial reports might help assess economic risks but would miss legal or compliance-related risks. (D) Analyzing competitor performance could give insight into industry-specific challenges, but it does not directly help identify local risks related to law and compliance.
61. An international bank is preparing for an external audit to verify its compliance with anti-money laundering (AML) regulations. The Chief Compliance Officer (CCO) is concerned about gaps in the current risk management practices related to monitoring and reporting suspicious activities. What should the bank prioritize to ensure compliance with AML regulations and mitigate related risks?
The Correct Answer is A. Strengthening internal controls and implementing automated systems for monitoring transactions (A) ensures the bank meets AML regulatory requirements efficiently and reduces the risk of human error. Automation enhances the ability to detect and report suspicious activities in real time. Training employees (B) is necessary but should complement automated systems. Outsourcing AML compliance (C) does not absolve the bank of its responsibility to comply with regulations, and delaying the audit (D) would likely raise concerns with regulators. Implementing robust systems to monitor and report suspicious activities is key to achieving compliance and managing risk.
Strengthening internal controls and implementing automated systems for monitoring transactions (A) ensures the bank meets AML regulatory requirements efficiently and reduces the risk of human error. Automation enhances the ability to detect and report suspicious activities in real time. Training employees (B) is necessary but should complement automated systems. Outsourcing AML compliance (C) does not absolve the bank of its responsibility to comply with regulations, and delaying the audit (D) would likely raise concerns with regulators. Implementing robust systems to monitor and report suspicious activities is key to achieving compliance and managing risk.
62. A healthcare organization uses access control lists (ACLs) to restrict access to sensitive patient data. During an internal audit, it is discovered that the ACLs have not been reviewed in over a year, and several former employees still have access to sensitive systems. How should the organization evaluate the effectiveness of its current ACL controls?
The Correct Answer is A. The organization should perform a comprehensive review of its ACLs (A) to remove unnecessary access rights and ensure only authorized personnel can access sensitive data. ACLs must be regularly updated to maintain effectiveness, especially when employees leave the organization. Accepting the risk (B) is not advisable as it leaves the organization vulnerable to insider threats. While switching to role-based access control (C) could be beneficial, it does not address the immediate issue of outdated ACLs. Implementing an automated access review system (D) is a good long-term solution, but a manual review is needed to address the current gaps in the control.
The organization should perform a comprehensive review of its ACLs (A) to remove unnecessary access rights and ensure only authorized personnel can access sensitive data. ACLs must be regularly updated to maintain effectiveness, especially when employees leave the organization. Accepting the risk (B) is not advisable as it leaves the organization vulnerable to insider threats. While switching to role-based access control (C) could be beneficial, it does not address the immediate issue of outdated ACLs. Implementing an automated access review system (D) is a good long-term solution, but a manual review is needed to address the current gaps in the control.
63. A multinational retailer is implementing the COSO ERM framework to improve its risk assessment process across global operations. The Chief Risk Officer (CRO) has asked for a detailed analysis of strategic, operational, and compliance risks. Which approach best aligns with the COSO ERM framework for conducting a comprehensive risk assessment?
The Correct Answer is C. The COSO ERM framework encourages integrating the assessment of strategic, operational, and compliance risks (C) into a single, unified process. This approach ensures that risk management is aligned with the organization’s overall objectives and provides a holistic view of the risks facing the enterprise. Prioritizing only compliance risks (A) would neglect other critical risk areas. Conducting separate risk assessments (B) could lead to fragmented risk management, and focusing solely on strategic risks (D) would ignore operational and compliance risks that could also significantly impact the business.
The COSO ERM framework encourages integrating the assessment of strategic, operational, and compliance risks (C) into a single, unified process. This approach ensures that risk management is aligned with the organization’s overall objectives and provides a holistic view of the risks facing the enterprise. Prioritizing only compliance risks (A) would neglect other critical risk areas. Conducting separate risk assessments (B) could lead to fragmented risk management, and focusing solely on strategic risks (D) would ignore operational and compliance risks that could also significantly impact the business.
64. A healthcare organization is performing a Business Impact Analysis (BIA) for its electronic health record (EHR) system. The BIA indicates that a 12-hour downtime would disrupt patient care, leading to potential regulatory violations and significant reputational damage. What action should the organization prioritize based on the BIA findings?
The Correct Answer is B. (A) While encryption enhances security, it does not address the downtime issue highlighted in the BIA. (B) The BIA has identified that system downtime could severely disrupt patient care. The most effective action is to develop a disaster recovery plan focused on minimizing downtime and restoring the EHR system as quickly as possible. (C) Patient notification may be part of a contingency plan but is not the priority after a BIA. (D) Outsourcing may be a future consideration, but the immediate need is a recovery strategy. Therefore, developing a disaster recovery plan is the priority.
(A) While encryption enhances security, it does not address the downtime issue highlighted in the BIA. (B) The BIA has identified that system downtime could severely disrupt patient care. The most effective action is to develop a disaster recovery plan focused on minimizing downtime and restoring the EHR system as quickly as possible. (C) Patient notification may be part of a contingency plan but is not the priority after a BIA. (D) Outsourcing may be a future consideration, but the immediate need is a recovery strategy. Therefore, developing a disaster recovery plan is the priority.
65. A financial institution has implemented a firewall to prevent unauthorized access to its internal network. To test the effectiveness of this control, the cybersecurity team wants to ensure that only permitted traffic is passing through. Which method would provide the best assessment of the firewall's effectiveness?
The Correct Answer is B. Performing a penetration test (B) is the best method to assess the firewall’s effectiveness because it actively tests whether unauthorized access can bypass the firewall. Reviewing logs (A) provides useful data but does not directly test whether the firewall can withstand real-world attacks. Comparing configurations to best practices (C) ensures the setup is correct but does not test how the firewall performs in a live attack scenario. Employee surveys (D) do not assess the technical effectiveness of the firewall, as this is a purely technical control.
Performing a penetration test (B) is the best method to assess the firewall’s effectiveness because it actively tests whether unauthorized access can bypass the firewall. Reviewing logs (A) provides useful data but does not directly test whether the firewall can withstand real-world attacks. Comparing configurations to best practices (C) ensures the setup is correct but does not test how the firewall performs in a live attack scenario. Employee surveys (D) do not assess the technical effectiveness of the firewall, as this is a purely technical control.
66. An e-commerce company is compiling its annual control status report for its board of directors. The report must include an assessment of how well existing controls have mitigated identified risks. What is the most important aspect of reporting the control status to ensure the board can make informed decisions?
The Correct Answer is B. The most important aspect of reporting the control status is to summarize the effectiveness of each control and highlight any gaps in risk mitigation (B). This ensures that the board of directors can understand the overall risk posture and make informed decisions about where improvements may be needed. Providing detailed technical descriptions (A) may be too granular for board-level reporting. Highlighting improvements (C) is useful but doesn’t provide a complete picture of control effectiveness. A list of all controls (D) may be informative, but without analysis of their effectiveness, it lacks actionable insights.
The most important aspect of reporting the control status is to summarize the effectiveness of each control and highlight any gaps in risk mitigation (B). This ensures that the board of directors can understand the overall risk posture and make informed decisions about where improvements may be needed. Providing detailed technical descriptions (A) may be too granular for board-level reporting. Highlighting improvements (C) is useful but doesn’t provide a complete picture of control effectiveness. A list of all controls (D) may be informative, but without analysis of their effectiveness, it lacks actionable insights.
67. An organization is migrating its customer data from on-premise storage to a cloud service provider. The data includes personally identifiable information (PII). The risk team is asked to assess the threats that could impact this migration. Which of the following scenarios would be categorized as an external threat to the data during the migration?
The Correct Answer is A. (A) A cloud provider experiencing a data breach due to unauthorized access is an external threat because the cloud provider is an external entity, and the breach is caused by factors outside the organization’s control. (B) A misconfiguration by the internal IT team is an internal risk since it is caused by personnel within the organization. (C) A delay in the migration is an operational issue, not a threat to the data's integrity or security. (D) An incomplete data transfer due to outdated internal software is an internal technical risk, not external. Therefore, the correct external threat is the risk of the cloud provider experiencing a breach.
(A) A cloud provider experiencing a data breach due to unauthorized access is an external threat because the cloud provider is an external entity, and the breach is caused by factors outside the organization’s control. (B) A misconfiguration by the internal IT team is an internal risk since it is caused by personnel within the organization. (C) A delay in the migration is an operational issue, not a threat to the data's integrity or security. (D) An incomplete data transfer due to outdated internal software is an internal technical risk, not external. Therefore, the correct external threat is the risk of the cloud provider experiencing a breach.
68. An energy company has a low risk appetite for environmental liabilities but a high risk appetite for developing new renewable energy projects. The company’s board is considering a project in a region where environmental regulations are strict, and violations could lead to significant fines. How should the Chief Risk Officer (CRO) align the company’s risk profile with its environmental risk tolerance and strategic goals?
The Correct Answer is B. The CRO should implement robust environmental impact assessments and compliance monitoring (B) to ensure that the project aligns with the company’s low tolerance for environmental liabilities while pursuing its high risk appetite for renewable energy development. Addressing compliance issues after development begins (A) could lead to fines and reputational damage. Increasing the tolerance for environmental risks (C) would conflict with the company’s established risk profile. Abandoning the project (D) is unnecessary if environmental risks can be mitigated through proper management and compliance strategies.
The CRO should implement robust environmental impact assessments and compliance monitoring (B) to ensure that the project aligns with the company’s low tolerance for environmental liabilities while pursuing its high risk appetite for renewable energy development. Addressing compliance issues after development begins (A) could lead to fines and reputational damage. Increasing the tolerance for environmental risks (C) would conflict with the company’s established risk profile. Abandoning the project (D) is unnecessary if environmental risks can be mitigated through proper management and compliance strategies.
69. An energy company has implemented a control monitoring process to track the performance of its network security controls. As part of the process, the risk manager receives alerts about several recurring issues with firewall configurations that allow unauthorized access to specific internal systems. What should the risk manager’s next step be?
The Correct Answer is A. The correct next step is to investigate the firewall configuration errors (A) to identify their root cause and ensure compliance with security policies. This will allow the company to fix the underlying issue. Disabling the firewall (B) would expose the company to significant risks. Notifying the audit team (C) may be necessary later, but the first action should be addressing the configuration errors. Implementing compensating controls (D) could be a temporary solution, but fixing the root issue with the firewall is a priority.
The correct next step is to investigate the firewall configuration errors (A) to identify their root cause and ensure compliance with security policies. This will allow the company to fix the underlying issue. Disabling the firewall (B) would expose the company to significant risks. Notifying the audit team (C) may be necessary later, but the first action should be addressing the configuration errors. Implementing compensating controls (D) could be a temporary solution, but fixing the root issue with the firewall is a priority.
70. A retail organization has established an ERM framework aligned with ISO 31000. The risk management team (second line of defense) has identified a gap in how the first line of defense is assessing risks related to supply chain disruptions. What should the second line of defense do to improve the first line’s ability to assess and manage these risks effectively?
The Correct Answer is B. The second line of defense should provide training and tools (B) to the first line of defense to help them assess supply chain risks effectively within the ERM framework. This builds the first line’s capability to manage their own risks. Taking over the process (A) would undermine the first line’s responsibility. Involving the third line (C) at this stage is premature, as it is the role of internal audit to evaluate, not manage, risk processes. Outsourcing (D) is not necessary if the first line can be trained to handle these risks internally.
The second line of defense should provide training and tools (B) to the first line of defense to help them assess supply chain risks effectively within the ERM framework. This builds the first line’s capability to manage their own risks. Taking over the process (A) would undermine the first line’s responsibility. Involving the third line (C) at this stage is premature, as it is the role of internal audit to evaluate, not manage, risk processes. Outsourcing (D) is not necessary if the first line can be trained to handle these risks internally.
71. A financial institution is undergoing an audit to assess its compliance with data protection regulations. The auditors are particularly focused on how customer data is handled in the "disposal" phase of the data life cycle. What is the most effective action the institution should take to ensure that sensitive customer data is securely disposed of?
The Correct Answer is B. Implementing secure data deletion techniques such as cryptographic erasure or data wiping (B) ensures that sensitive digital data cannot be recovered after disposal, which is crucial for compliance with data protection regulations. Shredding physical copies (A) addresses paper records but not digital data. Backing up data before deletion (C) is not relevant to the disposal phase, as the goal is to securely eliminate data. Encrypting data prior to deletion (D) may enhance security, but if the data is not properly wiped, it could still be recoverable.
Implementing secure data deletion techniques such as cryptographic erasure or data wiping (B) ensures that sensitive digital data cannot be recovered after disposal, which is crucial for compliance with data protection regulations. Shredding physical copies (A) addresses paper records but not digital data. Backing up data before deletion (C) is not relevant to the disposal phase, as the goal is to securely eliminate data. Encrypting data prior to deletion (D) may enhance security, but if the data is not properly wiped, it could still be recoverable.
72. An e-commerce company faces a reputational risk related to potential data breaches. The company's risk appetite statement indicates that they have zero tolerance for risks that can result in negative public perception. During a risk review, a medium likelihood risk is identified that could expose customer data in the event of a breach. What risk response option should the company pursue to best align with its risk appetite?
The Correct Answer is D. The company has zero tolerance for reputational risks, meaning accepting the risk (A) or transferring it (C) is not in alignment with the organization's risk appetite. Avoiding the risk (B) by disabling customer data storage would disrupt core business functions and is not a realistic option. The most appropriate response is to mitigate the risk (D) by implementing stronger encryption and monitoring systems, which would align with the company's intolerance for reputational harm while allowing business operations to continue.
The company has zero tolerance for reputational risks, meaning accepting the risk (A) or transferring it (C) is not in alignment with the organization's risk appetite. Avoiding the risk (B) by disabling customer data storage would disrupt core business functions and is not a realistic option. The most appropriate response is to mitigate the risk (D) by implementing stronger encryption and monitoring systems, which would align with the company's intolerance for reputational harm while allowing business operations to continue.
73. An e-commerce company is implementing a risk treatment plan to mitigate the risk of denial-of-service (DoS) attacks that could disrupt its online sales platform. The IT team has proposed the use of a cloud-based DDoS protection service. What is the most critical step to include in the implementation of this risk treatment plan?
The Correct Answer is A. Testing the DDoS protection system (A) by simulating attacks is the most critical step to ensure the protection service works as expected and can mitigate a DoS attack in a real-world scenario. While an SLA (C) provides assurances, it does not validate that the solution works. Notifying customers (B) may provide awareness, but it doesn’t reduce the risk. Implementing a backup platform (D) may be useful for business continuity but doesn’t directly address the effectiveness of the DDoS protection system.
Testing the DDoS protection system (A) by simulating attacks is the most critical step to ensure the protection service works as expected and can mitigate a DoS attack in a real-world scenario. While an SLA (C) provides assurances, it does not validate that the solution works. Notifying customers (B) may provide awareness, but it doesn’t reduce the risk. Implementing a backup platform (D) may be useful for business continuity but doesn’t directly address the effectiveness of the DDoS protection system.
74. A global pharmaceutical company is expanding into new markets, and the executive team is concerned about the risks related to regulatory compliance in different countries. The Chief Risk Officer (CRO) suggests incorporating these regulatory risks into the enterprise risk management (ERM) framework. Which action would best ensure that the company’s ERM framework addresses these regulatory risks effectively?
The Correct Answer is B. Developing a centralized regulatory risk management strategy (B) within the ERM framework ensures that regulatory risks are managed consistently across all markets, aligning with the overall enterprise strategy. Implementing teams in each market (A) could lead to inconsistent risk management practices, while allowing local managers (C) to handle risks independently may result in a lack of alignment with corporate risk management goals. Focusing only on critical markets (D) would leave other regions vulnerable. ERM emphasizes the need for a coordinated, enterprise-wide approach to managing risks, including regulatory compliance.
Developing a centralized regulatory risk management strategy (B) within the ERM framework ensures that regulatory risks are managed consistently across all markets, aligning with the overall enterprise strategy. Implementing teams in each market (A) could lead to inconsistent risk management practices, while allowing local managers (C) to handle risks independently may result in a lack of alignment with corporate risk management goals. Focusing only on critical markets (D) would leave other regions vulnerable. ERM emphasizes the need for a coordinated, enterprise-wide approach to managing risks, including regulatory compliance.
75. A software development company is creating a risk scenario around the failure of a newly deployed application that is critical to their clients’ operations. The scenario involves a bug that causes data corruption and loss of customer information. What additional elements should the risk management team consider to fully develop this scenario?
The Correct Answer is A. The Correct Answer is A. (A) To fully develop the scenario, the team must assess the probability of the bug being triggered during normal use and evaluate the legal, financial, and reputational consequences for clients if their data is lost. This enables a comprehensive understanding of the risk. (B) The deployment of a patch is part of risk mitigation but not part of scenario development. (C) Backup systems may help mitigate the risk, but they are not the focus of developing the initial risk scenario. (D) The development team's experience is not a critical factor in developing the scenario. Therefore, assessing the probability and consequences of the bug is essential.
(A) To fully develop the scenario, the team must assess the probability of the bug being triggered during normal use and evaluate the legal, financial, and reputational consequences for clients if their data is lost. This enables a comprehensive understanding of the risk. (B) The deployment of a patch is part of risk mitigation but not part of scenario development. (C) Backup systems may help mitigate the risk, but they are not the focus of developing the initial risk scenario. (D) The development team's experience is not a critical factor in developing the scenario. Therefore, assessing the probability and consequences of the bug is essential.
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