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Business, Finance, Technology > 5: Risk Management > Flashcards

5: Risk Management Flashcards

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1
Q

What is risk?

A

The possible variation in an outcome from what is expected to happen

The possibility that an event will occur and adversely effect the achievement of objectives

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2
Q

What are the three attitudes to risk? Or APPETITES?

A

Risk averse

Risk neutral

Risk seeker

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3
Q

What are the three types of risk?

A

Business risk

Financial risk

Operational risk

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4
Q

The four types of event risk?

A

Disaster

Regulatory

Reputation

Systematic

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5
Q

What is at the key at risk management?

A

Probability (likelihood)

X

Impact (consequence)

Also think about EXPOSURE and VOLATILITY

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6
Q

What are the four measures of central tendency?

A

Mean
Median
Mode
Expected values

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7
Q

What is the mean?

A

Dividing the sum of the values by the number of values

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8
Q

What is the median?

A

The middle set of values

Overcomes the problem of skewed distribution

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9
Q

What is the mode?

A

The value that occurs most often

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10
Q

What is expected values?

A

Long run average

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11
Q

What are the four steps in the risk management process?

A

Risk awareness and identification

Risk assessment and measurement

Risk response and control

Risk monitoring and reporting

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12
Q

What are the 5 techniques to identify risk?

A

PEST/SWOT

External advisors

Interviews/questionnaires

Internal audit

Brainstorming

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13
Q

What are the five types of loss?

A

Property loss

Liability loss

Personnel loss

Pecuniary loss

Interruption loss

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14
Q

What are the four options on a risk assessment map?

A

High impact/ high probability
- avoidance

High impact/ low probability
- transfer

Low impact/ high probability
- reduction

Low impact/ low probability
- accepted

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15
Q

Whats on the axis of a risk heat map?

A

X axis
- improbable
- remote
- occasional
- probable
- frequent

Y axis
- negligible
- low
- moderate
- significant
- catastrophic

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16
Q

What are the four risk reduction methods on the TARA model, in order or preference?

A

Avoidance

Reduction

Transfer/sharing

Acceptance/retention

17
Q

What is ALARP?

A

As low as reasonably practicable

Risk is reduced to a level that is proportional to cost required to reduce the risk further

18
Q

What are the three reasons risk monitoring is needed?

A

To monitor the effectiveness of the current RM process

To monitor whether the risk profile is changing

The corporate governance code requires listed companies to:
- determine the nature and extent of risks
- report risk management issues
- additional board disclosure

19
Q

What is a crisis v a disaster?

A

Crisis is an unexpected event or significant disruption that threatens the wellbeing of a business

A disaster is when the business’s operations break down for some reason, leading to potential losses

20
Q

What are the seven types of crisis?

A

Natural event

Industrial accident

Product service or failure

PR disaster

Business crisis

Management crisis

Legal/regulatory crisis

21
Q

What does crisis management involve?

A

Contingency planning

Crisis prevention

22
Q

What are the two axis to business resilience?

A

Axis 1: processes and functions to protect the organisation
- (specific functions)

Axis 2: general organisational characteristics driving resilience
- (general)

23
Q

What are the two types of disaster?

A

A major crisis causing a breakdown

An event resulting in serious consequences

Create a disaster recovery plan!

24
Q

Why do a standard deviation or coefficient of variation?

A

SD: how far away on average the data points are from the mean

CoV: dispersion of data points in a data series around the mean
- gives a sense of scale to SD
- percentage to aid comparison

Everything to determine how much RISK in comparison to the amount of RETUEN

25
Q

What is the range?

A

The difference between the lowest and highest value in a set of data

26
Q

How to calculate standard deviation?

A
  1. Calculate the mean
  2. Calculate the deviation (taking the mean away from each value)
  3. Calculate the variance (square all of the deviations, make a mean from those)
  4. Calculate the SD (square root the variance)
  5. Calculate the coefficient variation (standard deviation divided by the mean)
27
Q

What are the key characteristics of a normal distribution frequency distribution?

A

Symmetrical and peaks in the centre

Mean is in the centre of the diagram

Curve is symmetrical to the mean. 50% above and 50% below

Mean, median and mode all the same

SD shows how far the values are spread out from the mean

28
Q

Key percentages in normal distribution?

A

34% of values lie between mean and 1SD

47.5% values lie between mean and 2SD

49.9% values lie between mean and 3SD

29
Q

More detail about event risk?

A

Disaster, regulatory, reputation, systematic

Includes any new regulatory requirements

Includes the failure of a supplier in the supply chain (systematic)

30
Q

Business risk?

A

Any competitor on the market that could affect business

  • includes product risk, which is getting a competitor
31
Q

What’s a highly geared company?

A

Lots of borrowings

The higher the proportion of borrowings, the greater the financial risk

32
Q

How is uncertainty judged?

A

If you are given the probabilities of different outcomes, there is no uncertainty!

33
Q

What is risk exposure?

A

The measure of the way a business is faced by risks

34
Q

What kind of risk does automated production increase?

A

Financial risk

35
Q

4 ways to assess the scale of risk?

A

Probability

Impact

Volatility

Exposure

Business, Finance, Technology (14 decks)

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