Isaca Updated CRISC Exam Questions and Answers by millie-mae

Key risk indicators (KRIs) are metrics used by organizations to monitor and assess potential risks that may impact their objectives and performance. KRIs also provide early warning signals that help organizations identify, analyze, and address risks before they escalate into significant issues1. Effective KRIs are thosethat are relevant, measurable, predictable, comparable, and informational2. The most important factor for developing effective KRIs is including input from risk and business unit management, as they are the persons who have the best understanding of the risk environment, the risk appetite and tolerance, and the risk factors and impacts of the organization. By including input from risk and business unit management, the organization can ensure that the KRIs are aligned with the organization’s strategy, vision, and mission, and that they reflect the current and emerging risks and their potential consequences. Engaging sponsorship by senior management, utilizing data and resources internal to the organization, and developing in collaboration with internal audit are not the most important factors for developing effective KRIs, as they do not provide the same level of insight and relevance as including input from risk and business unit management. Engaging sponsorship by senior management is a factor that involves obtaining the support and approval of the senior leaders who have the authority and accountability for the organization’s performance and governance. Engaging sponsorship by senior management can help to promote the importance and value of KRIs, and to ensure their communication and implementation across the organization, but it does not ensure that the KRIs are appropriate and accurate for the organization’s risk profile. Utilizing data and resources internal to the organization is a factor that involves using the information and assets that are available within the organization to support or enable the development of KRIs. Utilizing data and resources internal to the organization can help to enhance the quality and reliability of KRIs, and to reduce the cost and complexity of obtaining external data and resources, but it does not ensure that the KRIs are comprehensive and consistent with the organization’s risk environment. Developing in collaboration with internal audit is a factor that involves working with the internal audit function that provides independent and objective assurance and advice on the adequacy and effectiveness of the organization’s risk management. Developing in collaboration with internal audit can help to improve the validity and compliance of KRIs, and to provide feedback and recommendations for improvement, but it does not ensure that the KRIs are relevant and realistic for the organization’s risk objectives and strategies. References = 1: Key Risk Indicators: A Practical Guide | SafetyCulture2: KRI Framework for Operational Risk Management | Workiva3: [Risk and Information Systems Control Study Manual, Chapter 4: Risk and Control Monitoring and Reporting, Section 4.1: Key Risk Indicators, pp. 181-185.]

According to Wikipedia1, a maturity model is a framework for measuring an organization’s maturity, or that of a business function within an organization, with maturity being defined as a measurement of the ability of an organization for continuous improvement in a particular discipline. A maturity model will best indicate the effectiveness and efficiency of an organization or a business function, as it helps to evaluate how well they achieve their intended objectives with minimum resources, time, and cost. A maturity model also helps to identify and prioritize the areas and opportunities for improvement, and to establish and communicate the standards and best practices for the discipline. References = Wikipedia1

According to the CRISC Review Manual1, data selection is the process of choosing the appropriate data sources and variables for data analysis. Data selection is the most critical step in data analytics, as it determines the quality and validity of the results and insights derived from the analysis. Incorrect data selection is the greatest risk associated with the use of data analytics, as it can lead to inaccurate, incomplete, irrelevant, or biased outcomes that can adversely affect the decision making and performance of the organization. Incorrect data selection can also cause legal, regulatory, ethical, or reputational issues for the organization, if the data used for analysis is not authorized, reliable, or compliant. References = CRISC Review Manual1, page 255.

The BEST way to demonstrate alignment of the risk profile with business objectives is through risk scenarios, because they are the descriptions and illustrations of the potential events or situations that may affect the achievement of the business objectives and processes. Risk scenarios can help to demonstrate how the risk profile, which is the summary and representation of the identified and assessed risks, is relatedand relevant to the business objectives and processes, and how the risk responses and controls are designed and implemented to support and enable the business objectives and processes. The other options are not the best way, because:

Option B: Risk tolerance is the level of variation or deviation from the expected or desired outcome that the organization is willing to accept or endure, but it does not demonstrate alignment of the risk profile with business objectives, which is the process of ensuring that the risk profile and the business objectives are consistent and compatible with each other.

Option C: Risk policy is the document that defines the principles, guidelines, and requirements for the risk management process and activities in the organization, but it does not demonstrate alignment of the risk profile with business objectives, which is the process of showing and proving that the risk profile and the business objectives are coherent and integrated with each other.

Option D: Risk appetite is the amount and type of risk that the organization is willing to take or pursue in order to achieve its objectives and goals, but it does not demonstrate alignment of the risk profile with business objectives, which is the process of establishing and maintaining that the risk profile and the business objectives are aligned and balanced with each other. References = Risk and Information Systems Control Study Manual, 7th Edition, ISACA, 2020, p. 104.