An exposure is
A) synonymous with risk.
B) equal to risk multiplied by the likelihood of detection.
C) equal to risk multiplied by the financial consequences.
D) not possible with a good system of internal controls in place.

Question

Quizplus · Accepted Answer

An exposure refers to a situation or event that may result in financial loss or damage to an organization. It is calculated by multiplying the likelihood of the risk by the financial impact that may result if the risk materializes. Therefore, the correct answer is C - "equal to risk multiplied by the financial consequences." Choice A is incorrect because exposure represents a potential loss, whereas risk refers to the probability of a potential loss. Choice B is incorrect because it confuses exposure with the likelihood of detection, which is not relevant to the calculation of exposure. Choice D is incorrect because even with a good system of internal controls, there may still be exposures that arise from various sources.

An Exposure Is