In Example Company (TEC), what scenario may indicate risk accountability is not sufficiently defined?

When evaluating the structure of risk management within an organization, it's crucial to have clarity around roles and responsibilities. The scenario where risk management is solely a central function and not integrated with divisions indicates that risk accountability may not be sufficiently defined because it suggests a lack of ownership at various levels of the organization. When risk management operates in isolation, it can lead to a disconnect between those who create risks and those who manage them, resulting in accountability being blurred.

In effective risk governance, it is essential that all parts of the organization understand their roles in risk management. If risk is managed by a central team without integration into the operational divisions, those divisions may not be fully aware of their risk exposures or the necessary actions to mitigate them. This lack of integration can create an environment where risks are not adequately monitored or addressed, leaving the organization vulnerable. By contrast, a decentralized approach allows divisions to take responsibility for risks pertinent to their operations, which fosters a culture of accountability throughout the organization.

The other scenarios do touch upon aspects of risk management but do not directly indicate a lack of defined risk accountability. For instance, having risk management reviewed at quarterly meetings suggests that oversight exists, while division GMs having performance incentives based on gross sales alone might not reflect on risk accountability but