Which statement best explains the importance of risk-based control activities?

Addressing inherent risks is crucial for the sustainability and success of any business, especially in the cannabis industry, where operations often face unique challenges and regulatory scrutiny. Risk-based control activities are designed to identify, assess, and manage these risks proactively. By focusing on the specific risks that an organization faces, these activities enable businesses to implement targeted strategies that mitigate those risks more effectively.

When risks are properly identified and managed, a company can protect itself from unwanted risk events, such as potential legal issues, financial losses, or operational disruptions. This not only ensures compliance with regulations but also enhances the overall resilience and adaptability of the business. Thus, risk-based control activities play a fundamental role in safeguarding the organization, ultimately allowing it to operate more successfully in a volatile environment like the cannabis market.