Question at position 37 According to COSO’s Enterprise Risk Management (ERM) framework, establishing the organizations risk appetite is part of which ERM component:Monitoring enterprise risk management performance.Risk information, communication and reporting.Risk in execution.Risk, strategy and objective setting.

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BlackTom AI · Accepted Answer

To analyze this question, we consider the components of COSO’s ERM framework and how they relate to establishing risk appetite.
Option 1: 'Monitoring enterprise risk management performance.' This focuses on oversight and performance measurement of the ERM process, not on setting risk appetite itself. It describes a monitoring activity rather than the setting of appetite, so this is not the correct component.
Option 2: 'Risk information, communication and reporting.' This deals with gathering, sharing, and communicating risk data and reports, which supports decision making but does not specify the actual establishment of risk appetite values or thresholds.
Option 3: 'Risk in execution.' This phrase emphasizes risks encountered during the execution of strategy and operations, highlighting risk events and controls during implementation rather than the initial definition of appetite.
Option 4: 'Risk, strategy and objective setting.' This option aligns with the ERM framework’s integration of risk appetite into the process of setting strategy and objectives. Establishing the organization’s risk appetite is about defining the amount and type of risk the organization is willing to accept in pursuit of its objectives, which is directly connected to risk, strategy, and objective setting in ERM.
In summary, the other options describe supporting activities (monitoring, reporting, execution risks) rather than the foundational step of determining how much risk the organization is willing to accept as it sets strategy and objectives. The correct alignment is option 4, which explicitly links risk appetite to risk, strategy, and objective setting.

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