Risk is an integral aspect of business operations, and organizations employ multifaceted approaches to identify, evaluate, and
Question:
Risk is an integral aspect of business operations, and organizations employ multifaceted approaches to identify, evaluate, and mitigate potential risks. Unexpected loss, however, poses a distinctive set of challenges due to its unpredictable nature, setting it apart from losses that can be anticipated and prepared for within conventional risk management frameworks.
Scenario Analysis: Consider a scenario where a global manufacturing company is operating in a politically unstable region. While the company may factor in expected losses related to market volatility or supply chain disruptions, unexpected losses may arise from sudden political upheavals or regulatory changes that were not foreseeable. The magnitude of such losses can be substantial, making them a prime example of unexpected loss.
Risk Mitigation Strategies: Organizations deploy diverse strategies to manage unexpected losses, recognizing that complete mitigation may not always be achievable. These strategies may include the establishment of contingency funds, comprehensive insurance coverage for unforeseen events, and the implementation of robust risk management frameworks that prioritize adaptability.
Question:
For a given risk, an unexpected loss is:
A. a loss that cannot be prepared for.
B. an amount that should be budgeted for.
C. an amount that should be reserved as capital.
D. a loss that is very unlikely to occur.
Auditing and Assurance services an integrated approach
ISBN: 978-0134065823
16th edition
Authors: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan