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

What does the term "root cause" refer to?

1. Final outcome of a risk

2. Underlying source of a risk

3. Consequence of risk management

4. Predictable risk event

The correct answer is: Underlying source of a risk

The term "root cause" refers to the underlying source of a risk, making it essential for effective risk management. Identifying the root cause is critical because understanding what leads to potential risks allows organizations to develop strategies to mitigate or eliminate those risks before they manifest. By addressing the root cause, risk management professionals can implement more effective controls and practices, rather than just dealing with the symptoms of the problem. Analyzing risks in this way helps in uncovering underlying factors that may not be immediately visible but significantly contribute to risk exposure. This proactive approach enhances the overall resilience of an organization. In contrast, the other options describe different aspects of risk but do not capture the concept of root cause. The final outcome of a risk is related to its consequences, while a predictable risk event refers to risks that can be anticipated, and the consequence of risk management pertains to the results of corrective actions rather than the fundamental reasons for the risk's existence. Therefore, option B encapsulates the essence of root cause analysis in risk management.