Chapter 1 Intro to risk management Flashcards
When did risk management environment change and why
After financial crisis of 2008 international regulatory agencies required improvement to risk management disclosures and processes
Traditional risk management only considered what?
Accidental loss
Dictionary definition of risk is?
The possibility of loss or injury: peril
Against all odds book defines risk as …
Derived from Italian word risicare meaning to dare. In this it is a choice rather than a fate. We are betting in an outcome. Outcome can be negative or positive.
ISO 31000.2009 define risk as?
Effect of uncertainty of objectives
COSO ERM:2004 committee of sponsoring organizations define risk as?
The possibility that an event will occur and adversely affect the achievements of objectives.
RIMS definition of risk is…
An uncertain future outcome that can improve or worsen your position
Risk management insight defines risk as…
The probable frequency and the probable magnitude of future loss.
CFA institute define risk as
Exposure of a proposition of which one is uncertain.
Definition of risk management ISO 31000:2009
Coordinated activities to direct and control and organization with regard to risk.
COSO ERM 2004 risk management definition
The identification assessment and response to risk to a specific objective
RIMS definition of risk management is?
Strategic risk management is a business discipline that drives deliberation and action regarding uncertainties and untapped opportunities that affect and organization’s strategy and strategy execution
There are four high level categories of risk..what are they?
Hazard or pure risk
Operational risk
Financial risk
Strategic risk
Hazard risk is?
Risk of accidental loss including the possibility of loss or no loss
Risk profile is
A set of characteristics common to all risks in. Portfolio
Systemic risk is?
The potential for a major disruption in the function of an entire market or financial system
Cost of risk is?
The total cost incurred by an organization because of the possibility of accidental loss
Reducing the cost of hazard risk associated with a particular asset or activity is the total of four things what are they?
Cost of accidental losses not reimbursed by insurance
Insurance premiums or expenses incurred for noninsurance indemnity
Cost of risk control techniques to prevent or reduce the size of accidental losses
Cost of administering risk management activities
Reduce deterrence effects of hazard risks making losses less frequent, less severe and more foreseeable benefits an organization how?
Alleviates management fears of potential losses and increase feasibility of ventures that once appeared to risky
Increase profit potential by greater participation in investment or production activities
Make the organization a safer investment and therefore more attractive to suppliers of investment capital
How to reduce the downside of risk consider the following…
Risk management Intelligent risk taking Maximize profitability Holistic approach to risk management Follow legal and regulatory requirements Benefits for the economy Reduce waste of resources improve the allocation of productive resources Reduce systemic risk
The benefits of risk management for an insurer are….
They can provide benefits to their clients and organizations by developing methods to reduce the cost of hazard of risk and provide cost effective risk transfer mechanisms Insurers require risk management programs to meet regulatory requirements
Risk management objectives should align with what?
They should align with overall corporate objectives
What are 8 typical risk management goals?
Tolerable uncertainty Legal and regulatory compliance Survival Business continuity Earnings stability Profitability and growth Social responsibility Economy of risk management operations
Tolerable uncertainty is?
Aligning risks with the organizations risk appetite
