What is the MAIN purpose of designing risk management programs? 

Answer options:

A. To reduce the risk to a level that the enterprise is willing to accept
B. To reduce the risk to the point at which the benefit exceeds the expense
C. To reduce the risk to a level that is too small to be measurable
D. To reduce the risk to a rate of return that equals the current cost of capital

A

Risk cannot be removed completely from the enterprise; it can only be reduced to a level that an organization is willing to accept. Risk management programs are hence designed to accomplish the task of reducing risks. Incorrect Answers: B: Depending on the risk preference of an enterprise, it may or may not choose to pursue risk mitigation to the point at which benefit equals or exceeds the expense. Hence this is not the primary objective of designing the risk management program. C: Reducing risk to a level too small to measure is not practical and is often cost-prohibitive. D: Reducing risks to a specific return ignores the qualitative aspects of the risk which should also be considered.