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Risk Management (Auditing) > Chapter 11 Risk Management > Flashcards

Chapter 11 Risk Management Flashcards

1
Q

The process of measuring or assessing risk and developing strategies to management.

A

Risk Management

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2
Q

Define (ISO)

A

International Organization of Standardization

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3
Q

Things that risk management should do

A
  1. Create Value
  2. Address uncertainty and assumptions
  3. Be an integral part of the organizational processes and decision making
  4. Be dynamic, iterative, transparent, tailor able, and responsive to change
  5. Create capability of continual improvement and enhancement considering the best available
    Information and human factors
  6. Be systematic, structured and continually or periodically reassessed
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4
Q

The process of risk management consists of several steps

A
  1. Establishing the Context
  2. Identification of potential risk
  3. Risk assessment
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5
Q

Establishing the context involve

A

a. Identification of risk in a selected domain or interest
b. Planning the remainder of the process
c. Mapping
d. Defining a framework for the activity and an agenda for identification
e. Developing a. Analysis of risks involved in the process
f. Mitigation or solution of risks using available technological, human and organizational resources

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6
Q

Mapping out the following

A
  1. The social scope of risk management
  2. The identity and objectives of stakeholders
  3. The basis upon which risks will be evaluated, constraints
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7
Q

Can start with the analysis of the source of problems or with the analysis of the problem

A

Identification of potential risks

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8
Q

Common risk identification methods are

A

A. Objective based risk
B. Scenario based risk
C. Taxonomy based risk
D. Common risk checking
E. Risk charting

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9
Q

Once risks have been identified their potential severity of impact and the probability of occurrence must be assessed

A

Risk Assessment

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10
Q

The Factors usually considered with respect to investments are.

A
  1. Business Risk
  2. Financial Risk
  3. Liquidity Risk
  4. Default Risk
  5. Interest Rate Risk
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11
Q

Refers to the uncertainty about the rate of return caused by the nature of the business.

A

Business Risk

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12
Q

Related to the probability, that some or all of the initial investment will not be returned.

A

Default Risk

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13
Q

The firm’s capital structure or sources of financing determine

A

Financial Risk

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14
Q

Most commonly associated with bond price movements, rising interest rates cause bond prices to decline and declining interest rate cause bond prices to rise.

A

Interest Rate Risk

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15
Q

Is associated with the uncertainty created by the inability to sell the investment quickly for cash.

A

Liquidity Risk

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16
Q

Decisions made by a firm’s management and board of directors materially affected the risk faced investors.

A

Management Risk

17
Q

It is easy to observe the decline in the price of a stock or bond, but it is often more difficult to recognize that the purchasing power of the return you have earn on an investment has declined (risen) as a result of inflation (deflation).

A

Purchasing Power Risk

18
Q

Risk associated with manufacturing, trading and service concerns

A

A. Market Risk
B. Operations Risk
C. Financial Risk
D. Business Risk

19
Q

Under Market Risk

A

A. Production Risk
B. Competitor Risk

20
Q

Under Operations Risk

A

A. process stoppage
B. Health and safety
C. After sales service failure
D. Environmental
E. Technological Obsolescence
F. Integrity

21
Q

Under Financial Risk

A

A. Interest rate volatility
B. Foreign currency
C. Liquidity
D. Derivative
E. Viability

22
Q

Under Business Risk

A

A. Regulatory Change
B. Reputation
C. Political
D. Regulatory and legal
E. Shareholder relations
F. Credit rating
G. Capital availability
H. Business interruptions

23
Q
A
24
Q

This includes performing an activity that could carry risk

A

Risk Avoidance

25
Q

Involves reducing the severity of the loss or the likelihood of the loss from occurring

A

Risk Reduction

26
Q

Means sharing with another party the burden of loss or the benefit of gain, from a risk, and the measures to reduce a risk

A

Risk sharing

27
Q

Involves accepting the loss or benefit of gain from a risk when it occurs

A

Risk retention

28
Q

Is the technique for measuring, monitoring and controlling the financial or operational risk on a firm’s balance sheet

A

Risk management

29
Q

The most commonly encountered areas of risk management include

A
  1. Enterprise risk management
  2. Risk management activities as applied to project management
  3. Risk management for megaprojects
  4. Risk management of information technology
  5. Risk management techniques in petroleum and natural gas

Risk Management (Auditing) (2 decks)

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