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RISK MANAGMENT > CH 3 > Flashcards

CH 3 Flashcards

1
Q

What are board of directors

A

This a small group of people who accept certain roles and responsibilities in line with corporate legislation

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2
Q

Why does board of directors exist

A

It exists to watch over an organisation and give it overall direction, they must act in a lawful manner to further interests of shareholders

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3
Q

What does board of directors do

A

It sets clear objectives for executive management and arranges necessary funds and facilities

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4
Q

The companies Act 2006 requires directors to have regards amongst other to

A
  • long term consequences of their decisions
  • interest of the company’s employees
    -need to foster the company’s b’ness relationships with suppliers/customers and others
    -impact of the company’s operation on the community and environment
    -desirability of maintaining a reputation for high standards of b’ness conduct
    -need to act fairly between members of the company
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5
Q

The UK corporate Governance Code charges directors with

A

-reporting to shareholders on their stewardship
-supervising management of the business
-setting the company’s strategic aims and providing leadership to put them into effect

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6
Q

The UK Corporate Governance Code is based on

A

It’s based on principle of accountability, transparency, probity, and focus on the sustainable success of an entity over the longer term

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7
Q

in the The UK Corporate Governance Code ,under accountability

A
  • the board is responsible for determining the nature and extent of significant risks it’s willing to take in achieving it’s corporate objectives
    -the board should maintain sound risk management and internal control systems
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8
Q

Most board of directors have 5 responsibilities which are

A

-Regulations of the executive to ensure they uphold shareholders interest and laws governing conduct of b’ness
-Approving the report and accounts, annual budget, strategy and other important plans
-Selecting, appraising and rewarding CEO and ensuring succession planning is actively addressed
-Supervision of the process of risk management and ensuring necessary actions are adopted to mitigate against those risks
-Ensuring that company integrity and principles are upheld on critical matters

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9
Q

When does a board delegate some of its responsibilities

A

They do so after considering ownership ,objectives ,organisation structure, personnel and the interest to other stakeholders

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10
Q

What’s a common approach within which different board go about supervising risk management

A

They appoint a risk subcommittee

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11
Q

How does a board select members of the risk subcommittee

A

Board will carefully select individuals with appropriate risk backgrounds from executive and its own members to constitute the risk subcommittee, they may also have additional members from outside the board and the executive.

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12
Q

What does the board delegate to the risk subcommittee

A

It will delegate its risk assessment and risk management supervision responsibilities

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13
Q

What is the responsibility of the risk subcommittee

A

They are under pressure from the board to demonstrate that risk controls are implemented and effective. they command full board attention when it has issues to resolve

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14
Q

With whose authority does the risk subcommittee act with

A

They act with board authority, setting policies and making risks decisions as required. They are required to seek full board approval for policies and decisions that affect the organisation in a major way

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15
Q

The remit for a board risk subcommittee will include

A

This will include compliance with appropriate legislation and regulation relating risk management functions of corporate governances

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16
Q

What is the risk subcommittee responsible for implementing

A

-Risk Policies
-Setting up and monitoring systems to identify and asses risks
-specifying risks apetite
-reporting on risk management for the report and account

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17
Q

What is the risk subcommittee responsible for reporting

A

it will report on
-current risk issues
-profiles
-investigate and advise on risks associated with proposed new ventures

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18
Q

What can the risk subcommittee technically submit

A

It can only submit recommendations for approval, they will proceed with general board authority on everything except the very largest and important issues and will submit summary reports of its activities for discussions at full board meetings. The full board then votes to accept the report

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19
Q

what is the first and most important task of a risk subcommittee

A

To publish and maintain the overall risk management philosophy of the organisation

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20
Q

What does the risk management philosophy prepared by risk subcommittee set out

A

it will set out the organization’s commitment to risk assessment and management, and what it expects to achieve by risk management

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21
Q

the risk management philosophy prepared by risk subcommittee identifies

A

It identifies major threats to the organisation as seen by the board and strategy for dealing with the threats

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22
Q

the risk management philosophy prepared by risk subcommittee outlines

A

It outlines the management structure and control by which it means to supervise risk management activities

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23
Q

What is the purpose of the risk management philosophy

A

To provide a consistent framework for ongoing risk work and convince stakeholders that risk is being effectively managed

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24
Q

For an organisation subject to regulatory regime what is the risk management philosophy

A

This is a key document to fulfil the requirement to demonstrate proper corporate governance

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25
Q

What is corporate governance

A

This is the way the board sets up an organisation to achieve its objectives together with the systems it puts in place to manage and control that organisation

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26
Q

What follows with a strong corporate governance arrangement

A

the board will have good timely information on all aspects of the organisation and be in full control of its operations

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27
Q

What are some common corporate governance codes of practices

A
  • companies should respect shareholders rights and help them to exercise these rights
    -Companies should recognize they may have obligations to other stakeholders
    -The board needs the skills and understanding to review and challenge management performance
    -Companies should have a code of conduct for their directors and managers that promotes ethical and responsible decision making
    -Companies should make public the roles and responsibility of the board and management to provide shareholders with a level of accountability
    -Companies should have procedures to independently verify their financial reporting
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28
Q

In UK and US codes of corporate governance focuses on

A

It focuses more on the interest of shareholders

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29
Q

In Japan and continental Europe S codes of corporate governance focuses on

A

They give more emphasis on interest of other stakeholders

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30
Q

What are the main standards of codes of practice for corporate governance

A

UK corporate Governance Code
Sarbanes- Oxley Act 2000(USA)

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31
Q

What does the UK corporate Governance code provide

A

it provides a code of best practice for companies listed on the London Stock exchange

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32
Q

Who oversees the UK corporate Governance code

A

The Financial Reporting Council (FRC ), this code is reviewed every two years with minor adjustments

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33
Q

Why has the 2018 UK corporate Governance code been re written

A

its substantially rewritten to improve readability and sharpen its focus. It’s principle based making it more flexible than the US one

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34
Q

Initially the UK corporate Governance code was voluntary however what did the FCA implement

A

The FCA listing rules the UK financial regulator requires public listed companies in all industries to disclose in their annual report and accounts how they have complied with the code or explain how they have not complied with its recommended practices

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35
Q

What are the recommended practices listed in the UK corporate Governance code and in more detailed guidance on board effectives which it accompanies, include

A

-board to provide leadership, define purpose, values, strategy and make resources available
-board to consider the views of all stakeholders both shareholders and workforce
-independent non executive directors to be identifies and form at least half the board
-a separation of the roles of chair and ceo
-annual evaluation of the board including composition/diversity/performance, with an effective succession plan in place
-remuneration policies should be transparent/fair and aligned with long-term objectives

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36
Q

What are particularly important recommended practices on

A

On competence, risk management and internal control

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37
Q

Recommended practices on competence, risk management and internal control specify that boards of listed companies should

A

-be individually and jointly competent, and possess the relevant skills and knowledge to perform their roles effectively
-conduct a regular, thorough review of risks to which the company is exposed including frequency and severity
-specify the company’s risk apetite
-agree and implement board policies on risk and control
-establish prudent and effective internal controls
-review the effectiveness of the company’s system of internal control and risk management and formally resort these at least annually

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38
Q

What does the The July 2018 UK Corporate Governance Code aim to promote

A

It aims to promote transparency and integrity in business for society as a whole and requiring the board to interact with all stakeholders particularly workforce

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39
Q

What does the The July 2018 UK Corporate Governance Code aim to strengthen

A

It aims to strengthen the confidence in the way UK businesses are run and promote the UK as a good place to work, invest and do business.

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40
Q

What has the new code doen to alleviate current concerns

A

The code tightens recommendation on board succession and diversity and sets out principles for remuneration awards

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41
Q

Strict compliance with corporate mandator is mandator under listing rules for

A

Public companies only

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42
Q

Other legislation and guidance requires all large public and private companies to

A

They require large public and private companies to inclide certain information in their annual reports and on their websites
-They also require including a statement disclosing their corporate governance principles for large private companies

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43
Q

The Sarbanes- Oxley Act 2002 was named after

A

Senator P Sarbanes and Representative M. Oxley, a.k.a SOX

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44
Q

What did The Sarbanes- Oxley Act 2002 establish

A

It established enhanced standards for all US public companies listed by the US financial regulator i.e US Securities and Exchange Commissions(SEC) and the accountancy firm that audit them

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45
Q

Why was the The Sarbanes- Oxley Act 2002 bought in

A

It was bought in to clean up a stock market that had shaken by the internet bubble together with succession of scandals involving major corporations, auditors and securities analysis

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46
Q

How are the rules under the US The Sarbanes- Oxley Act 2002

A

It’s rules-based and has much stricter enforcement that the UK Corporate governance code, it carries heavy fines and long term imprisonment for those who fail to comply with its requirement

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47
Q

What are the eleven sections or titles of the SOX

A

-1 Public company accounting oversight board
-2 Auditor independence
-3 Corporate responsibility
-4 Enhanced financial disclosures
-5 Analyst conflict of interest
-6 Commission resources and authority
-7 Studies and reports
-8 Corporate and criminal fraud accountability
-9White collar crime penalty enhancements
-10 corporate tax returns
-11 corporate fraud and accountability

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48
Q

What is the public company accounting oversight board

A

This is a quasi public agency, established to provide independent regulation of auditors, defining the procedures for compliance audits and enforcing the specific mandates of SOX

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49
Q

How are standard for external auditors independence set under Title II

A

Under this title standards for auditor independence are set, including forbidding them to undertake consultancy work on audited clients

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50
Q

What does Title III of the corporate responsibility entail

A

This mandates that senior executives take individual responsibility for the accuracy of financial reports and the penalties for non compliance

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51
Q

What does Title IV- Enhanced financial disclosures

A

Deals with enhanced reporting requirements for financial transactions i.e off balance sheet transaction and stock transaction of senior management

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52
Q

What does Title V analyst conflict of interest entail

A

Code of conduct is set for security analyst including disclosures of conflict of interest

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53
Q

What does Title VI commission resources and authority entail

A

Defines the authority of the SEC, to censure or ban securities professionals from practicing as a broker, adviser or dealer

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54
Q

What does Title VII studies and reports entail

A

Describes how investigations are to be conducted for enforcing violations of the ACT by public companies or auditors

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55
Q

What does Title VIII Corporate and criminal fraud accountability entail

A

It sets criminal penalties for fraud by manipulation, destruction or alteration of financial records and provides protection for whistle blowers

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55
Q

What does Title VIII Corporate and criminal fraud accountability entail

A

It sets criminal penalties for fraud by manipulation, destruction or alteration of financial records and provides protection for whistle blowers

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55
Q

What does Title VIII Corporate and criminal fraud accountability entail

A

It sets criminal penalties for fraud by manipulation, destruction or alteration of financial records and provides protection for whistle blowers

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56
Q

According to the title IX what has happened to white collar crimes penalties

A

The criminal penalties and conspiracies has increased

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57
Q

Under Title X, who should sign corporate tax returns

A

The CEO

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58
Q

What does title XI of corporate fraud and accountability entail

A

Corporate fraud and tampering with records are identified as criminal offences.

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59
Q

What is the SEC empowered to do in regards to corporate fraud

A

They can temporarily freeze large or unusual payments

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60
Q

What does the SOX put more emphasis on than the UK’s corporate governance code

A

Less emphasis is put on risk managmemnt and way more on ensuring the validity of financial reports to the shareholders

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61
Q

What is one of the negative drawbacks of the SOX

A

The compliance has proved costly to implement and also the Act deters smaller organisation from contemplating listing on they New York Stock Exchange

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62
Q

Section 404 of the SOX is often singled out for analysis, why is that so

A

This is because the section requires that publicly traded corporations use a formal risk control framework and that management and the external auditor report on the adequacy of internal control on financial reporting

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63
Q

When an organisation fails, how are investigations focused

A

Investigations are more focused on whether or not expected standards were upheld

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64
Q

When an organisation fails what are lawyers focused on

A

They have a benchmark against which to pursue claims/damages for mismanagement and subsequent stakeholder loss

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65
Q

When an organisation fails what are prosecutors of executives focused on

A

They highlight risk management deficiencies

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66
Q

What are internal controls

A

These are devices and procedures put in place to help ensure that management objectives are met

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67
Q

What are some examples of internal control activities

A
  • Approvals
    -Authorization
    -Reconciliations
    -Separation of duties
    -Physical Control
    -IT control
    -Peer Reviews
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68
Q

What is fundamental to effective internal control

A

The environment in which control is required

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69
Q

What attributes towards the environment for effective internal control

A

-Standards,
-Philosophy
-Values of an org
-The attitude
-competence of managers and staff

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70
Q

What are procedures for deciding how risks should be managed

A

Risk identification, analysis and assessment against objectives

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71
Q

Why is information recording and communication important in internal control

A

This is necessary to coordinate activities and produces consolidated risk report to help the board manage and direct

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72
Q

What does internal audit provide

A

It provides independent assurance on control and recommend improvement where applicable

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73
Q

Why is monitoring necessary

A

TO check procedures are both efficient and effective

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74
Q

When are internal controls particularly effective

A

When a procedure is established with well defined objectives and specified rules

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75
Q

In auditing and accounting what are internal controls

A

This is the process designed to help an organisation accomplish specific goals or objectives

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76
Q

What is one of the most commonly used internal control framework

A

The one published by Committee of Sponsoring organisation of the Treadway commission (COSO) in connection with risk classification

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77
Q

Why do US organisation tend to prefer COSO

A

This is because compliance with it satisfies the US legal requirement for financial reporting as set out in SOX

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78
Q

How does COSO define internal control

A

This is the process effected by board of directors, management, other personnel of an org to provide reasonable assurance regarding achieving of objectives in the below categories
- Effectiveness and efficiency of operations
-Reliability of financial reporting
-Compliance with applicable laws and regulations
-Safeguarding of assets

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79
Q

Under COSO it defines internal controls as having the below five essential components

A

-Risk assessment
-control environment
-Control activities
-Information and communication
-Monitoring activities

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80
Q

What are other tools that a risk manager has at its disposal

A

Risk transfer
insurance
Continuity plans

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81
Q

when is the approach and process of Control Self Assessment(CSA) is usually established

A

It’s established before hand normally by risk management staff in conjunction with an audit

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82
Q

What does Control Self assessment require from operational management and staff

A

They require them to self review or elf- audit risk control for which they are responsible and to communicate results up through the appropriate management line

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83
Q

Control Self assessment is used in combination with

A

It’s used in combination with monitoring activities

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84
Q

Control Self assessment is subject to

A

It’s subject to periodic audit to check if its delivering trusted and useful information

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85
Q

Control Self assessment is a useful way of ensuring

A

It’s a useful way of ensuring compliance with corporate standards right across an organisation, this includes risk aspects of legislation and other compliance needs

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86
Q

Control Self Assessment CSA was originally designed for

A

It was designed for financial controls to support regulatory compliance

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87
Q

What does Control self assessment enable

A

Risk managers to understand and produce reports on current activity that may be required by the risk department, insurers, audit committee and by external regulator

88
Q

Risk management in an org is an integrated process aimed at

A

It’s aimed at identifying and controlling risks that may affect the achievement of corporate goals

89
Q

Responsibility of risk management lies on

A

It lies with the board, thus a need for clear communication and reporting structure

90
Q

Why does the board have responsibility of risk management

A
  • So as to assure the board the system is working as intended
    -So as to enable the board to exercise the necessary control
91
Q

an effective risk management will depend on

A

-clear statement of objectives from board of directors
- a systematic approach to risk identification in changing circumstances
-an analysis of risk against criteria set by the board
-effective management of selected risk

92
Q

What is enterprise risk management(ERM)

A

Structure of an org set up to control risk management across the whole organisation

93
Q

What does the Enterprise Risk management (ERM) system allow

A

Allows all risk of an org to be looked at together and from different perspectives, also known as holistic approach

94
Q

Regular audits of ERM are important because

A

To provide assurance that processes function to specified standards and also monitor results

95
Q

What are benefits that successful risk management provide

A

–better informed strategic decisions
-successful management of change and higher operational efficiency
-reducing borrowing costs
-improving competitive advantage
-org expects more accurate financial reporting

96
Q

why are small companies less likely to use ERM

A

They may not have the resources to do so and may not have pressure from outside to confirm

97
Q

A successful Enterprise Risk Management has 2 key elements, which are

A

1.Workable framework clarifying functional responsibility and interactions, and the systems for internal communication, reporting and control
2.Personalizing this framework is a set of terms reference for key staff

98
Q

What does the ERM show

A

It shows how essential functions of an org combined to create an integrated system for managing risk across the whole org

99
Q

What does the Enterprise risk management specify

A

IT specifies required information flows and procedures for achieving them

100
Q

What does the Enterprise risk management identify

A

It identifies where overlapping responsibilities might occur and together with job descriptions and clarify who is responsible for initiating action plans and ensuring their success

101
Q

What will an audit function establish

A

It will be trying to establish that ERM systems and procedures are effective

102
Q

What will a compliance function establish

A

It will look for assurance that risks threatening compliance are being adequately identified and controlled

103
Q

What is GRC

A

Governance, Risk and Compliance (GRC)

104
Q

What does GRC enable in audit and compliance

A

It enables compliance and audit to work closely together using the same strategis,processes and technologies

105
Q

Why do organizations with separate risk management, compliance and audit activities have difficulties providing coherent information to the board to improve corporate governance

A

This is because different vocabulary, approaches, systems and documentation make it difficult to maintain a clear view of risks and their dependencies especially for the risks that are cross departmental boundaries

106
Q

What is an objective of GRC

A

To rationalize information gathering and processing structures using common technology to capture store and process information

107
Q

Why does GRC require organisation-wide training

A

This is required so as to introduce a common vocabulary across all risk management and assurance functions

107
Q

Why does GRC require organisation-wide training

A

This is required so as to introduce a common vocabulary across all risk management and assurance functions

108
Q

When will there be less room for misunderstanding and more scope for consolidating information from risk audit and compliance

A

When there is a defined integrated architecture for information processing, supported by common GRC software technology, risk, audit and compliance work with an agreed common database. This becomes easier to identify trends, as monitoring and review become more efficient

109
Q

When can the GRC be introduced

A

Only when the overall designed is completed and approved can the GRC system and procedures be introduced progressively at unit/operational level

110
Q

How is GRC expected to improve governance and efficiency

A

It does so by aligning strategy, processes, technology and people

111
Q

in GRC environment how is risk management considered

A

it’s no longer considered in isolation from audit and compliance activities as it must share the same technology and procedures, but the principles and processes of risk management activity still apply

112
Q

Why is ERM a dynamic management system

A

It’s a dynamic system which states that people be organized and trained to carry our delegated tasks within specified boundaries and specified communication and reporting channels

113
Q

ERM system design takes place in what environment

A

In an environment that is subject to continual change

114
Q

In a typical ERM system a group risk management would be responsible for

A

-setting up and maintaining ERM framework
- managing all risk management functions within the group
The head of all the function called chief risk officer or group risk manager

115
Q

How does The chief risk officer fulfill their responsibilities

A

They do so through a number of subordinate risk officers, each with a designated are of interest and specific tasks to address. IF the organisation is large number of risk officers could be supervised by an immediate risk manager if appropriate

116
Q

What does the board need to ensure to maintain standards of good corporate governance

A

The board will need to be sure that risk management functions are carried out as they intended

117
Q

A typical ERM framework might interpose what a group to maintain standards of good corporate governance

A

a group audit function between the risk management function and the boards

118
Q

What will be the task of group audit function imposed on a typical ERM framework

A

They will carry put independent monitoring and performance measurement and are responsible for audit all risk management activities as well as for internal control and other aspects of corporate governance

119
Q

When an org is closely supervised or regulated by government rules, they run a risk of losing their license, what can an org do to ensure strict compliance

A

The org can form a separate group compliance function to manage risk threatening compliance with regulations, that operates at the same level as group risk management but only responsible for risks that fall within compliance remit

120
Q

How do boards share their workload

A

They do so by appointing subcommittee to carry out certain aspects of their work

121
Q

The subcommittee appointed by board comprises of

A

It comprises of board members with appropriate expertise and other expert representative anywhere within the organisation. E.g Risk subcommittees and audit subcommittees

122
Q

The subcommittee appointed by board comprises of

A

It comprises of board members with appropriate expertise and other expert representative anywhere within the organisation. E.g Risk subcommittees and audit subcommittees

123
Q

What is a committee form a management point of view

A

A specified group of people often from different functions who meet at regular intervals in a controlled environment to exchange info and coordinate actions

124
Q

The risk subcommittees and audit subcommittees are independent information channels to the board, this helps with

A

This helps with preventing the board on only getting one sided view of operation from individual function or the CEO

125
Q

what do committees attract compared to other more passive forms of communication like shared database or reports

A

they attract being able to encourage dialogue and initiative

126
Q

how may the board have further independent information channel

A

If they have an external auditor employed

127
Q

How does the ERM affect an organisation

A

IT affects an organisation at every level, function and operational unit of an org and is clearly fundamental to the way an org goes about achieving its objective

128
Q

Large org are concerned with which types of audit process

A

2 types, internal and external

129
Q

Who conducts external audits

A

They are conducted by separate professional to give independent assurance to stakeholders that published information conforms to specific standards and is factually correct

130
Q

How are internal audits carried out

A

They are carried out within an org to provide assurance to the board that approved systems and procedures are operating as intended

131
Q

according to the IIA what is the aim of internal audit

A

To evaluate and contribute to improvement of governance, risk management and control process using a systematic and discipline approach

132
Q

From a board point of view what is the purpose of internal audit

A

To provide independent assurance that specified functions and procedures are operating effectively and point out improvements that will enhance corporate governance capability

133
Q

Before starting with risk malmanagement audit what must audit team do

A

They will have to familiarize themselves with risk management framework, by understanding terms of reference for risk management function and be quite clear about its objectives

134
Q

Generally what is the audit team to see in the risk management team

A

They are looking to see if appropriate procedures are in place and being followed and if the whole risk management system is meeting requirements of the board and consider if recommendation for improvement need to be made

135
Q

what will the audit team consider when deciding whether enterprise risk management systems and procedures are effective

A

-significant risks are being identified and assessed, especially those risks that could threaten the existence/success of an org
-appropriate risk responses are selected in line with risk apetite decided by the board
-relevant risk information is captured and communicated in a timely manner across the org and enable staff/management/the board to carry out their responsibilities

136
Q

What risks will the audit team concentrate on

A

They will concentrate on those risks that affect achievement of stated objectives

137
Q

Main purpose of internal audit of risk management is

A

To provide independent assurance to the board that an effective ERM system is in place and operating effectively

138
Q

What differentiates risk management team from audit team

A

Responsibility, risk management function is responsible for setting up and maintaining an effective risk management system and responsible for results it achieves, but audit function just monitors comments and advises and does not make risk management decision or does not take responsibility for any risk management actions

139
Q

What is the ole of an audit team in risk mangement

A

Advisory work, they can be harnessed as consultants but must avoid line management activities

140
Q

Auditors must be

A

Independent advisors

141
Q

for auditors how should their investigation, observations, and recommdations be

A

Investigations must be independent, Observation clearly objective and recommendation purely for advise

142
Q

How can auditors be criticized

A

They can be criticized as being too closely involved or being distance and out of touch

143
Q

A professional and competent audit is considered as

A

This is a powerful check on the operations it examines, and will help improve the effectiveness of the risk management process

144
Q

Typically what do large organisation set out to do

A

They set out to act lawfully and uphold moral values

145
Q

What must compliance keep up in an org

A

It must keep up to date with existing and new legislation affecting any orgs operation

146
Q

What does compliance provide

A

It provides policies, guidance, training and advise on compliance issues and assurance that suitable compliance controls are in place and effective

147
Q

What is compliance responsible for if an org has published code of conduct

A

They are responsible for making new employees aware of expected standards

148
Q

What is the head of group compliance responsible for

A

They are responsible for identifying and evaluating all risks that threatened to result in non -compliance

149
Q

The board can appoint a compliance subcommittee to fulfill compliance responsibilities, however the board can avoid appointing a second subcommittee for compliance by

A

They can do so by having compliance report to the audit subcommittee putting the emphasis on compliance system rather than individual risk control

150
Q

What is the task of the head of group compliance

A

They are responsible for identifying and evaluating all risks that threatened to result in non- compliance and provide assurance that rusks are being adequately controlled

151
Q

Who does the head of group compliance have direct access to

A

They have direct access to chairperson of the board

152
Q

Compliance activities are a subset of

A

They are a subset of audit and risk management activities concentrating on more important risks

153
Q

What are potential conflicts of audit, risk management and compliance activities working together in a large group

A

-Line managers will be tired with 2/3 sets of people asking the same questions
-all 3 functions may argue over ownership and priorities of individual risks
-Duplicate records may be kept and objective decision making prejudiced by internal professional rivalry

154
Q

Effective risk management will heavily depend on

A

It will depend on the ability of the central risk management professionals to communicate with and persuade their management colleagues to treat risk in a coordinated manner. And require them to treat risk in accordance with the senior management expertise

155
Q

responsibility of risk control through out an org lies on the

A

It lies on the board of directors

156
Q

Board of directors will appoint a risk subcommittee in fulfilling heir responsibilities for risk management, what will this subcommittee promote

A

It will promote policy directives and also provides a forum for resolving inevitable differences in attitude and priorities between managers

157
Q

How will risk subcommittee set out structure in which they intend to manage risk

A

In a written document available for general reference, also known as risk management architecture

158
Q

what does risk management architecture describe

A

It describes the risk management structure of the org, laying out lines of communication for reporting risk management issues

159
Q

Documents describing the risk architecture can be called

A

-Risk Strategy
-Risk Structure
-Risk Governance

160
Q

Document describing the risk architecture will as minimum

A

-specify board of directors or subcommittee responsible for risk management
-state in general terms how risk is perceived
-specify the roles and responsibilities of any senior risk professionals or departments

161
Q

what other things should risk architecture desribe

A

-define general framework for identifying/evaluating/reporting risks
-specify an authority to approve risk management related aspects of procedures
-clarify the role of risk committee
-lay down guidelines for auditing and assurance

162
Q

How often should risk management architecture document be reviewed

A

It should be reviewed at least every one or two years to reflect major changes in an org or its environment

163
Q

What is a risk management framework supported by

A

It’s supported by individual job descriptions that set out duties and responsibilities of individual roles

164
Q

Risk management framework are designed to ensure

A

The management decisions are based on good and consistent risk information with sound understanding of possible consequences and likely outcomes of alternative course of action

165
Q

In their terms of reference what is the head of department primarily responsible for

A

They are responsible for managing operational risks and promoting risk awareness. and identifying, assessing and prioritizing current and emerging risks in their areas, they will clarify risk strategy, explain the board’s attitude to risk and implement risk management process in their department

166
Q

individual job description and personal objectives include suitable risk elements so that staff

A

-recognize and understand risks that relate to their individual roles and activities
-appreciate how risk management contributes to successful achievement of objectives
-clearly understand their personal responsibilities for reporting and managing risks

167
Q

What happens if the risk management process identifies a risk that needs to be actively managed

A

The framework will specify that this needs to be assigned to an individual risk owner, and they will be responsible for assessing and managing this organization’s response

168
Q

ERM system and corporate governance requirements both depend on

A

They depend on effective risk management frameworks

169
Q

What do formal risk identification, analysis and control expected to contribute

A

They contribute to strategic decision making as well ass reducing consequences of risk

170
Q

if the head of ERM function is not a board member then who is more appropriate

A

The position to be sufficiently close to board level to reflect board authority and provide easy and regular access to board members

171
Q

Who is chief risk officer

A

The most senior professional risk manager in an org

172
Q

chief risk officer can contribute in which decisions

A

They can contribute in decisions regarding the direction an org is to follow and will be intimately involved in details of strategic plans

173
Q

The chief risk officer will be responsible for

A

-establishing and maintaining effective ERM framework in line with risk subcommittee recommendations
-setting detailed targets and objective within the board remit
-demonstrating whether those objectives has been met

174
Q

what is a crucial objective of chief risk officer

A

To improve risk awareness in the org

175
Q

How long does the board expect risk culture to mature

A

Every Year

176
Q

What does the chief risk officer monitor

A

They shall monitor all significant risks, maintain risk profiles and ensure risk reporting to approval internal and external recipients meets their needs

177
Q

What is one of the most important aspects of the job of the chief risk officers

A

Identifying individual risk owners and making sure they carry out actions as required

178
Q

What are some of the chief risk officers financial constraints

A

They have to work within a limited budget in terms of activities and allocation of resources and will be expected to justify risk management expenditure in financial terms like return on capital employed

179
Q

Internal communications by the chief risk officer includes which groups

A

-business units
-committees
-directors
-legal
-audit
-compliance

180
Q

External communications by the chief risk officer includes which groups

A

-Auditors
-Regulators
-Shareholders
-The media

181
Q

Chief risk officer carries out their responsibilities through

A

Through a team of direct subordinates and will need appropriate management skills

182
Q

What is a risk manager

A

Describes a person who supervises a group of risk officers but reports to a chief risk officer

183
Q

Who is a risk officer

A

Title given to risk management professional who carries out selected duties under the guidance and direction fo the chief risk officer

184
Q

Risk officer can be promoted to a senior risk officer what role will they have

A

They will have a wider role and additional responsibilities to utilize the benefits of experience

185
Q

In a large org a risk officer may report to

A

Report through an intermediary senior risk manager or head of risk

186
Q

The duties of a risk officer are

A

They are a subset of those of the chief risk officer

187
Q

How does a risk officer normally start

A

They start by familiarizing themselves with one area or function of b’ness reporting in detail to chief risk officer and perhaps sitting in one or tow of lover level committee

188
Q

Why are committees established

A

As forums to bring together experts or representatives from different areas of the organisation to discuss common topics or objectives

189
Q

When do committees work best

A

when knowledgeable representatives are carefully selected to cover all aspects likely to be discussed and when thy are set up with clear guidelines and objectives

190
Q

What is the task of the chairperson of a committee

A

To ensure all views are equally aired, discussions remain objective and conclusions are properly documented in minutes

191
Q

What does an effective committee meeting need

A

IT needs adequate preparation against a clear agenda, unrestricted access to up to date, reliable info concerning topics to be discussed

192
Q

Members of risk committees must be carefully selected for

A

-their detailed knowledge of the functions being discussed
-the ability to work well in groups
-their reputation in supporting risk management objectives

193
Q

Generally each committee will have a representative from

A

at least one representative of a central group risk department, who keeps the chief risk officer informed of important proceedings and pass information on group standards and requests to the committee

194
Q

Who will be responsible for approving all published work polices and procedures

A

Group or divisional management, they will expect and respect constructive comments and amendments form appropriate risk committees

195
Q

What is risk apetite

A

It’s a statement of an org’s attitude to risk. The amount of risk that an org is prepared to accept, tolerate or be exposed to at any point in time

196
Q

Risk apetite must consider which type of risks

A

Threats and Opportunities

197
Q

Apart from setting limits in amount of downside risk an org is prepared to take, risk apetite policy must allow for

A

They must allow for controlled risk taking where anticipating long term gains outright potential short term losses

198
Q

In a large organisation how is risk apetite defined

A

Its defined at different levels of management and functions, with a formal escalation process where managers encounter risk beyond their level of decision

199
Q

What does defining risk apetite provide

A

A framework for informed decision making, highlights the risks that need attention and promotes consistency of business decisions. And provides basis of audits and investigations

200
Q

How is a risk apetite policy statement typically look like

A

A typical solution is a presentation in matrix form

201
Q

Risk apetite policy is a guide that can be used for which risks

A

It can be used for both Existing risks and for new and emerging risks. Describing those risks an org is actively willing to take

202
Q

What is Risk Tolerance

A

Those risks an org might be able to put up with

203
Q

What is another important characteristic of Risk

A

How often it’s likely to occur

204
Q

The way people behave at work is strongly influenced by

A

Customs and practices of their organisation

205
Q

The health and safety executive has identified activities that promote a risk aware culture. This includes

A

The acronym LILAC
-Leadership
-Involvement
-Learning
-Accountability
-Communication

206
Q

Under the The health and safety executive what does leadership define

A

Its in terms of clarification of strategic and personal risk objectives

207
Q

Under the The health and safety executive what does involvement define

A

Involvement of stakeholders at all stages of risk management

208
Q

Under the The health and safety executive what does learning define

A

Learning from events with effective training

209
Q

Under the The health and safety executive what does learning define

A

Learning from events with effecive training

210
Q

Under the The health and safety executive what does accountability define

A

Accountability of individuals but with shared efforts to prevent reoccurrence

211
Q

Under the The health and safety executive what does communication define

A

Communication with free discussion of objectives methods and results

212
Q

What is an obvious initiative of enhance risk awareness culture in an org

A

Promotion of an awareness campaign, supported with training aids, literature and poster displays

213
Q

An organisation with effective risk management process can expect

A

They can expect less unexpected losses and better selection of future opportunities leading to greater epected gains

214
Q

What s a qualitative indication of progress in developing risk awareness in an org

A

Regularly assessing the current level of risk culture

215
Q

The processes of observation, audit and interviews are used to evaluate

A

They are used to evaluate the extent to which risk culture is embedded in an org procedures and practices

216
Q

What is a general risk maturity model commonly used

A

4NS

217
Q

What is the 4Ns

A

This has four level maturity labeled as naïve, novice, normalized and natural with corresponding descriptions for each of these levels

RISK MANAGMENT (5 decks)

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