6.4 Linking risk to strategy

Question 1

There is a growing demand for more effective risk management practices to cope with the rapidly changing business environment. Give some examples of areas under increased regulatory scrutiny.

Answer 1

Money laundering
Terrorism financing
Climate change disclosures
Corporate governance reporting
Environmental compliance
Contingency planning
Data protection regulations
Basel financial regulations

Question 2

Many organisations focus on assessing and managing risks arising from their chosen strategy. What is the issue with this approach?

Answer 2

This approach does not consider the choice of strategy and consideration of alternatives, nor does it capture the execution of strategy risk or how the chosen strategy supports the corporate mission and long term objectives.

Question 3

Why did Interserve plc supper a collapse in its share price in 2017-18?

Answer 3

Due to an ill-conceived strategic decision to expand from construction into energy from waste, a sector in which it had no expertise.

Question 4

The role of the board in risk management includes:

• formally approving risk a_________
• challenging m____________ on risk appetite assumptions
• seeking comprehensive a________ on how non-financial risks are monitored and mitigated.
• encouraging management to d______ risk alongside strategy.
• hiring external a________ to evaluate risks
• connecting the i______ a____ function to strategic planning and risk management processes.

Answer 4

appetite
management
assurances
discuss
advisors
internal audit