ExpertEasy1 markMultiple Choice
CPA · Question 22 · Area I: Business Analysis
A company identifies a risk that a new competitor might enter the market. Management decides to launch a loyalty program to lock in customers. Under the COSO ERM framework, this response is best classified as:
A company identifies a risk that a new competitor might enter the market. Management decides to launch a loyalty program to lock in customers. Under the COSO ERM framework, this response is best classified as:
Answer options:
A.
Avoidance
B.
Reduction (Mitigation)
C.
Sharing
D.
Acceptance
How to approach this question
Identify the action type. Avoid (stop activity), Reduce (take action to lower risk), Share (transfer to 3rd party), Accept (no action).
Full Answer
B.Reduction (Mitigation)✓ Correct
B
Implementing a loyalty program is an active step to reduce the likelihood of customer churn (impact of the risk). This is Risk Reduction.
Common mistakes
Confusing Reduction with Sharing.
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