Abbreviations Flashcards
(IACFA = I Am Control Freak Agent aka an RM)
5 Steps of Risk Management Process
Risk Identification: Examine Exposures, perils, hazards. Can include understanding of a company’s position and goals.
Risk analysis: Qualitative and quantitative analysis (#’s vs impacts that can’t be measured easily). Assessing potential impact of exposures on one’s business.
Risk Control: Any conscious action or inaction to minimize, at the optimal cost, the probability, frequency, severity, and unpredictability of a loss.
Risk Financing: Acquisition of external funds or allocation of internal funds to pay for losses.
Risk Administration: Ongoing implementation and monitoring of risk management programs, policies and procedures.
LUV D
4 Definitions of Risk in Risk Management
1: Chance or probability of loss (Likeliness of loss)
2: Uncertainty concerning a loss (Uncertainty concerning Loss)
3: Possibility of a variation of outcomes from a given set of circumstances (Variation of outcomes)
4: Difference between expected losses and actual losses. (Difference between expected and Actual)
PARTS
5 Techniques of Risk Control
Prevention
Avoidance
Reduction (in severity)
Transfer of Risk
Segregation / Duplication / Separation (Spreading exposure over different areas to reduce impact)
IB PPPP (I Be Peter Piper Picking Peppers)
Impacts of an Effective RM Program (6)
Identify Exposures and Opportunities (Effective change management, risk awareness, planning and networking)
Brand and Reputation Safeguarded (Good emergency response plans, business continuity Plans, company culture, outreach, community involvement)
Profitability Increases (Maintain / Minimize costs, effective claims management and expenses)
Protect Cash Flow and Assets (Minimize cash flow spikes and disruptions, effective claims management, good loss controls)
Productivity and morale Increases (well integrated loss controls, safety, building safe guards, operating procedures)
Processes, Quality, and Technology improvements (Good safety practices, well maintained equipment, use of effective technology)
GUTSEE
6 Types of emerging Risks
Geopolitical (Trade barriers, War)
Uninsurable Operations / Strategic (Supply chain weakness, worker turnover, application of emerging tech)
Technological
Societal
Economic
Environmental
RESP (get the RESPect from your employees)
Risk Management Manual - 4 Key Purposes
References for all procedures, safety protocol, messaging, reporting of incidents
Expectations for performance and cooperation
Support from Senior management for RM program to all employees
Procedures conveyed to employees to familiarize with
LIP
3 Ways and Organizational Culture is Formed
Lead / Incentivize / Repeat
ORC
Importance of ORC
- Operational Performance
- Risk Management Effectiveness
- Compliance
CEAT
4 Characteristics of an Effective ORC
(Characterstica of Effective org AT
Corporate Governance: Clear responsibility for Risk Management. Transparency and timeliness of risk info
Tone at the Top: Leaders acting in the way they command
Effective decision making
Authority and Accountability: Embedding RM abilities and responsibilities within the organization
LETS P JP
7 General Classes of Risk
Legal: Compliance or arise from common law and statutory liability.
Economic: Arise from operations or economic, financial marketplace, or entrepreneurial activities. Unemployment, bank failures, etc.
Technological: Arise from growing dependence upon and use of technology, as well as those created by emerging technologies.
Social: Arise from public relations, loss of reputation, damage to brand, cultural issues, social direction or social media.
Physical: Property, People or Information. Can be common perils or other less impactful events.
Juridical: Arise from jury or judge’s decision or from court or jury attitudes.
Political: Changes in the law, re-interpretations or changes in government policy, politics and diplomacy
FP POS + CAMPS
Factors That Influence Risk Appetite and Risk-Taking Ability
(5 Internal and 5 External)
5 Internal (FP POS)
- Financial Status
- Predictability of losses including frequency and severity
- Past Experience with Risk Taking
- Organizational objectives
- Stage of Orgs Life?
5 External Factors (CAMPS)
- Competition and the need to take a biz risk
- Alternatives for risk transfer available?
- Market Position
- Public Image
- Stakeholder perception of risk
FLL TPC SRT (I go to the Florida TPC in my SRT)
Intellectual Property Examples
Franchise
License
Leases and Leasehold Interest
Trade Secret
Patent
Copyright
Service Mark
Registered Mark
Trademark
TIP O BE tipped
HR Logical Class Exposures
- Temp employees, volunteers, leased employees
- Independent contractors
- Primary clients, suppliers, vendors
- Owners, partners, shareholders
- Board members / officers
- Employees
RIDDES
HR Logical Class Perils
- Resignation, termination, retirement
- Illness, on and off Job
- Death
- Disability, on and off job
- Employment Practices
- Strikes or labor unrest
DBCD
Duty Breach Caused Damages
4 Elements that Express Negligence (all need to be present)
Duty Owed: Duty must exist by defendant to the claimaint
Breach of Duty: Duty owed was not fulfilled
Causation: Breach of duty must be the proximate cause of the injury / damages
Damages: Actual damages or injury must be the result of the breach. Have to be able to show the damages
C LEG (C the LEG that this contract has to stand on)
4 Characteristics of an Enforceable Contract
- Competent Legal Parties
- Legal Purpose
- Exchange of Legal Consideration (money, goods, services exchanged)
- Genuine Agreement or Assent (willing buyer and seller)
D(3)IRP
Damages (3 Types)
- Compensatory (Make individual whole again
- Punitive (pay damages to punish the defendant)
- Liquidated Damages (contract stipulates the amount of damages to be paid)
- Injunction
- Reformation of Contract
- Performance
I PAPA
5 Types of Checklists
Industry Checklist: Specific operations, industries, and provide detailed listing of activities or situations found in industries.
Perils Checklist: ID original source or cause of loss once the exposure is identified and BEFORE a loss occurs. Used for companies willing to invest in preventing losses
Asset Checklist: Both tangible and intangible assets, best used for property and net income exposures
Preliminary Checklist: General info on the business, ownership, personnel, description of operations
Activities Checklist: Yes or no listing of various activities or situations in which an org is involved. Can group activities together based on biz class. Best for liability and human resources exposures.
PD DSC
5 Flowchart Analysis Methods
(Watch the Puck Drop with my DSC FAM)
- Product Analysis: assess ability of org to produce deliverables
- Dependency Analysis: examines all materials and activities required to complete a process
- Site analysis: selecting sites for operations
- Decision analysis: examine relevant information related to the decision
- Critical path analysis: dependency analysis that focuses on every key task necessary to complete a project
C IN FLIPS
8 Analytical Methodologies
Specialty Resource Method
Non-Insurance Contract Review Method
Insurance Policy Review Method
Insurance Checklist Method
Procedures and Policy Review
Compliance Review
Financial Statement Analysis
Loss Data Analysis
GG MST
5 Accounting Systems an RM May Encounter
GAAP
Government or fund accounting
Managerial Accounting
STAT
Tax Accounting
M BH FEAR
7 Property Valuation Methods
My biggest BH FEAR is that my property is undervalued
- Historical Cost: OG purchase price of property
- Book Value: Historical cost, less accumulated depreciation
- Market Value: Amount a willing buyer will give to a willing seller
- Replacement Cost: Amount to replace a damaged or destroyed piece of property with new property of like kind and quality with no regard for depreciations
- Actual Cash Value: The replacement cost less an allowance for depreciation or obsolescence
- Economic Value: future stream of income assigned to the property
- Functional Replacement Cost: the cost to repair or replace damaged or destroyed property with materials that are functionally the equivalent of the property. Ex: Old bank vault and tellers’ cages and stained glass windows, now operates as a hotel. FRV, ID materials are no longer available or cost prohibitive
CREDIT
6 Components of an Income Statement
Cost of goods sold (COGS)
- Direct cost of producing the goods or products sold. Materials and labor
- Understanding the calculation of the COGS is essential for evaluation of business interruption exposures and potential claims.
Revenue or sales
- Operating Revenue: Sales of goods and services
- Non-Operating income: Gains or losses from sources not related to the typical activities of the business or org (investments, property or asset sales, currency exchanges. etc.)
Expenses
- Operating expenses: Business incurs to keep it running such as wages, office supplies
- Non-operating expenses: not directly related to core business operations (ex: interest payments on debt, restructuring costs, inventory write-offs, etc)
Depreciation, depletion, amortization
Interest expense
- Reducing income from interest
Taxes
- Reducing income by taxes
(FLIMSCC)
7 Components of a Balance Sheet: 4 Assets // 2 Liabilities // Owners Equity
Fixed Assets (Asset #1)
- Long-term tangible property or equipment an organization owns and uses in its operations to generate income
Long-Term Liabilities (Liability #1)
- more than 12 months
Inventory (Asset #2)
- Raw Materials
- Work in progress
- Finished Goods
Marketable Securities (Asset #3)
- highly liquid securities such as stocks or bonds easily converted to cash
Stockholder’s Equity (Owners Equity #1)
- How much the owners of a company have invested in the business by investing money or retaining earnings over time.
Current Liabilities (Liability #2)
- Short term financial obligations that are due within one year (utilities, vendor contracts, etc)
Current Assets (Asset #4)
- All assets of an org that are expected to be sold or used as a result of standard business ops over 1 year
CRAP
4 Broad Categories of Stockholder Equity
-common shares of stock
- preferred shares of stock
- additional paid-in capital
- retained earnings
ERRN
4 Profitability Ratios
- Earnings Per Share = after-tax net income / # of shares outstanding
- Return on Assets = net income / total assets
- Return on equity: Net income / stockholder equity
- Net Profit Margin = Net Income / Sales
RAN LR (i RAN the LR’s and here’s the financial analysis)
Financial Statement Analysis: 5 Uses
Risk Tolerance and Bonding Capacity Assessed: How much an org is able to risk and how much they can bond
Asset Valuation Review (Balance Sheet): Discover undervalued assets and unreported assets
Net Income Loss Potential Assessed (Income Statement): Net income losses reduce capital to meet org goals. Planned expansion can defer
Liquidity and Financial Strength Assessed
- Balance sheet and liabilities of which they may be unaware. Liquidity key to lending institutions
Risk Using Financial Projections or Pro-Forma Statements Assessed: future looking docs. Forecast intentions and anticipated results
OF HS (the OF girl from HS is a broad)
4 Broad Categories of Risk for ERM
- Operational: Day-to-day affairs centered around principal operations
- Financial: Originate with decisions coming out of finance department
- Hazard: Addressed in TRM. Legal liability, property damage and natural catastrophes
- Strategic: Originate in Exec board
QB MAP O (Quarter Back the Map of the Org)
6 Impacts of ERM on an Org
- Brand and Rep protected
- Profitability increases
- Awareness of importance of RM
- Objectives supported through planning and budgeting
- Morale and Productivity increased
- Quality, process and Tech increased
(RICES)
5 Requirements of the ERM Implementation Process
Risk Assessment ERM
- Clear understanding of risk appetite and risk taking ability
Implementation Leader and Dedicated Cross-Functional Committees
- Dedicated leader
Common Language Regarding Risk
- Easy to understand across company
Established Framework (6)
Support from Senior Management Team
- Need active support and to provide incentive
STTRRM
6 Areas to Establish Framework in an ERM Implementation Process
(eSTTablish fRRaMework)
- Stakeholders that are key ID’d
- Training and education of employees
- timeframe and budget Established
- RM policy / procedure
- Roles, responsibilities, and accountabilities
- monitoring and review of the progress of implementation and modifying, if necessary.
