QuestionABC Manufacturing operates in a highly regulated chemical industry.

The scenario represents inherent risk, making option A the correct answer. Inherent risk refers to the susceptibility of a process, system, or organization to errors or failures due to its nature, environment, or complexity, independent of the effectiveness of internal controls.

ABC Manufacturing operates in a highly regulated and complex chemical industry. Such environments naturally involve complicated regulatory requirements, hazardous materials, and stringent compliance obligations. These characteristics increase the likelihood of errors or ISMS defects simply because of the industry’s complexity, even when internal controls exist. This is the defining feature of inherent risk.

Option B is incorrect because control risk relates to the possibility that internal controls fail to prevent or detect issues. In the scenario, controls are in place, but the risk arises from the complexity of the industry itself rather than a failure of controls. Option C is incorrect because detection risk concerns the auditor’s ability to detect existing issues during an audit, not the organization’s operational environment.

In ISO/IEC 27001 audits, understanding inherent risk is essential for planning audit focus and depth. Highly regulated industries naturally carry higher inherent risk due to complexity and compliance demands. Therefore, the scenario clearly represents inherent risk.