Discover the key factors that should have the most influence on an organization’s response to new industry regulations. Explore the roles of risk control baselines, control objectives, risk management framework, and risk appetite in shaping an organization’s approach to regulatory compliance.
Table of Contents
Question
Which of the following should have the MOST influence on an organization’s response to a new industry regulation?
A. The organization’s risk control baselines
B. The organization’s control objectives
C. The organization’s risk management framework
D. The organization’s risk appetite
Answer
The most influential factor in an organization’s response to a new industry regulation should be C. The organization’s risk management framework.
Explanation
An organization’s risk management framework provides the structure and guidance for identifying, assessing, and managing risks across the entire organization. It establishes the processes, policies, and procedures for dealing with various types of risks, including regulatory compliance risks.
When a new industry regulation is introduced, the risk management framework serves as the foundation for the organization’s response. The framework helps the organization to:
- Identify and assess the potential impact of the new regulation on the organization’s operations, objectives, and stakeholders.
- Determine the level of risk associated with non-compliance and the organization’s ability to comply with the new regulation.
- Develop and implement appropriate risk treatment strategies, such as updating policies, procedures, and controls to ensure compliance with the new regulation.
- Monitor and review the effectiveness of the risk treatment strategies and make necessary adjustments.
While risk control baselines, control objectives, and risk appetite are essential components of an effective risk management program, they are ultimately guided by the overarching risk management framework.
Risk control baselines (A) establish the minimum level of controls required to manage risks, but they may need to be adjusted based on the new regulation’s requirements.
Control objectives (B) define the desired outcomes of the organization’s control activities, but they should be aligned with the risk management framework and the new regulation’s objectives.
Risk appetite (D) sets the level of risk an organization is willing to accept, but it must be considered in the context of the risk management framework and the potential consequences of non-compliance with the new regulation.
In summary, an organization’s risk management framework should have the most influence on its response to a new industry regulation, as it provides the structure and guidance for identifying, assessing, and managing regulatory compliance risks in a comprehensive and consistent manner.
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