Risk and Insurance Management Society (RIMS) Certified Risk Management Professional (CRMP) Practice Exam

Once risks have been analyzed, against what should the risk management professional evaluate the risks?

1. Appetite

2. Monitoring plan

3. Treatment

4. Underwriting criteria

The correct answer is: Appetite

The appropriate evaluation of risks following their analysis involves determining how they align with the organization's risk appetite. Risk appetite refers to the level of risk that an organization is willing to accept in pursuit of its objectives. By assessing risks against risk appetite, a risk management professional can identify which risks are acceptable, which require mitigation strategies, and how much risk the organization can actually tolerate without compromising its goals or operations. In contrast, while monitoring plans, treatment options, and underwriting criteria are important components of the risk management process, they serve different purposes. Monitoring plans focus on observing and adjusting to risks over time, treatment involves strategies for managing those risks (like avoidance, reduction, sharing, or acceptance), and underwriting criteria generally pertain to the standards or policies set by insurers to determine the eligibility and terms for coverage, not the internal assessment of risks in relation to appetite. Thus, evaluating risks against appetite ensures that the organization's risk management strategies align with its overall strategy and objectives.