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
2
Q
What is the objective of risk management?
A
- Optimise risk-adjusted returns
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.
4
Q
What is the objective of ERM?
A
- Improve processes and decision making to create value
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
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
7
Q
What are the four risk responses
A
- Retain
- Remove
- Reduce
- Transfer