Chapter 13 - Risk Management

Question 1

Risk Management table

Answer 1

Preceding: strategy, risk group with goals

• Identify risk
• understand and scale risk
• develop risk response strategy
• implement strategy/responsibilities
• implement monitoring and control
• review and refine
  => start over again

Question 2

Identify Risks

Answer 2

• international
• fraud, malfeasance
• corp reputation
• environmental
• tech
• financial
• economic
• business
• political, legal, regulatory
• contractual inadequacy

….there is no one single risk framework

Question 3

Risk management

Answer 3

The process of understanding and managing the risks that the organisation is inevitably subject to in attempting to achieve its corporate objectives.

Question 4

Shareholder value =

E&Y definition

Answer 4

Static NPV of existing business model + Value of future growth options

Question 5

Risk management strategy

Answer 5

Identifying and mitigating risks as a new company initiative

Question 6

Risk appetite

Answer 6

driven by
risk capacity: amount of risk a company can bear

risk attitude: overall risk approach

residual risk: remaining business risk after controls are implemented

Question 7

Risk management (TARA)

Answer 7

Transfer (unlikely, severe)
Avoid (likely, severe)
Reduce/Mitigate (likely, mild)
Accept (unlikely, mild)

Question 8

Ethics and Risk Sources

Answer 8

Ethics = act in the public interest

Fundaments:
Integrity - honest
Objective - not biased
Competent - knowledgable and skilled
Confidentiality - not to disclose data
Professional - lawful

Question 9

Public interest of accountancy
(Stakeholders)

and Corporations as society shapers

Answer 9

Clients
Credit providers
Governments
Employees
Investors

Companies can shape societies (ie Mc Donalds), hence they have to act ethically (having the public interest in mind)