Certified Internal Auditor (CIA) Part 1: Business Acumen — Question 82

Which of the following is a benefit of using a portfolio view of risks?

Answer options

• A. It can show risks that are severe at the organization level
• B. It can show how some risks offset other risks by acting as natural hedges at the business objective level
• C. It can show how risks fall within categories and the interdependencies among risks within categories
• D. It can show positive or negative correlations with changes occurring in the external environment

Correct answer: B

Explanation

The correct answer, B, highlights the ability of a portfolio view to reveal how some risks can counterbalance others, enhancing risk management through natural hedges. Options A, C, and D focus on different aspects of risk representation but do not specifically address the offsetting nature of risks, which is crucial for strategic decision-making.