The correct answer isC. The balance between potential benefits in achieving the objectives and costs, effort, or disadvantages of implementation. ISO 31000 emphasizes that risk treatment decisions should beproportionate, informed, and value-focused.

Selecting risk treatment options requires evaluating trade-offs. Organizations must consider how much a treatment option contributes to achieving objectives while also assessing its costs, resource requirements, operational impact, and potential disadvantages. This balanced approach ensures that risk management protects and creates value rather than imposing unnecessary burdens.

Option A is incorrect because focusing solely on cost ignores effectiveness and value creation. Option B is equally flawed, as ignoring costs and effort may lead to unsustainable or impractical solutions. Option D contradicts ISO 31000’s emphasis on feasibility, proportionality, and alignment with context.

From a PECB ISO 31000 Lead Risk Manager perspective, effective risk treatment is about makinginformed choices, not automatically selecting the most aggressive option. Therefore, the correct answer isbalancing benefits with costs, effort, and disadvantages.

The correct answer isA. The level of risk. ISO 31000:2018 definesrisk levelas the magnitude of a risk, commonly expressed as a combination of the likelihood of an event and its consequences. Determining the level of risk is a core outcome ofrisk analysis, which aims to develop an understanding of the nature of risk and its characteristics.

In Scenario 4, the Solenco team explicitly assessed both thelikelihood(“possible,” quantified as 10%) and theconsequences(€900,000 per event) of inverter failure. They then combined these elements by calculating an expected annual impact of €90,000. This quantitative combination of likelihood and consequence directly represents the determination of thelevel of risk, enabling comparison and prioritization within the risk register.

Risk acceptance criteria and risk tolerance relate to decision-making thresholds that determine whether a risk is acceptable or requires treatment. These are defined earlier during context establishment and risk criteria setting, not calculated during risk analysis. Risk appetite refers to the amount and type of risk an organization is willing to pursue and is a strategic-level concept, not a calculated outcome of likelihood and consequence.

From a PECB ISO 31000 Lead Risk Manager perspective, calculating the level of risk supports informed risk evaluation and prioritization. It enables organizations to allocate resources effectively and focus on risks that threaten value creation and protection. Therefore, the correct answer isthe level of risk.

The correct answer isA. To create and protect value. ISO 31000:2018 explicitly states that thepurpose of risk management is the creation and protection of value. This principle is foundational and underpins all other aspects of the risk management framework and process. According to ISO 31000, risk management improves performance, encourages innovation, and supports the achievement of objectives by addressing uncertainty in a structured and informed manner.

ISO 31000 does not define risk management as a mechanism to eliminate all risks. On the contrary, it recognizes that risk-taking is often necessary to pursue opportunities and create value. Attempting to eliminate all risks would be impractical and could hinder innovation, strategic growth, and operational effectiveness. Therefore, option B is incorrect.

Similarly, while compliance with legal and regulatory requirements is an important consideration within risk management, ISO 31000 clearly emphasizes that compliance isnot the sole purposeof risk management. Risk management applies to all types of objectives—strategic, operational, financial, reputational, environmental, and social—and goes beyond regulatory compliance alone. Hence, option C is incomplete and incorrect.

ISO 31000 also acknowledges that uncertainty is inherent in organizational activities and decision-making. Risk management does not aim to remove uncertainty, but rather tounderstand, assess, and manage itin a way that supports informed decisions. Therefore, option D is incorrect.

From a PECB ISO 31000 Lead Risk Manager perspective, understanding that the ultimate purpose of risk management is value creation and protection is essential. This principle ensures that risk management is integrated into governance, strategy, and operations, supporting sustainable success rather than acting as a purely defensive or compliance-driven function.

The correct answer isB. Inclusive. ISO 31000:2018 identifiesinclusivenessas a key principle of effective risk management. This principle requires appropriate and timely involvement of relevant stakeholders to ensure their knowledge, views, and perceptions are considered when managing risk. Inclusive risk management improves awareness, supports informed decision-making, and enhances ownership of risk responses.

In the scenario, Gospeed’s top management failed to adequately consider input from operational staff when pursuing a new international delivery contract. Despite staff raising concerns about unreliable customs data and potential delays, their feedback was ignored in the rush to secure the deal. This directly contradicts the inclusiveness principle outlined in ISO 31000, which emphasizes that stakeholder engagement should occurat all stages of the risk management process, particularly when decisions have operational implications.

The consequence of this failure was delivery delays and financial penalties, demonstrating how excluding key stakeholders weakens risk identification, analysis, and treatment. While integration is also an important ISO 31000 principle, the issue described is not the absence of risk management from organizational processes, but rather theexclusion of relevant stakeholders from decision-making.

Continual improvement relates to learning and enhancing the risk management framework over time, which is not the primary failure described. The dynamic principle concerns responding to change and emerging risks, whereas the core issue here was ignoring available knowledge.

From a PECB ISO 31000 Lead Risk Manager perspective, the scenario clearly illustrates a violation of theinclusiveprinciple, making option B the correct answer.

The correct answer isC. Bow-tie analysis. Bow-tie analysis is a visual risk analysis technique that combines elements of fault tree analysis and event tree analysis. It illustrates thecauses of a risk event on the left side, theevent itself in the center, and theconsequences on the right side, while also showingpreventive and mitigating controlson both sides.

In Scenario 4, the team used a structured visual technique that mapped the causes leading to inverter failure on one side and the potential consequences on the other, including the controls that could prevent or mitigate both sides. This description precisely matches the bow-tie analysis method.

Monte Carlo simulation involves probabilistic modeling using repeated random sampling, which was not described. Business impact analysis focuses on assessing the consequences of disruptions to critical activities, not mapping causes and controls. SWOT analysis is a strategic planning tool, not a detailed cause-and-effect risk analysis technique.

From a PECB ISO 31000 Lead Risk Manager perspective, selecting appropriate techniques is essential for effective risk analysis. Bow-tie analysis is particularly useful for understanding single-point-of-failure risks and communicating complex cause–consequence relationships clearly to stakeholders. Therefore, the correct answer isbow-tie analysis.

The correct answer isB. Performance. In the COSO ERM framework, thePerformancecomponent focuses on identifying, assessing, prioritizing, and responding to risks that may affect the achievement of an organization’s objectives. This component ensures that risks are understood in terms of theirseverity and impact on performanceand that appropriate risk responses are applied to keep the organization aligned with its goals.

The Performance component includes activities such as identifying risks, assessing their likelihood and impact, prioritizing risks, and implementing risk responses. This aligns closely with ISO 31000’s risk management process, particularly the steps ofrisk identification, risk analysis, risk evaluation, and risk treatment. Both frameworks emphasize that understanding how risks influence objectives is essential for informed decision-making and value creation.

Option A,Review and revision, focuses on evaluating how well the enterprise risk management system is functioning over time and identifying areas for improvement. While important, it does not primarily address the assessment of how risks affect objective achievement.

Option C,Strategy and objective-setting, relates to defining strategic objectives and considering risk when setting those objectives, but it does not focus on ongoing risk assessment and response.

Option D,Governance and culture, concerns oversight, ethical values, and risk culture, not the operational assessment of risk impacts on goals.

From a PECB ISO 31000 Lead Risk Manager perspective, understanding COSO ERM’s Performance component reinforces the ISO 31000 principle that risk management must be integrated into performance management and decision-making. Therefore, the correct answer isPerformance.

The correct answer isB. Hazard and Operability (HAZOP) process. HAZOP is a structured and systematic risk identification technique that usesguide wordssuch as “too high,” “too low,” “more,” “less,” or “other than expected” to identify deviations from intended operating conditions and analyze their causes and consequences.

In Scenario 4, the team explicitly used guided discussions with prompts like “too high,” “too low,” and “other than expected,” which directly corresponds to the HAZOP methodology. This technique is commonly used in engineering, energy, and process industries to identify operational hazards and performance deviations.

Scenario analysis explores plausible future situations rather than deviations in current processes. Human Reliability Analysis focuses on human error probabilities, which was not the primary focus here. The Delphi technique involves iterative expert surveys rather than structured deviation analysis.

From a PECB ISO 31000 Lead Risk Manager perspective, selecting appropriate risk identification techniques based on context and industry is critical. HAZOP is well suited for complex technical systems like energy production processes. Therefore, the correct answer isHazard and Operability (HAZOP) process.