1.4 The global regulatory framework for risk management

Question 1

The three main strands of the global regulatory framework for risk are:

• i___________ laws
• n_______ laws
• s________

Answer 1

international
national
standards

Question 2

Why is there a need for international regulations and standards?

Answer 2

Because risk exposures often cross national boundaries.

Question 3

Modern, diverse r_____ may be connected. For example, a major pollution event or weather event may affect f________ markets across the world, which can then affect the supply of c_______.

Answer 3

risks
financial
credit

Question 4

The i____________ nature of the world has led to the development of i____________- standards for risk management.

Answer 4

interconnected

international

Question 5

The following key areas are subject to international regulations and standards that have relevance in a risk management context:

• c___________ governance
• e____________ regulation
• f____________ stability
• h_______ and s_______

Answer 5

corporate
environmental
financial
health and safety

Question 6

Effective corporate governance is important to modern business - weak governance can lead to c___________, scandals, organisational failure and system breakdowns that damage the interests of all s___________ groups

Answer 6

corruption

stakeholder

Question 7

What is arguably the most influential standard on corporate governance?

Answer 7

The G20/OECD 2015 Principles of Corporate Governance

Question 8

The purpose of the G20/OECD 2015 Principles of Corporate Governanceis to provide a worldwide b___________ for good corporate governance.

Answer 8

benchmark

Question 9

What 5 key areas are typically covered by international law and regulation on environmental matters?

Answer 9

air quality
water quality
waste management
contamination clean up
chemical safety

Question 10

Why is national environmental law important to other nations?

Answer 10

Environmental risks (e.g. climate change) do not respect national borders, and so the behavior of organizations within one nation may have knock on effects to others.

Question 11

Why should organisations seek to comply with international rules and regulations?

Answer 11

To avoid the threat of fines or other sanctions

Question 12

The stability of the global financial s______ is a key source of risk for all organisaitons. It is necessary to ensure continued access to c________ and to avoid the collapse of organisations or even n_______

Answer 12

system
capital
nations

Question 13

Markets are fundamentally interconnected, so f__________ problems in one country can have g______ implications.

Answer 13

financial

global

Question 14

What is the term for the risk associated with the interconnectedness of global markets?

Answer 14

market contagion risk

Question 15

What is the best modern example of financial market contagion?

Answer 15

The 2008 financial crisis

Question 16

What was the cause of the 2008 financial crisis?

Answer 16

Rising US interest rates and falling house prices led to an increase in mortgage default rates. This affect the value of various mortgage-backed products which quickly spread to lending markets causing banks to collapse. This then spread to Europe and Asia.

Question 17

What are the five key international financial agencies?

Answer 17

The Organisation for Economic Co-operation and Development
The World Bank
The international Monetary Fund (IMF)
The Financial Stability Board (FSB)
The Bank for International Settlements (BIS)

Question 18

What is the primary source of regulation on global financial stability risks?

Answer 18

The Basel Accords - arrangements negotiated by the Basel Committee, whose members are representatives of the G20.

Question 19

What is meant by health and safety?

Answer 19

The protection of people from sickness, disease and injury.

Question 20

What are the four types of global regulation?

Answer 20

Rules
Guidance
Principles
Risk-based regulation

Question 21

What are “rules” in the context of global regulation?

Answer 21

Rules are direct legal requirements, contravention of which will lead to enforcement action in most cases, leading to fines, imprisonment, sanctions etc. International rules are generally rare.

Question 22

What is “guidance” in the context of global regulation?

Answer 22

Guidance includes standards or codes of practice - these need not be complied with, and it is up to an organization how to interpret and implement guidance. Guidance generally follows best practice.

Question 23

What are “principles” in the context of global regulation?

Answer 23

Principles rely on high-level desirable outcomes, that a country organisation may adapt to suit its own situation. A principle based approach reflect the reality that there is no one-size fits all approach to risk management

Question 24

What is meant by “risk-based regulation”?

Answer 24

The concept that a higher degree of risk, the greater the level of regulation. For example, chemical processing is much more closely regulated than the service sector.

Question 25

Which is the main body on international health and safety regulation?

Answer 25

The International Labour Organisation (ILO)

Question 26

Name two key international agreements on environmental protection.

Answer 26

Kyoto Protocol

Paris Agreement