CISM Information Security Risk Management Practice Question
A company has a risk appetite that is 'low' for operational risks. A risk assessment recently identified that a high-speed trading platform has a residual risk rating of 'high' after controls are applied. The cost to further reduce the risk is $1 million, which exceeds the expected benefit. What is the most appropriate action for the risk owner?
⚠ Common exam trap
A common mix-up: candidates confuse 'risk acceptance' with 'ignoring the risk' or assume that a low risk appetite always mandates mitigation, failing to recognize that formal acceptance with senior sign-off is a legitimate and required response when cost-benefit analysis shows mitigation is not justified.
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
Accept the residual risk with formal sign-off from senior management
The risk owner has determined that the cost to further reduce the residual risk ($1 million) exceeds the expected benefit, making additional controls economically unjustifiable. Since the company's risk appetite is 'low' for operational risks but the residual risk is 'high', the most appropriate action is to formally accept the residual risk with senior management sign-off, as this documents the decision and acknowledges the deviation from the stated risk appetite. This aligns with the CISM principle that risk acceptance is a valid treatment option when the cost of mitigation outweighs the benefit, provided it is approved at the appropriate level.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✓
Accept the residual risk with formal sign-off from senior management
Why this is correct
Since controls are not cost-effective, acceptance is appropriate with proper approval.
- ✗
Adjust the risk appetite to 'moderate' to align with the residual risk
Why it's wrong here
Risk appetite is strategic; changing it solely for one risk is inappropriate.
- ✗
Transfer the risk by taking out an insurance policy
Why it's wrong here
Insurance might not cover high-speed trading losses adequately.
- ✗
Approve additional controls to lower residual risk regardless of cost
Why it's wrong here
Not cost-justified; alternative treatments should be considered.
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JA
Written by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
This CISM practice question is part of Courseiva's free ISACA certification practice question bank. Courseiva provides original exam-style practice questions with explanations, topic-based practice, mock exams, readiness tracking, and study analytics to help learners prepare for the CISM exam.