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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Brunello Winery produces expensive wines. Brunello’s enterprise risk management team has chosen its particular risk response to each of its top five inherent risks. The risk graph below shows Brunello’s risks after all of the team's risk responses have been enacted.

Chapter 13, Problem 35E, Brunello Winery produces expensive wines. Brunellos enterprise risk management team has chosen its

Required:

Refer to Brunello’s risk graph and determine the particular risk response alternative (Accept, Avoid, or Reduce) that the team chose to implement for each of the company's inherent risks 1 (IR1) through 5 (IR5).

To determine

Identify the type of response chosen by the company for each of its top 5 inherent risks.

Explanation

Enterprise Risk Management:

Enterprise risk management is a process in which, business risks are maintained at a level decided by the management, so that the strategic plans of the organization are achieved. That is, risks are maintained at a level that satisfies both the risk category as well as objectives of the organization.

There are three types of responses that organizations may choose to deal with different types of risks. These are to accept, avoid, and reduce risks.

Type of response chosen by the company for each of its top 5 inherent risks is discussed as follows:

RiskResponse
1AcceptInherent risk 1 is accepted since it is below the risk appetite of the company...

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