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Corporate Governance > 6. Risk Management Frameworks And Standards > Flashcards

6. Risk Management Frameworks And Standards Flashcards

0
Q

How does the Institute define risk?

A 
The possibility of an event occurring
That will have an impact
On the achievement of objectives.
Risk is measured in terms of
Impact
And likelihood
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1
Q

The view of risk as a h—, enterprise-wide activity is a recent one.

A

Holistic

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2
Q

When should a problem or hazard not be considered a risk?

A

When it does not or cannot affect the organisation’s objectives

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3
Q

Risk can create — as well as bring threats or dangers

A

Opportunities

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4
Q

What are the main two elements involved in measuring risk?

A

Impact

Likelihood

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5
Q

How does the Institute define risk management?

A 
A process to
Identify
Assess
Manage
And control
Potential events or situations
To provide reasonable assurance
Regarding the achievement of the organisation's objectives
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6
Q

How does COSO define Enterprise Risk Management?

A

A process effected by an entity’s board of directors, management and other personnel,
Applied in strategy setting and across the enterprise,
Designed to identify potential events that may affect the entity,
And manage risk to be within its risk appetite,
To provide reasonable assurance
Regarding the achievement of entity objectives

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7
Q

Many top level considerations of risk concentrate on processes and structures. What else should they consider?

A

Culture

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8
Q

Organisations with a — culture find it difficult to review materialised risks, incidents and near misses for lessons learned

A

Blame

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9
Q

The — of risk management are the elements of the organisation responsible for managing different aspects of risk

A

Structures

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10
Q

Outline the general steps of a risk management process

A 
Setting objectives
Identifying risks
Assessing impact and likelihood
Determine appetite
Implement responses
Monitoring and reporting of effectiveness of responses
Taking corrective action
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11
Q

How does the Institute define risk appetite?

A 
The level of risk that is acceptable
To the board or management.
This may be set in relation to
The organisation as a whole,
For different groups of risks
Or at an individual risk level
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12
Q

What are the main categories of risk management strategies?

A 
Terminate
Tolerate
Transfer
Treat
(Exploit)
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13
Q

According to the Institute, Internal Audit will normally provide assurance on what three areas of the risk management process?

A

Design and effectiveness of RM processes
Management of “key” risks, including effectiveness of responses
Reliable and appropriate assessment of risks and reporting of risk and control status

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14
Q

What are the three most important sources of current thinking on risk management?

A

Financial services
Hazard management
Insurance

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15
Q

Historically, risk management has been a key discipline within the — — sector

A

Financial services

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16
Q

List the main types of risk

A 
Strategic
Operational
Financial
Legal
Reputational
Project
Information
Country
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17
Q

Operational risks relate to the — carried out within an organisation

A

Activities

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18
Q

— risks relate to the activities carried out within the organisation

A

Operational

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19
Q

Operational risks may include risks associated with…

A 
Recruitment
Retention
Human error
Fraud
Business interruption
Security
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20
Q

Operational risks may arise from what sources?

A

Organisation’s structure and systems
People
Products
Processes

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21
Q

How does the Office of Government Commerce describe strategic risk?

A

Risk concerned with
Where the organisation wants to go
How it plans to get there
And how it can ensure survival

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22
Q

Strategic risks are more likely to relate to — factors than operational risks

A

External

23
Q

Strategic risks are more likely to be beyond the organisation’s ability to — or — than operational risks

A

Manage or control

24
Q

Strategic risks are usually — term than operational risks

A

Longer

25
Q

As well as presenting significant dangers to the organisation, strategic risks can also provide —

A

Opportunities

26
Q

Financial risks include what four types of risk?

A

Credit
Liquidity
Market
Investment

27
Q

From what three areas do legal risks mainly arise?

A

Threat of litigation
Risk of breaching legislation and regulations
Risk posed by changes in legislation and regulations

28
Q

What are the main types of project risk?

A 
Human
Technical
Cost
Quality
Time
Benefits
Partner risk
29
Q

Which of the key corporate governance committees highlighted the linkage between corporate governance and risk management?

A

The Hampel Committee (1998)

30
Q

Which principle of the Code states that “the board should maintain risk management and internal control systems”?

A

C2 Risk Management and Internal Control

31
Q

What does principles C2 Risk Management and Internal Control state?

A

The board should maintain risk management and internal control systems

32
Q

According to provision C.2.1, the board should, at least annually…

A 
Conduct a review of the effectiveness
Of the company's
Risk management
And internal control systems
And report to shareholders that they have done so
33
Q

The annual review of risk management and internal control systems required by provision C.2.1 should cover what?

A

All material controls, including:
Financial
Operational
And compliance controls

34
Q

How did the business community initially react when the requirement to include and annual review of risk management and internal control was introduced into the 1998 combined code.

A

They were unsure how to conduct such a review, especially where they had previously only considered financial controls

35
Q

What was the response to the business community’s concerns over the requirement for annual review as stated in provision C.2.1?

A

The Turnbull Guidance

Produced by Nigel Turnbull

36
Q

List the principal risk management standards

A 
AS/NZS 4360:1999 and AS/NZS 4360:2004
HM Treasury "Orange Book" 2001 & 2004
IRM Risk Management Standard 2002
COSO Enterprise Risk Management 2004
ISO 31000
37
Q

Which large UK organisation based their risk management standards on AS/NZS 4360?

A

National Health Service

38
Q

What are the seven steps of the risk management process according to AS/NZS 4360?

A 
Establish context
Identify risks
Analyse risks
Evaluate risks
Treat risks
Communicate risks
Monitor risks
39
Q

When was AS/NZS 4360 withdrawn?

A

Following the issue of ISO 31000

40
Q

What are the six steps of the Orange Book risk management process?

A 
Identify risks and define framework
Evaluate risks
Assess risk appetite
Identify responses to risks
Gain assurance about effectiveness of risks
Embed and review
41
Q

When was the COSO Enterprise Risk Management framework published?

A

2004

42
Q

According to the COSO ERM framework, what does ERM encompass?

A

Aligning risk appetite and strategy
Enhancing risk response decisions
Reducing operational surprises and losses
Identifying and managing multiple and cross-enterprise risks
Seizing opportunities
Improving deployment of capital

43
Q

According to COSO ERM, ERM can be considered a —, ongoing and flowing through an entity

A

Process

44
Q

According to COSO ERM, ERM can be considered as effected by — at every level of the organisation

A

People

45
Q

According to COSO ERM, ERM can be considered as applied in — setting

A

Strategy

46
Q

The COSO ERM framework is geared to achieving an organisation’s objectives, set forth in what four categories?

A

Strategic
Operations
Reporting
Compliance

47
Q

The COSO ERM framework is based on the COSO internal control framework. What are its eight components?

A

Internal Environment

Objective Setting
Event Identification
Risk Assessment
Risk Response

Control Activities
Information and Communication
Monitoring

48
Q

ISO 31000 stresses the importance of the risk management —

A

Context

49
Q

What does ISO 31000 mean by the risk management “context”?

A

The structure that supports risk management processes

50
Q

According to ISO 31000, what are the three elements of the risk management “context”?

A

Risk architecture
Risk strategy
Risk protocols

51
Q

What does risk architecture comprise?

A

Roles and responsibilities

Communication and reporting structure

52
Q

What does risk strategy comprise (as part of ISO 31000 risk context)?

A

Risk management policies, including:
Risk appetite
Risk attitude

53
Q

What do risk protocols comprise?

A

Rules, procedures and guidelines, specifying:
Risk management methodologies
Tools and techniques
Monitoring and reporting arrangements

54
Q

An effective risk management framework ought to enable risk management to become a — part of an organisation’s approach, rather than a one off exercise

A

Living

55
Q

An effective risk management framework ought to enable risk management to give encouragement to — — that is properly informed, understood and controlled within the overall risk appetite and control framework

A

Risk taking

56
Q

An effective risk management framework ought to enable risk management to — an organisation’s corporate governance structures and requirements

A

Complement

Corporate Governance (11 decks)

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