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RISK MANAGMENT > CH 2 > Flashcards

CH 2 Flashcards

1
Q

Why should risk management include measurements of benefits

A

This should be done so as to justify the use of resources and budgets

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2
Q

An large organizations common objectives are shared to various stakeholders and other people with interest in the organization’s performance including

A

-Shareholders
-Employs
-Customers
-Suppliers
-Banks
-Trade Unions
-Relevant government departments

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3
Q

What is a stakeholder

A

This is any individual/group/organization that can affect or be affected or perceive itself to be affected by a risk

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4
Q

What happens after objectives are set out

A

The organization will develop strategies and plans to demonstrate those objectives can be met

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5
Q

Strategic plans should not be adopted without considering risks involved, published plans only indicate some of the risks assessed because

A

The organization will not want to highlight its perceived weaknesses thus attempt to limit public discussions to well known documented concerns and usually only broad categories of risk will be mentioned

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6
Q

in pursuing their objectives, orgs will have a wide range of dependancies including

A

It could be other organizations, resources or markets they rely on

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7
Q

Why will the continuation of the dependencies be crucial

A

It will be crucial to avoid losses, weaknesses emerging and some cases survival of the organization

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8
Q

What does risk have the potential of threatening

A

Risks are anything with the potential to threaten the operations, assets and other responsibilities of an organization

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9
Q

What are some of the risks that the directors of an organization will consider

A

-market factors and trends
- potential competition moves
-possible technological change
-developing the need of the customer they serve

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10
Q

How can government affect achievement of a business plan

A

-They can take over business
Introduce regulatory legislation
impose financial controls
change taxation requirement

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11
Q

In what things do employees have legal rights on

A

-Maternity leave
-Sick pay PEnsions
Dismissal procedures
Minimum Pay
Holiday entitlement

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12
Q

How do organizations reduce the risk of costs arising from employee disputes

A

Careful attention to employment contract, rules of conduct, written clarification of responsibilities and suitable management training

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13
Q

What legal obligations do organizations have in respect to hiring

A

They must obtain and examine appropriate documents from prospective employees because the Immigration Act 2016 made it unlawful to employ anyone not legally entitled to wok in the UK

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14
Q

Anything that dissatisfies the employees is viewed as

A

It is viewed as a risk that threatens efficient operation and achievement of objectives

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15
Q

What does systematic racism affect

A

the individual performance and threaten achievement of organization objectives

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16
Q

what is a sound basis for effective assessment of racial discrimination risk

A
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16
Q

what is a sound basis for effective assessment of racial discrimination risk

A

The Race at Work Charter

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17
Q

What other risk regarding employees must the organisation consider

A

Behavior of employees, thus risk of fraud and general negligence should be considered and precautions taken against willful damage being caused by is gruntled staff

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18
Q

Why are organizations and their suppliers interdependent

A

This is because each must have confidence that the other party will perform

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19
Q

What does the organization require from the supplier

A

Good quality, on-time deliveries from the supplier

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20
Q

What does the supplier require from the organization

A

They require dependable payment from the organization

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21
Q

With supplier and Organization where does the risk lie in respect of perceived defaults

A

It will depend on the wording of the legal agreement between the two, thus organization must not assume that risk is automatically subcontracted with a task

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22
Q

Where does risks arise in the supply chain

A

Where goods and services need to be competetively priced

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23
Q

What does the Modern Slavery Act 2015 do

A

They make large organizations legally responsible for ensuring that slavery or human trafficking are not taking place in their organization or any of their supply chains

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24
Q

What are distributors known as

A

They are in effect wholesale customers

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25
Q

What could damage the distributor

A

Failure of one or more source of supply could damage the distributor in various ways, and can lead to the distributor failing altogether if an adequate replacement supplier is not found

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26
Q

What happens to an org if they fail to satisfy the statutory and other requirements set by regulators

A

This could lead to imposing of substantial fines, restricting business or closing down a business altogether

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27
Q

What would an adverse regulator comment do to an organization

A

It will invariably damage reputation

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28
Q

What can the media be viewed as

A

It can be viewed as wholesale distributor of the reputation of an organization and its officials

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29
Q

Why are Private investors more exposed to devastating loss than stock market investors

A

This is because stock market investors have more opportunity to spread their investment, thus their risks across different companies and markets

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30
Q

How can investors who have non monetary stake in an organization be at risk

A

This is because they stake their professional and personals reputations alongside that of an organization, they can too suffer loss together with any damage to the organization itself. It’s difficult and long process to rebuild this type of asset

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31
Q

To whom to banks and investor finance companies have interest with

A

They have interest in those organizations they have provided money too, and if the money is perceived to be a greater risk due to unexpected downturn in the org’s strength then the cost of borrowing can increase drastically

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32
Q

What happens if financier believe their is sufficient cause for concern with an organization

A

They can demand that assets that are security for loans be sold immediately and loans repaid

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33
Q

Under relationship between financier/bank and an organization(borrower) the decision to sell mortgaged asset lies on

A

The decision will be based on the interest of the financier and not the long term interest of the organization and its other stakeholders

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34
Q

Who are quoted shareholders

A

They come to an organization through stock markets in various forms

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35
Q

What does failing stock values lead to

A

It will increase the cost of borrowing capital

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36
Q

How does the failing stock values lead to increased cost of borrowing capital

A

If lenders perceive that relationship between total borrowings and net value of the company is narrowing they will demand higher interest rates and security

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37
Q

What else can affect shares

A

Single points of influence like credit rating agencies

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38
Q

Public and statutory interest regarding the quality of the environment will cover a very wide range including

A

It will cover pollution of physical environment, renewable sources of materials, water disposal, energy ,and water conservation, waveband utilization and fair trade issues

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39
Q

What are some examples of individual organization having their own stakeholder pressures

A
  • Political organisation have their own dependencies to protect
    -Industry pressure groups/ industry associations
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40
Q

Who else are a form of stakeholders

A

Competitors, if an org is weakened by an unexpected event then their might be competitors who will see this as an opportunity for themselves

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41
Q

AN organisation needs to consider the below that it needs to keep safe from damage and loss

A

-Safety of People
-Safety of assets
-Revenue and cash flows
-Legal obligations
-Delivery of promised goods and services

42
Q

What does safety of people entail

A

Organisation needs to ensure that they provide employees with a safe working environment and provide them with the necessary resources they need to carry out their duties effectively

43
Q

Main operational objective of an organisation is

A

To deliver the services and goods it has promised

44
Q

One of the challenges of Risk Exposure are

A

The identification of new types of risk

45
Q

How might impact of a present risk change

A

They might change as circumstances change, and new risks and types of risks continually emerge

46
Q

What are some of the risks present today that would not have been recognized 100years ago

A

-New Health Risk i.e Covid
-Technology Risks-Cyber crime
-Developments in Genetic engeering and stem cell research
-Effects of high density electromagnetic fields and solar flares
-Increase risk and changing methods of terrorism

47
Q

What is the emerging risks with the highest profile

A

Climate change

48
Q

What must risk managers incorporate in their reports to directors

A

specific climate change analysis due to the adverse effect climate change has to the world

49
Q

What implications have most far-reaching implications

A

Decisions taken to address climate change

50
Q

The institute of Risk Management established a special interest working group in 2019 published a guidance report on

A

The guidance report is focused solely on climate change to help risk managers see that climate change risk mitigation measures are built into their organization’s business plans

51
Q

Due to uncertainties in climate changed, organizations are recommended to look at climate change implications in how many horizons

A

In 3 horizons, which are short term 1-3 years, medium term 3- 10 years and longer term over 10 years

52
Q

What can happen due to lack of management control and ineffective administration

A

This can bankrupt large companies if policies and procedures designed in head office are not implemented abroad

53
Q

What are global risks

A

These are events and trends that have potential global impact

54
Q

What do global risks affect

A

They affect organizations with international operations and home organizations with international suppliers or market

55
Q

Global risks are divided into 6 general categories, which are

A

-Global economic risks
-Global environmental risks
-Global social risks
-Global technology risk
-Geopolitical Risks
-Political Risks

56
Q

What are global economic risks

A

These are financial issues that affect a particular market sector or global trading environments

57
Q

What are some examples of global economic risks

A
  • Oil price fluctuations
    -reduction in Chinese economic growth
    -the world banking crisis
58
Q

What does an attempt to manage global economic risk lead to

A

This causes government to alter their fiscal policies, organizations to reassess markets and price structures and consumers to alter their spending pattern

59
Q

What are global environmental risks

A

These can be natural phenomena, weather related or consequences of man made activity

60
Q

What are some examples of global environmental risks

A

Earthquakes,
Air pollution
Biodiversity loss
Hurricanes,
Tsunamis
Floods d
Draught
They have the impact of destroying assets and economic implications that can last for years

61
Q

What are global social risks

A

They arise from the ease with which people and ideas move around the world

62
Q

How are organizations affected by the global social risks

A

They may be affected by local government regulations attempting to mitigate various social risks by imposing penalties or censorships

63
Q

What are global technology risks

A

This describes events like internet or satellite failure leading to the breakdown of commercial distribution and customer service facilities

64
Q

What are examples of global technology risks

A

-Data fraud on a global scale
-Data loss on a global scale
-technological risks from new developments or
-technological risks from better understanding of current developments

65
Q

Geopolitical Risks

A

This arises when several nations disagree and in return causes tension and the risk of armed conflict, where a particular nation’s philosophy and behavior is seen as a general threat to others

66
Q

How are geopolitical risks managed

A

They are are usually addressed by diplomacy, reinforced by threats of economic or physical intervention, using either sanctions will affect any organisation with operations in the concerned area

67
Q

What are political risks

A

These are risks that stem from political activity by governments, but are not likely to provoke widespread immediate and united opposition

68
Q

Political issues mainly arise from

A

They arise from economic or social decisions, at times the effect are local and at times repercussions are felt in particular activities/b’ness sectors around the world

69
Q

How is a single point of failure created

A

Its created by concentrating information in a central computer system with a common communication system servicing both internal and customer -facing staff

70
Q

What does concentration of data also cause

A

This causes communication problems e.g loss of communication with call center could deprive an organisation of its customer information

71
Q

What are first line defense for cyber crime

A

Using the latest operating system, installing security software from a reputable source, making sure available security related software updates are installed, and encrypting data streams

72
Q

Why is staff training essential in cyber crime

A

This is essential as malicious software is often sent as attachments to seemingly harmless messages or emails

73
Q

New technology offers unlimited opportunities like

A

-flexible operation and application
-speed of data sorting and distribution
-worldwide connectivity through internet and mobile phone networks

74
Q

What is the downside of new technology

A
  • the need for increased physical security
    -Protection from human interference
75
Q

Terrorrst risk identification, assessment and prevention is the responsibility of

A

This is the responsibility of the police and intelligence services, sifting information from a variety of UK and overseas sources

76
Q

What do risk professionals need to identify emerging risks

A

-Knowledge
-Imagination

77
Q

Risks professional need to keep up to date with

A

-current development
-proposals for change in their local environment
-information about their stakeholders
-their expectation
-new legislation and regulations
-current affairs
-professional best practice guidelines

78
Q

The risk management process involves

A

-Establish the context
-Identify risks
-Analyze Risks
-Evaluate Risks
-Treat Risks

79
Q

Good Risk Management will avoid

A

It will avoid unpleasant surprises by recognizing and managing risks before unexpected damage occurs. And also examine business opportunities that lie in careful understood risk taking

80
Q

In the risk management process, what does the “establish the context entail”

A

This will assist with a creating a clear understanding of the objective, structure and culture of an organisation before identifying risks

81
Q

The process of establishing the context results in

A

The development of a risk management philosophy on which all future risk management decisions will depend

82
Q

In the risk management process, what does the “Identify Risks “entail

A

Here the organisation understands what threats there are, what might make it more difficult to achieve stated objectives or prevent achieving them altogether

83
Q

In the risk management process, what does the “Analyze Risks “entail

A

This entails understanding the potential within those threats for damage to the organisation and its stakeholders

84
Q

What are the three questions asked during analyze risks in the risk management process

A

-Could it happen?
-How bad would the loss/damage be?
-How often could it happen?

85
Q

In the risk management process, what does the “Evaluate Risks “entail

A

This decides what risk levels (single and cumulative) are acceptable and thus identify those risks that are at a level or frequency that are unacceptable to the organisation

86
Q

In the risk management process, what does the “Treat Risks “entail

A

This entails steps that must be taken to control or limit the impact of those risks deemed unacceptable

87
Q

Under Treat risks in the risk management process what are some appropriate actions that may be appropriate

A

-reduce likelihood/frequency
-reduce impact ,whether it’s human/operational/financial
-transfer the risks to another organisation
-prepare for the incident by continuity planning

88
Q

What are some of the on going activities at all stages of risk management process

A

-Monitor and Review
-Communicate

89
Q

What does monitoring and reviewing entail in the risk management process

A

This involves updating and maintaining the agreed risks levels, risk analysis and evaluation a the organisation changes and evolves

90
Q

Risk management procedures are essential ingredient of

A

Essential ingredient of effective quality control

91
Q

Risk management procedures are assessed for

A

They are assessed for quality and quality control procedures assessed for risk

92
Q

Information on risk and risk changes is essential for

A

It’s essential for a wide range of planning, investment and management activities

93
Q

Communication of risk must be

A

-properly organized
-effectively controlled

94
Q

What is the highest level of any organisation

A

The board of directors, who has legal responsibilities for the welfare of their organisation and its stakeholders

95
Q

What does the directors’ statement of risk philosophy define

A

IT defines the different levels of perceived threat, likelihood and impact of each requiring different responses, this statement can embrace how risk is monitored and reported

96
Q

The directors’ statement of risk needs to be communicated through

A

It needs to be issued formally and communicated across the organisation as a base point for individual risk work

97
Q

The organisation structure is also described as

A

The risk architecture of an organisation

98
Q

The risk architecture of an organisation defines

A

This specifies the roles and responsibilities of key people involved together with communication and risk reporting structure

99
Q

Why are anecdotes in informal discussions dangerous

A

They are dangerous as they can miss key exposures

100
Q

Who are best able to understand the threats anecdotes carry

A

Individual function Managers

101
Q

How does process of identifying risks starts

A

The debate starts with clear objectives, with a definition of the tasks and contributions from all those that can add to the debate

102
Q

When do we decide on risk levels

A

Once risks are thoroughly understood then we decide on which risk levels whether single or cumulative are acceptable

103
Q

Decision on acceptability must be in line with

A

The must be in line with risk appetite and risk tolerance levels set by senor management of the organisation

RISK MANAGMENT (5 decks)

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