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Corporate Governance > 7. Strategic Perspective On Risk Management > Flashcards

7. Strategic Perspective On Risk Management Flashcards

0
Q

— — are the first line of defence and have direct responsibility for the management of risks

A

Operational units

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1
Q

List the three lines of defence in risk management.

A

First line: operational units
Second line: oversight functions
Third line: assurance functions

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2
Q

— — are the second line of defence and have responsibility for coordinating and overseeing the risk framework

A

Oversight functions

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3
Q

— — are the third line of defence and provide independent and objective assurance with respect to the integrity and effectiveness of the risk management framework

A

Assurance functions

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4
Q

What does the Code say about the directors’ responsibility with respect to risk management and internal control?

A

They should, at least annually, conduct a review of the effectiveness of the company’s risk management and internal control systems and should report to shareholders that they have done so.

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5
Q

According to Turnbull 2005, what five factors should the board consider when determining its policies with regard to internal control?

A

Nature and extent of risks facing company
Extent and categories of risk it regards as acceptable to bear
Likelihood of the risks materialising
Ability to reduce incidence and impact of risks that do materialise
Costs of operating particular controls relative to benefit obtained

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6
Q

What are the board’s MAIN responsibilities with regard to risk management?

A

Set out policies for internal control and risk management

Satisfy itself that those policies are working

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7
Q

How to the roles of executive and non-executive directors vary with respect to risk management?

A

Executives responsible for ensuring implementation of board policy
Non-executives responsible for ensuring they have sufficient information to be assured the executives are in control

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8
Q

As well as the policy framework, the board should put in place — — to enable effective risk management

A

Additional structures

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9
Q

The board should not just rely on — monitoring processes within a company to discharge its duties

A

Embedded

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10
Q

List the high level responsibilities of the board over risk and risk management

A

Top level ownership and championship of ERM
Ownership of overall RM policy
Defining high level risk appetite
Regular review of highest level risk register
Taking action on risks that have been escalated
Delegating certain responsibilities to a risk or audit committee
Holding management to account for complying with and operating the RM process

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11
Q

To help identify and manage the key risks that an organisation faces, many entities are increasingly employing — — and — —

A

Risk committees and risk officers

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12
Q

In the history of UK corporate governance, who recommended that major financial institutions have separate risk committees?

A

Sir David Walker (2009)

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13
Q

Did the 2010 UK Corporate Governance code take up Sir David Walker’s recommendation that major financial institutions should have separate risk committees?

A

No

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14
Q

The risk committee is — defined in UK Corporate Governance

A

Poorly

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15
Q

How does HM Treasury define the risk committee?

A

A committee established with executive authority to take action to manage the risks which face the organisation

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16
Q

Risk committees more usually consist of…

A

Executive management

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17
Q

A main role of the risk committee is to oversee the implementation of the — — — on behalf of the board

A

Risk management policy

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18
Q

A main role of the risk committee is nurturing and fostering an appropriate — towards ERM across the organisation

A

Culture

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19
Q

A main role of the risk committee is to identify and report to the board on the major — — and opportunities that the organisation faces

A

Negative risks

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20
Q

A main role of the board is m– and r– in detail how effectively the key risks are being managed

A

Monitoring and reviewing

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21
Q

A main role of the risk committee is promoting the exchange of — — — in risk management throughout the organisation

A

Best practice techniques

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22
Q

Where there is no risk committee, where does the UK Corporate Governance Code lay the duties of the risk committee

A

The audit committee

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23
Q

If there is a risk committee, what is the ideal division of effort and focus?

A

Risk committee presents content of risk register to audit committee or board
Audit committee reviews process whereby organisation identified, evaluated and took action on risks

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24
Q

In a large organisation, the risk committee may be supported by what?

A

Risk officer or officers

Risk function

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25
Q

Often, the role of risk officer is not a — — — but forms part of an individual’s wider responsibilities

A

Full time job

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26
Q

Many organisations use their — — as a meeting forum for their risk officers

A

Risk committees

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27
Q

Risk officers assist in the implementation of the organisation’s — — policies and procedures in the area in which they work

A

Risk management

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28
Q

Risk officers bring together in the — — the key risks facing that part of the organisation

A

Prescribed format

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29
Q

Risk officers are often expected to help individual departments carry out…

A

Risk assessment exercises

Testing to ensure integrity of risk management information

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30
Q

What are likely to be the main tasks of an overall risk officer?

A

Championing methodology
Managing risk management process
Bring together results for consideration of risk committee or board

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31
Q

What does CRO stand for?

A

Chief Risk Officer

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32
Q

In some cases, the CRO will also be the head of…

A

The internal audit function

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33
Q

What must be ensured when the Chief Risk Officer is also the Head of Internal Audit?

A

Roles clearly distinguished
Clear the ownership of risk management lies with management
Head of Internal Audit only responsible for overall risk management policy and reporting to the board
Situation should be approached with caution

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34
Q

The role of executive management at lower levels is to — the board’s risk policy into processes and procedures

A

Interpret

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35
Q

— has the primary responsibility of managing risk on a day-to-day basis

A

Management

36
Q

Management should or should not be seeking to eliminate risk?

A

Should not

37
Q

Rather than trying to eliminate risk, management should be…

A

Managing it down to an acceptable level as defined by the risk appetite

38
Q

Management play a key role in the identification of — and — risks

A

Threat and opportunity

39
Q

How May management identify threat and opportunity risks?

A

Risk workshops
Discussions with individuals
Assistance of internal audit function

40
Q

Having identified risks in their area, management must assess…

A

The impact and likelihood of the risks occurring

41
Q

The risks identified and assessed by management will usually form the basis of the local — —

A

Risk register

42
Q

Management should be involved setting and communicating the — —

A

Risk appetite

43
Q

The – — helps determine the level and extent of internal controls required

A

Risk appetite

44
Q

Management decide on the — — they will employ to manage risk

A

Risk responses

45
Q

Management must ensure they have put in place — mechanisms to show risks are being managed to an acceptable level

A

Feedback

46
Q

Ideally, feedback mechanisms should — when problems are about to occur

A

Predict

47
Q

Finally, management should — on the risk situation in their area

A

Report

48
Q

List the functional experts involved in risk management

A 
Occupational Health and Safety (OHS)
Quality assurance
Risk management
Insurance
Security
Business Continuity Management
Finance, Human Resources and IT
49
Q

The Health and Safety Executive (HSE) recommends a —, — — approach to health and safety

A

Reasoned, risk based

50
Q

Given its specialist nature, how is the OHS risk management process likely to be treated?

A

Separately from the general business risk management process

51
Q

The role of the quality assurance function is to promote what?

A

A process that helps focus on meeting customer requirements
Through the quality of all tasks
Carried out in the organisation

52
Q

Around what quality standard are many quality assurance functions based?

A

ISO 9001:2000

53
Q

For what is a separate risk management function responsible?

A 
Managing
Coordinating
And overseeing
The risk management policy and processes
On behalf of the board
54
Q

What are the two most important ways that internal audit provides value to the organisation?

A

Objective assurance that RM processes and internal control systems operating effectively
Assurance that major business risks are being managed appropriately

55
Q

The role of internal audit is primarily to provide assurances on what three areas?

A

Risk management processes (design and effectiveness)
Management of “key” risks
Reliable and appropriate assessment of risks and reporting of risk and control status

56
Q

Describe internal audit’s core role with regards to ERM

A

To provide objective assurance to the board on the effectiveness of risk management

57
Q

What are the key factors to take into account when determining internal audit’s role in ERM?

A

Whether activity raises any threats to independence and objectivity
Whether it is likely to improve risk management, control and governance processes

58
Q

What are the five roles with regard to ERM that internal audit OUGHT TO undertake?

A

Assurance on RM process
Assurance that risks correctly evaluated

Evaluating RM process
Evaluating reporting of key risks

Reviewing management of key risks

59
Q

What roles should internal audit NOT TAKE with regard to ERM?

A 
Setting risk appetite
Imposing RM processes
Management assurance on risk
Taking decisions on risk response
Implementing risk responses
Accountability for risk management
60
Q

What roles may internal audit legitimately undertake with regard to ERM provided appropriate safeguards in place?

A

Facilitating identification and evaluation of risk
Coaching management in responding to risk
Co-ordinating ERM activities
Consolidating reporting on risks
Maintaining and developing ERM framework
Championing ERM framework
Developing RM strategy for board approval

61
Q

On what will depend the extent of internal audit’s ERM consulting role?

A

Other resources available to board

Risk maturity of organisation

62
Q

In deciding whether ERM consulting services are compatible with internal audit’s assurance role, what is the key factor?

A

Whether internal audit function is assuming any management responsibility

63
Q

One of the safeguards for IA involvement in ERM is that it should be clear that — remains responsible for risk management

A

Management

64
Q

One of the safeguards with regard to IA involvement in ERM is that IA’s — should be documented in the audit charter

A

Responsibilities

65
Q

One of the safeguards with regard to IA’s involvement in ERM is that internal audit should not — any risks on management’s behalf

A

Manage

66
Q

One of the safeguards with regard to IA’s involvement in ERM is that IA cannot also give — — on any part of the ERM framework for which it is responsible

A

Objective assurance

67
Q

One of the safeguards with regard to IA’s involvement in ERM is that any work beyond assurance activities should be recognised as a — — and the implementation standards relating to such engagements should be followed

A

Consulting engagement

68
Q

In terms of risk management, each of the associated review functions needs to what?

A

Be clear about its role to avoid overlap and duplication

69
Q

As far as external audit is concerned, in what two areas of the effectiveness of the risk management process are they particularly interested?

A

Major risks facing the organisation

What is being done to manage those risks

70
Q

External audit may want to review the risk management process themselves, but they may seek to rely on…

A

Work carried out by other bodies within the organisation

71
Q

According to the Institute of Risk Management, what should an organisation’s risk management policy do?

A

Set out its approach to and appetite for risk
And its approach to risk management.
The policy should also set out the responsibilities for risk management
Throughout the organisation

72
Q

By what other terms are risk management policies known?

A

Risk strategies
Risk management strategies
Risk policies
Risk approaches

73
Q

A risk management policy is a — — — drawn up and/or endorsed by the board of directors

A

High level statement

74
Q

A risk management policy establishes, at a high level, what?

A

Overall approach to risk management
Risk appetite
Risk taking preferences
Risk response choices

75
Q

A risk management policy should be formally —

A

Documented

76
Q

A risk management policy should help establish an overall — within which the organisation should implement risk management

A

Framework

77
Q

The risk management policy should be — across the organisation

A

Communicated

78
Q

The risk management policy should be kept — to ensure its continued coherence and effectiveness

A

Current

79
Q

A risk management policy may contain a board level —

A

Endorsement

80
Q

A risk management policy may contain an introduction, setting out…

A

Overall purpose of risk management

Relationship to other policies

81
Q

A risk management policy may contain high-level parameters for risk a—

A

Appetite

82
Q

A risk management policy may contain statements in respect of risk p— in areas of business or service delivery activities

A

Preferences

83
Q

A risk policy may contain r— and r— in respect of risk management

A

Roles and responsibilities

84
Q

A risk management policy may contain the risk management — itself

A

Process

85
Q

A risk management policy may contain — and — guidelines concerning risks

A

Reporting and review

86
Q

A risk management policy may contain an e— mechanism in the event of risk management incidents

A

Escalation

87
Q

A risk management policy may contain a — detailing common risk language and defining terms to be used across the organisation

A

Glossary

88
Q

The — required to implement the organisation’s risk management policy should be clearly established at each level of management and within each business unit, team or function

A

Resources

Corporate Governance (11 decks)

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