1. What is ERM? Flashcards

1
Q

Define risk management

A

Process of:
* Identifying risks faced
* Assessing likelihood of risks materialising and the impact
* Deciding how to deal with each risk

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2
Q

What is the objective of risk management?

A
  • Optimise risk-adjusted returns
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3
Q

Define ERM

A
  • Structured and consistent application of risk management across whole org. It …
  • Considers all risk faced by org (upside, downside, quantifiable and unquantifiable) and their interactions with each other.
  • Interactions between risks will be taken into account when deciding how best to deal with risks faced. It …
  • Integrates risk measurement and management into business processes, so that risk info can influence all strategic business decisions.
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4
Q

What is the objective of ERM?

A
  • Improve processes and decision making to create value
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5
Q

What are the 5 key ERM concepts?

A
  • Holistic approach
  • Downside and upside risks
  • Risk measurement - quantifiable risks
  • Risk measurement - unquantifiable risks
  • Risk responses
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6
Q

What is the holistic approach when it comes to ERM?

A

o Consider risks as a whole and not consider individual risks in isolation…
o allowing for concentration of risk to be identified and diversifying effects to be allowed for

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7
Q

What are the four risk responses

A
  • Retain
  • Remove
  • Reduce
  • Transfer
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