5: Introduction to risk management

Question 1

What is the formula for gross risk?

Answer 1

Gross risk = probability x impact

Question 2

What is the TARA model for and what does it stand for?

Answer 2

The TARA model provides an outline of general risk responses.

Transfer (sharing risk to a third party)
Avoidance (Avoid risk by not undertaking risky activities)
Reduction (take action to limit risk to acceptable levels)
Acceptance (Tolerating losses when they arise)

Question 3

ALARP is the basis of many regulations relating to health and safety at work in the UK. What does ALARP stand for?

As low as relatively possible
As low as reasonably practical
As low as reasonably practicable
As low as relatively practical

Answer 3

As low as reasonable practicable

Question 4

An example of a natural crisis event is an earthquake causing physical disruption.

What is an example of a:
- Business crisis
- Legal / regulatory crisis
- Industrial accident

Answer 4

Business crisis - Loss of a key supplier / customer
Legal / regulatory crisis - New law / regulations increases costs
Industrial accident - Building collapse or fire

Question 5

Is “effective risk management” a characteristic of driving business resilience

Answer 5

Yes

Question 6

Is closure of significant business operations an example of external changes or planned changes?

Answer 6

Planned changes

Question 7

Many organisations face challenges in achieving resiliance through a lack of ____, lack of ____ and a lack of ____ thinking

Answer 7

expertise, input, cohesive

Question 8

Define exposure

Answer 8

Exposure is a measure of the way in which a business is faced by risks

Question 9

Define volitility

Answer 9

Volitility is a measurement of the variability of a risk factor

Question 10

An expected value is a long run average.

The formula for the expected value is

Answer 10

ΣPX

P = Probability
X = Number occuring

Question 11

Which statement is true:

The higher the coefficient of variation, the better the risk-return trade-off will be
The lower the coefficient of variation, the better the risk-return trade-off will be
The higher the coefficient of variation, the better the trade-off return will be
The lower the coefficient of variation, the better the trade-off return will be

Answer 11

The lower the coefficient of variation, the better the risk-return trade-off will be

Question 12

How do you calculate the coefficient of variation

Answer 12

Coefficient of variation is the standard deviation divided by the mean

Question 13

What type of loss is personnel loss?

Answer 13

Loss due to injury, sickness and death of employees

Question 14

What type of loss is pecuniary loss?

Answer 14

Loss aas a result of defaulting debtors

Question 15

In asssessing the potential gross risk, you need to take account of the

level of exposure and probability of occurance
potential loss and probability of occurance
potential loss and level of volitility
level of exposure and level of volatility

Answer 15

potential loss and probability of occurance

Question 16

“A risk averse investor will always choose the lowest risk investments, whatever their potential return”

Is this statement true of false?

Answer 16

True

Question 17

What type of risk includes process risk, people risk and event risk?

Operational risk
Financial risk
Business risk
Strategy risk

Answer 17

Operational risk