Ch.3- Governance

Question 1

Risk owners

Answer 1

Have a day to day responsibility to ensure risk mgmt activities effectively managed within organizations risk tolerance levels

Question 2

Why are there arrows flowing in both directions between the different elements of governance depicted in ex.3-2?

Answer 2

The arrows represent the flow of direction and accountability from one layer to next.

* Governance surrounds all activities in organization
* Risk mgmt - intended to Identify and manage risks + Exploit the opportunities that enable success
* Internal controls: center of exhibit b/c they represent subset, but integral part, of broader risk mgmt activities.

Question 3

What is the difference between the 2 areas of governance depicted in ex.3-3

Answer 3

• Strategic Direction: Board responsible for providing strategic direction and guidance relative to establishment of key business objectives, consistent with the organizations business model and aligned with stakeholder priorities
  
  • Governance Oversight: focuses on the boards role in managing and monitoring the organizations operations

Question 4

What are 3 different types of stakeholders that the board must understand? Give examples of each…

Answer 4

• Directly Involved: Directly involved in the operation of the operation of organizations business
○ Examples: employees, customers, vendors,

• Interested: affected by the success or other outcomes of the business
	○ Examples: shareholders/investors regulatory agencies, financial institutions

• Influence: influence aspects of the organizations biz, and as a result organizations success
	○ Examples: regulatory agencies, financial institutions

Question 5

7. In governance, what are the key responsibilities of:
   A. Board of directors
   b. Senior mgmt
   c. Risk Owners

Answer 5

Board of directors:
Establishing a governance committee
Articulating requirements for reporting to the board
Revaluating governance expectations periodically

Senior mgmt:
Ensuring that full scope of direction and authority delegated is understood
Identifying the processes and activities withing the organization that are integral to executing the governance direction provided by board
Evaluating what other business considerations or factors may create a justification for delegating a lower tolerance level to risk owners than that delegated by the board.
Ensuring sufficient information gathered frm risk owners to support retporting requirements to board.

Risk owners:
Evaluating whether the risk mgmt activities are designed adequately to manager the related risks within tolerance levels.
Assessing ongoing capabilities of the org. to execute those risk mgmt activities
Determining whether the risk mgmt activities are currently operating as designed
Conducting day to day monitoring activities to identify if anomolies from expected outcomes occurred.
Ensuring information needed is accurate and readily available, and provided on timely basis

Question 6

What are the 3 lines of defense in the 3 lines of defense model?

Answer 6

• 1st line of defense: mgmt controls, internal conrol measures
  
  • 2nd line of defense: financial controller, risk mgmt, compliance, health and safety, environmental, quality assurance
  • 3rd line of defense: Internal audit

Question 7

MC-Which of the following is NOT an appropriate governance role for an organizations board of directors?

Answer 7

Providing assurance directly to 3rd parties that org. governance processes are effective

Question 8

MC-Which of the following are typically governance responsibilities of senior mgmt

Answer 8

1. Delagating risk tolerance levels to risk managers

2. Ensuring sufficient information gathered to supports reporting to the board

Question 9

MC-ABC utility company sells electricity to residential customers and is a member of an industry association that provides guidance to electric utilities, lobbies on behalf of industry, and facilitates sharing among members. From ABC’s perspective, what type of stakeholder is this industry association?

Answer 9

Influences company

Question 10

MC-Who is responsible for establishing the strategic objectives of an organization?

Answer 10

Senior mgmt

Question 11

MC-who is ultimately responsible for identifying new or emerging key risk areas that should be covered by organizations governance process?

Answer 11

Risk Owners

Question 12

MC-The internal Audit function should not….

Answer 12

Oversee org governance and risk mgmt processes

Question 13

MC-Which of the following would not be considered a first line of defense in the 3 lines of defense model

Answer 13

Divisional controller