A company's ability to recover after a disaster is directly related to which of the following?

• A. The amount of cash on hand at the time of the disaster
• B. The company's annual revenue
• C. The number of employees present during the disaster
• D. The effectiveness of its internal controls and disaster recovery plan

Answer: (D)

Verified step by step guidance

1. Understand the concept of internal controls: Internal controls are processes and procedures implemented by a company to safeguard its assets, ensure the accuracy of financial records, and promote operational efficiency. They play a critical role in disaster recovery by ensuring the company can respond effectively to unexpected events.
2. Learn about disaster recovery plans: A disaster recovery plan is a documented strategy that outlines how a company will respond to and recover from a disaster, such as a natural calamity or cyberattack. It includes steps to restore operations, protect data, and minimize financial losses.
3. Recognize the relationship between internal controls and disaster recovery: Effective internal controls ensure that the company has systems in place to detect and respond to risks promptly. Combined with a well-designed disaster recovery plan, these controls help the company recover quickly and minimize disruptions.
4. Evaluate why other options are less relevant: While cash on hand, annual revenue, and the number of employees may influence recovery to some extent, they are not as critical as having robust internal controls and a disaster recovery plan. These factors ensure preparedness and systematic recovery.
5. Apply this understanding to similar scenarios: When analyzing a company's ability to recover from a disaster, focus on its preparedness, including the strength of its internal controls and the comprehensiveness of its disaster recovery plan, rather than external factors like revenue or employee count.