- A
Require the CSP to provide dedicated hardware security modules and restrict data storage to approved regions through contractual terms
This directly mitigates the identified risks and aligns with the organization's low risk appetite.
- B
Accept the risk because the CSP has strong security certifications and the likelihood of a breach is low
Why wrong: Acceptance violates the board's mandate to mitigate all risks and does not address regulatory compliance.
- C
Cancel the cloud migration and build a new private data center in a compliant location
Why wrong: This is an extreme avoidance strategy that is likely more costly and disruptive than negotiating with the CSP.
- D
Transfer the risk by purchasing cyber insurance that covers regulatory fines
Why wrong: Insurance does not prevent non-compliance; regulators may impose fines regardless.
Quick Answer
The correct answer is to require the CSP to provide dedicated hardware security modules and restrict data storage to approved regions through contractual terms. This directly addresses the core issues of cloud vendor risk management data residency by enforcing geographic data boundaries and regaining control over encryption key management, which is critical for meeting GDPR and SOX compliance. On the CISM exam, this scenario tests your ability to apply contractual and technical controls—rather than risk acceptance or transfer—when the board mandates a low risk appetite. A common trap is choosing insurance (risk transfer), which does not fix non-compliance, or building a private cloud, which is a costly, long-term project that fails the immediate need. Remember the mnemonic “Contract First, Compliance Last”—always use enforceable service-level agreements to lock down data residency and key sovereignty before considering other mitigations.
CISM Information Security Risk Management Practice Question
This CISM practice question tests your understanding of information security risk management. Read the scenario carefully and evaluate each option against the stated constraints before committing to an answer. After answering, compare your reasoning against the explanation and wrong-answer breakdown below. Once you have made your selection, read the full explanation to reinforce the concept and understand why each distractor is designed to mislead on exam day.
A multinational corporation is migrating its on-premises data center to a hybrid cloud environment. The organization processes highly sensitive financial data subject to strict regulatory requirements (e.g., GDPR, SOX). During the risk assessment, the information security manager discovers that the cloud service provider (CSP) stores data in multiple geographic regions, some of which do not meet the organization's data residency requirements. Additionally, the CSP's encryption key management is not fully under the organization's control, and the incident response plan does not include specific procedures for cloud-based breaches. The organization's risk appetite is low, and the board has mandated that all risks must be mitigated to an acceptable level. Which of the following is the BEST course of action?
Clue words in this question
Noticing these words before you look at the options changes how you read each choice.
Clue:
"best"Why it matters: Signals that multiple options may be partially correct. Choose the option that most directly solves the exact problem described, not the one that sounds most complete.
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
Require the CSP to provide dedicated hardware security modules and restrict data storage to approved regions through contractual terms
Option C is correct because it directly addresses the root cause (data residency non-compliance and key management) by requiring the CSP to provide dedicated key management and restrict data storage to approved regions. This aligns with the low risk appetite and regulatory requirements. Option A is wrong because accepting the risk contradicts the board's mandate. Option B is wrong because transferring risk via insurance does not achieve compliance. Option D is wrong because building a private cloud is costly and time-consuming, and not necessarily the best immediate action.
Key principle: NAT direction and interface roles matter as much as the IP address mapping. Inside/outside designation controls which traffic is translated.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✓
Require the CSP to provide dedicated hardware security modules and restrict data storage to approved regions through contractual terms
Why this is correct
This directly mitigates the identified risks and aligns with the organization's low risk appetite.
Clue confirmation
The clue word "best" in the question point toward this answer.
Related concept
Static NAT maps one inside address to one outside address.
- ✗
Accept the risk because the CSP has strong security certifications and the likelihood of a breach is low
Why it's wrong here
Acceptance violates the board's mandate to mitigate all risks and does not address regulatory compliance.
- ✗
Cancel the cloud migration and build a new private data center in a compliant location
Why it's wrong here
This is an extreme avoidance strategy that is likely more costly and disruptive than negotiating with the CSP.
- ✗
Transfer the risk by purchasing cyber insurance that covers regulatory fines
Why it's wrong here
Insurance does not prevent non-compliance; regulators may impose fines regardless.
Common exam traps
Common exam trap: NAT rules depend on direction and matching traffic
NAT is not only about the public address. The inside/outside interface roles and the ACL or rule that matches traffic are just as important.
Detailed technical explanation
How to think about this question
NAT questions usually test address translation, overload/PAT behaviour, static mappings and whether the right traffic is being translated. Read the interface direction and address terms carefully.
KKey Concepts to Remember
- Static NAT maps one inside address to one outside address.
- PAT allows many inside hosts to share one public address using ports.
- Inside local and inside global describe the private and translated addresses.
- NAT ACLs identify traffic for translation, not always security filtering.
TExam Day Tips
- Identify inside and outside interfaces first.
- Check whether the scenario needs static NAT, dynamic NAT or PAT.
- Do not confuse NAT matching ACLs with normal packet-filtering intent.
Key takeaway
NAT direction and interface roles matter as much as the IP address mapping. Inside/outside designation controls which traffic is translated.
Real-world example
How this comes up in practice
A small business has 20 workstations on the 192.168.1.0/24 network and one public IP from its ISP. The router uses PAT (NAT overload) so all 20 devices share one public address using different source ports. NAT questions test whether you understand the four address terms and which direction each translation applies.
What to study next
Got this wrong? Here's your next step.
Review the four NAT address types (inside local, inside global, outside local, outside global), PAT port overload, and static vs dynamic NAT use cases. Then practise related CISM NAT questions on configuration and troubleshooting.
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FAQ
Questions learners often ask
What does this CISM question test?
Information Security Risk Management — This question tests Information Security Risk Management — Static NAT maps one inside address to one outside address..
What is the correct answer to this question?
The correct answer is: Require the CSP to provide dedicated hardware security modules and restrict data storage to approved regions through contractual terms — Option C is correct because it directly addresses the root cause (data residency non-compliance and key management) by requiring the CSP to provide dedicated key management and restrict data storage to approved regions. This aligns with the low risk appetite and regulatory requirements. Option A is wrong because accepting the risk contradicts the board's mandate. Option B is wrong because transferring risk via insurance does not achieve compliance. Option D is wrong because building a private cloud is costly and time-consuming, and not necessarily the best immediate action.
What should I do if I get this CISM question wrong?
Review the four NAT address types (inside local, inside global, outside local, outside global), PAT port overload, and static vs dynamic NAT use cases. Then practise related CISM NAT questions on configuration and troubleshooting.
Are there clue words in this question I should notice?
Yes — watch for: "best". Signals that multiple options may be partially correct. Choose the option that most directly solves the exact problem described, not the one that sounds most complete.
What is the key concept behind this question?
Static NAT maps one inside address to one outside address.
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Last reviewed: Jun 7, 2026
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.
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