1.4 The global regulatory framework for risk management Flashcards
The three main strands of the global regulatory framework for risk are:
- i___________ laws
- n_______ laws
- s________
international
national
standards
Why is there a need for international regulations and standards?
Because risk exposures often cross national boundaries.
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_______.
risks
financial
credit
The i____________ nature of the world has led to the development of i____________- standards for risk management.
interconnected
international
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_______
corporate
environmental
financial
health and safety
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
corruption
stakeholder
What is arguably the most influential standard on corporate governance?
The G20/OECD 2015 Principles of Corporate Governance
The purpose of the G20/OECD 2015 Principles of Corporate Governanceis to provide a worldwide b___________ for good corporate governance.
benchmark
What 5 key areas are typically covered by international law and regulation on environmental matters?
air quality water quality waste management contamination clean up chemical safety
Why is national environmental law important to other nations?
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.
Why should organisations seek to comply with international rules and regulations?
To avoid the threat of fines or other sanctions
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_______
system
capital
nations
Markets are fundamentally interconnected, so f__________ problems in one country can have g______ implications.
financial
global
What is the term for the risk associated with the interconnectedness of global markets?
market contagion risk
What is the best modern example of financial market contagion?
The 2008 financial crisis
What was the cause of the 2008 financial crisis?
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.
What are the five key international financial agencies?
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)
What is the primary source of regulation on global financial stability risks?
The Basel Accords - arrangements negotiated by the Basel Committee, whose members are representatives of the G20.
What is meant by health and safety?
The protection of people from sickness, disease and injury.
What are the four types of global regulation?
Rules
Guidance
Principles
Risk-based regulation
What are “rules” in the context of global regulation?
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.
What is “guidance” in the context of global regulation?
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.
What are “principles” in the context of global regulation?
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
What is meant by “risk-based regulation”?
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.
Which is the main body on international health and safety regulation?
The International Labour Organisation (ILO)
Name two key international agreements on environmental protection.
Kyoto Protocol
Paris Agreement
