Certified Internal Auditor (CIA) Practice Test

What is a key aspect of enterprise risk management?

1. Guaranteeing organizational objectives are achieved.

2. Establishing control activities by internal auditors.

3. Identifying events negatively impacting objectives.

4. Choosing the best risk response for the organization.

The correct answer is: Identifying events negatively impacting objectives.

A key aspect of enterprise risk management (ERM) is the identification of events that may negatively impact an organization's objectives. This process is fundamental to ERM because it allows organizations to proactively recognize risks that could hinder reaching their strategic goals. By identifying these risks early, organizations can develop strategies to mitigate or respond to them, enhancing their overall risk management framework. Identifying potential threats is crucial for informed decision-making and resource allocation within the organization. It sets the stage for assessing the likelihood and impact of these risks, which is critical in prioritizing responses and ensuring that management is aware of the hazards the organization might face. While other aspects mentioned in the options such as establishing control activities, guaranteeing objectives, or choosing the best risk response are also relevant to a comprehensive risk management approach, they each stem from the foundational step of risk identification. Without effectively identifying risks, it would be challenging to implement controls, guarantee success, or develop appropriate responses, highlighting the centrality of risk identification in the ERM process.