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RISK MANAGMENT > CHAPTER 4 > Flashcards

CHAPTER 4 Flashcards

1
Q

What is the first step in the risk managemnt process

A

Effective risk identification

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2
Q

Whatis risk mangment within an org

Not a separate unit but

A

Its an integral to and indivisibl from strateguc and operatonal managemnt

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3
Q

When examining risk information what is the first informaton we need

A

We need a list of risks, and arrange them in some order of importance

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4
Q

What risks do we need to identify

A

Thise that affect our organisation , and we need to identify as many of those risks as possible, the more risk we identify the better prepared we can be

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5
Q

How will a risk department need to identify risks

A

They need to identify in a logical and cost effective manner

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6
Q

What are the internal intelligence sources to enable us to identify risks

right accross our organisation

A

-People
-Meetings
-Committees
-Documents
-Database
-Observation

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7
Q

Apart from personnel associated with audit and complaince function, what are other roles that may have managment of risk considered to be part of their role

A

-design engineers
-facilities manager
-project managers
-legal offiers
-product development manager
-company secretary

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8
Q

How will a formal meeting be recorded

A

The outcome of a formal meeting will be recorded in a document known as minutes

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9
Q

What will a properly written minutes allow

A

It will allow people absent from the meeting to learn about key decisions or activities that were made

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10
Q

What is a committee

A

A nominated group of people holding meetings for a particular reason

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11
Q

Whic department shall be involved in all committes that discuss risk

A

The risk department

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12
Q

What will a board risk subcommittee be authorised to fulfill

A

They will be authorised to fulfil baord responsibilities regarding risk

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13
Q

What is the purpose of an audit subcommittee

A

The purpose is to stand back from the organisaion’s functional executives and take a view on the behaviour of its manages and effectiveness of business controls

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14
Q

As the audit committee is discussing strategic risk controls what should the risk department do

A

The risk department should either be present or at the very least be required to report on the risk eposures to the committee

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15
Q

What will bring benefits to both audit subcommitte and risk department

A

Cooperation and goof relation ship

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16
Q

What are some examples of useful documents for risk information

A

-Proposal papers
-Auditors repots
-Insurance documents
-Proceudres manuals
-Historic risk reports

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17
Q

What are proposal papers

A

These are documents produced to support request for approvl

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18
Q

What do proposal papers set out

A

They set out background information leading to the request and the implication of its approval, predicted benefits will empasized and investment needed wil lbe detailed, They might highlight risks involved

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19
Q

What are auditors reports

A

These are douments recording the findings of audit activity

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20
Q

What are large organisations required by law

in terms of auditing

A

They are required to have an annual financial audit by a qualified external accountant

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21
Q

Some of regulatory authorities within UK financial services look at audit as

A

As evidence of goon managment contorl

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22
Q

apart from financial audits, what are other types of audits

A
  • Quality audits
    • Audits to ensure conformance with written working proedures
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23
Q

Non financial ausits are internally authorised by

A

-Senior Managers
-The board

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24
Q

What is the purpose of audit

A

The purpose is to check that proper output is bing produced, ir being accurate financial information of ull specification product

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25
Q

Auditor’s report comments on

A

The reliability of procedures, checks and control and may higlighy unnecessary risk for managemnt attention

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26
Q

What confidence do audits give

A

They give directors confidence that they can trust information presented to them and a measure of probability that planned outcomes will be achieved

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27
Q

What is the policy schedule

A

This is a place where the policy is made personal and specific to the insured

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28
Q

What details does thepolciy schedule have

A

-Insured’s name
-Insured’s address
-Policy period
-Premium
-Detail of the subject matter
-Sums insured or limit of liability
-Territorial limits
-Policy numner
-Reference to specia excluson/condition/aspet of cover

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29
Q

What do syrveys assist with

in insurance

A

They make comments about exposures and may include recommendaton to improve the control of risk

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30
Q

What are procedures manual

A

These are documents that set out procedures and methods to be followed by personnel working on various areas

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31
Q

Why should risk department take detailed interest in procedures manuals

A

This is because this is where procedureal risk management is implemented

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32
Q

Who will maintain records of individual risks

A

-Individual managers
-Risk Deparment

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33
Q

Why do most organisation keep record in databases

A

They do so to make use of serch facilities and for ease of record retrieval

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34
Q

Why is database separate from documents

A

This is becasue database implies continuos updated information sources, and documents are essentialy snapshots reports associated with a specific date

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35
Q

What are some externa sources of information available to identify risks in many different areas

A

-Gov’t org or org’s linked to the govt
-B’ness and professiona institutions
-Insurers and related orgs
-Database
-Emergency ervices
-Consultants
-Newspapers and Magazines
-Company reports
-Conferences

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36
Q

Gov’t orgs and orgs linked to gov’t ublish a wide selection of material that concentrate on

A

They usually concentrate on general risk information of interest to multiple orgs or general information on speific risk categories

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37
Q

Business and professional institutions publish useful information on

A

They publish on best practice, standards, audits, managment and governance issues. They also contain,hold surveys and pblish ase studies of topicl corporate incients

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38
Q

Insurers keep records of

A

They keep records of historical claims and more than happy to discuss individual claim files ad lessons to be leant from incidents that gave rise to claims

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39
Q

What do insurers also publish

A

They publish general risk related materials including research findings

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40
Q

Why are loss data sharing consortia common in financia institutions

A

They are common as they help reduce operational risk

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41
Q

What is Operational RIsk Consortium(ORIC)

A

This is a quality controlled loss database to support risk managment activities for insurers

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42
Q

The Operational RIsk Consortium(ORIC) hold informaton on

A

It hold info on operational riski.e losses due to failed peopleprocesses/systems/eternal events

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43
Q

The Operational RIsk Consortium(ORIC) aims to improve

A

It aims to improve the risk measurement and modelling skills of its members

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44
Q

Emergency services provide information on

A

It provides info on risk and trends in risk

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45
Q

What do consultants range from

A

They range from knowledgeable individuals with special skills to subsdiaries of insurers or brokers and global corporations with vast resources and contacts

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46
Q

What do consultants bring to a project

A

They bring focused, current information, specialist skils or additional resources to a project

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47
Q

Employing consultant should be subject to

A

subject to a stringent cost benefit asessment as this is a risk itself. More particularly focused on contract terms determining responsility for detrimenta outomes after using information or following their advise

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48
Q

What is the advantage of conferences

A

They have a way of bringing together people intersted in specialist subjects in a non-confrontiona environment

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49
Q

What are ways of collecting internal information

A

-A tour
-Automatic information gathering
-Collecting information from documents

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50
Q

what is a time well spent for ay risk professional

A

A tour of an org

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51
Q

An efficient organisation tour should inclue

A

-visits to various shop floors
- interviews wih key operational and faciltiies managers
- Get to know as many as you can and try to make them your frientds

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52
Q

During tour by getting to make friends with key operational and facilities managers, how will this help

an internal information collector

A

They will be able to provide org’s chrts and process flow charts for those areas in which they are involved in
-They can explain what their unit does, how it does it where, in theri view ie their exposures

53
Q

information that is gathered in a tour will be

A

a starting point for understanidng risks and impact

54
Q

who is often the responsibility for highlogting procedural risk for an individual worker

A

The risk department, particularly where practices/personnel have changed in or around a long established unit

55
Q

To enabe routine risk information collecton what should there be

A

There needs to be a proactive managment information sysem developed specifically for use by the risk department

56
Q

How does autmatic informarion gathering process begin

A

Process begins with an effective method of ensuring that all necessary information is bought into the department and is digested and turned into a useful managment tool in a properly structured way

57
Q

What will make automatic information gathering effective

A

The procudures for collecting risk information must be clearly documented and issued wth the authority of the managing direcor or ceo

58
Q

For collecting automatic information what proceudres must be followed for risks and potential hazards

A

There must be a recognised procedure for olleting specific information about risks that materialize into incidents and recording potential hazards reported by individuals

59
Q

The recognised procedures for collecting informtion on risks materialising into incidnts and recording potential hazards must clarify

A

These procedures must clarify how incidents are to be logged and what supporting data is required

60
Q

For large multinational organisation its an enormous tas to identiyf and keep track of risk data, thus

A

The data collected must be carefully selected, must be relaible,complete, accurte, with a system in place to prevent falsifiation,alteration or loss

61
Q

What is the most important thing on data collected from automatic information

A

The data must be useful and used in subsequent analysis and reports

62
Q

Its important for risk department to form good relationshis with operational managers throughout an org because

A

These managers will influence the attitude of people that are nominated to report risk data and in turn will directly affect the quality of rik imformation they collect

63
Q

How are useful risks data collected completely eletronically

A

Where plant or processes are highly automated or digital sensors are involved

64
Q

Whats an example of where data is electronically collected

A

Security camera operations
Flight data/black box

65
Q

For collecting information from documents, what are the selected documents

A

They will include minutes of relevant meetings, like meetings specificlly to discuss risk, meeting on key policy and meetings where strategic option are likely to be discussed

66
Q

why are discussions on security risks and some commercia risks geerally exclued from the minutes of meetings

A

This is because publishing risk information might alter the risk concerned

67
Q

What is our best soure of eternal information

A

The internet

68
Q

What is required to be done on external information collected on paper

A

Paper has to be scanned/sorted/processed in exactly the same way as paper information collected internally

69
Q

Information from the interent comes in which fomr

A

Machine-readable form

70
Q

External sureys are used extensively to

A

They are used to measure customer satisfaction and collect information for marketing use

71
Q

Before processing data what is a question we must address

A

Is the data relaibla and does it change

72
Q

What does processing unreliable data lead to

A

This leads to wrong concludiond being drawn, followed by bad managment advise and wrong decisions being made

73
Q

What should we do if we cant guarantee that our data is trustworthy

A

This must be explicitly stated in all subsequent reports and recommendations based on that information, explaining why we thing the data us likely not to be trustworthy

74
Q

Risk professional must be aware that there s apossibility of deliberate information falsification even, what would be the reason behind this

A

People may be trying to look good, or to provide optimistic results or hide partiular risks,other peole may have persona issues, disputes or grudges to resolve

75
Q

Information change can be in

A

It can be in personnel, products and market places or in the many dfiferent ways in which products or services are delivered

76
Q

Risk department must keep adequate detailed records in what form

information change

A

In a form that facilitates information search,retrieval and analysis

77
Q

What other records must risk department keep

A

They must keep records of analyses performed that led to critical decisions being taken

78
Q

What are methods of risk identification

A

-Organisation Charts
-Flow Charts
-Checklist and questionnaires
-Physical inspection
-Brainstorming and workshops
-fault trees
-Hazard and operability studies
9HAZOP)

79
Q

Why is an organisation chart useful

A

It’s useful as it demonstrates the organisation’s activities and organisational structure

80
Q

An organisation chart can be extended beyond the organisation to reflet

A

This will reflect where there are critical suppliers among thirdparties or other group deparments

81
Q

Why will a risk team need considerable people skills

on organisation charts

A

This wil be ideal to sell ideas and convinve reluctant audiences

82
Q

What doe a flow chart give and shows

A

It begin to gives a clear picture of risks carried and begin to show in detail how the impact of a risk incident will be felt through out an org

83
Q

What does flow chart picture

A

It pictures the route taken by all crucial ingredients of the final products through to completion and final delvery

84
Q

The logic of a flow chart is essntial tool when

A

Wheneer there are a range of products and services that are necessary key ingridients of the final products

85
Q

How can flow charts be in a large organisation

A

They can be extremely large and complicated

86
Q

In a large organisation if the chart is too large then

A

It an be sensible divided ito managable sections then consideration shoud be given to profuin several charts eah for a different type of informaton

87
Q

How can questionaires be used

A
  • Method of collecting risk data
    • Cn be used to start quantifying risk
88
Q

What are straightforward and ommonly used tools for risk idnetification

A

Checklist and Questionnaires

89
Q

Checklist and Questionnaires are useful as

A

-as an aide-memire to the risk team directly
-if risk team need to delegate info gathering to others
-to bring info that may have been gathered in different places nack together in a common format

90
Q

Checklist and Questionnaires are useful as

A

-as an aide-memire to the risk team directly
-if risk team need to delegate info gathering to others
-to bring info that may have been gathered in different places nack together in a common format

91
Q

What is a disadvantage of giving a questionnaire

A

The answes completed by the person will be directed by the uestions, they may not appreciate the need to add additional info that could in particular circumstances be crucial
-Are the answers precisely clear to thse who need to answer it or could there be 2 interpretation

92
Q

What are the benefits of checklist and questionnaire

A

They can be extremely efficient way to get basi information from a large numbe of different locations and people

93
Q

Why are trial runs with representative people important parto fquestionnaire design

A

This is becasue the feedback can help in the final design before release to the wider audience

94
Q

What are the main differences between questionnaire and checklist

A

-Questionnaire is sent to someone else to complete
-A checklist is something that simply promprs a profesional or another to give answers in a particular way

95
Q

why do questionnaires use checklist

A

They do so to limit possible answers to a question so that results are more easily analysed by computer

96
Q

What is another common use of checklist

A

The survey report forms used by riks surveyors

97
Q

A good questionnaire and checklist will solicit

A

A series of simple answers that can be easily processed by computer but it will also allow enough space for the user to complement these answers with comments, opinions and suggestions.

98
Q

What does the design of checklist need to take into account

A

It needs to take into account the technical skills of the user

99
Q

Why does survey fulfil a dual role

A

It has the role of identifying risks and also begins the job of managing them

100
Q

What is brianstorming and workshops

A

This involves a group selecting a topic for discussion and recording as may ideas as possible

101
Q

How are the brainstorming session

A

They are ussually informal and unstructured, their main focus is freedom of expresssion and quantity of ideas rather than quality

102
Q

In brainstorming sessions a professiona facilitator may be used whose role will be

A

To keep a careful balance between time, the agenda and the direction of the conerstion flow

103
Q

What is a desktop excercise in a brainstorming session

A

When meetings are arranged as an ecercise where scenarios are desribed and partiipants are expected to say how these scenerios migh unfold, jow damaging they migh be and how they could or cold not be managed

104
Q

Desktop excerise is commonly used to help

A

It helps in developing continuity plans

105
Q

what does desktop excercises highlight

A

they highlight risks and threats and their potential ipacton a particular division of an organisation. It can explore interdivision dependecnies and importance of these

106
Q

What is an alternative to desktop discussions

A

To stimulare incidents for people to manage through, thousgh this is expensive aand only appropriae in particular circumstances, usually when loss of life is at stake

107
Q

What are the useful purpsoes of excersises

brainstrming and workshop sessions

A

Useful purpose in familiarizing people with an incident situation so that they cope better if faced with a real emergenct

108
Q

With desktop excercises what do partisipants provide

brainstorminf and workshop

A

They provide feeback thpughts and ideas that can be studied and used to help manage future risk

109
Q

When do brainstorming groups gain best value

A

They do if risk professionals join them as full members or as observers or advisers

110
Q

What does a flow chart illustrate

A

The chain of events that bring together materials and resourcs to create and deliver an finished produt. It reveals the source of critical parts

111
Q

What does fault trees investigate

A

They investigate what could cause suppleis to ceae and consider the lkelihood of that happening

112
Q

Fault trees can achieve 2 things which are

A

-It can look at a flow chart from the POV of risk and begin to assess the chance of a supply chain being broken
-It can look at the risk within a process or piece of machinery and take a view on the potential for damage

113
Q

what does the fault tree not look at

A

The proess leading to the end result

114
Q

What does the fault tree look at

A

It tries to understand the potential for a failure to deliver that which is critically needed and the looks backwards to search out the possible cause of that failure, which could be from a single cause or combination of casue

115
Q

How does fault tree analysis begin

A

It begins with each ingredient then consders whether that ingredient cpuld fail to arrive in a timely way at the point of inclusion,and if so it takes a view on the consequenes

116
Q

Under fault tree analysis what is the premise

A

The premise is the a production line is an intergrated evolving process whereby there is one time only and one plae only for each part to be added

117
Q

Whne examining what could cause supply to faul, risk professional may also wish to review

A

To review the quality and resilience of the supplier’s factory, the may look at the supplier’s own pilocy in sourcing materilas

118
Q

How may an org reduce the potentioa of single points failure

in the supply chain

A

They may do so by sourcing ingredients form 2 or more entirely different suppliers, as the risk of simultaneous failure by 2 uppliers is much less if they are geographically separate

119
Q

An org will maintian high focus on which ingredients

A

High dependency/low availability ingredient

120
Q

What type of ingredients are High dependency/low availability ingredient

A

These are ingredients that could be a specialist or bespoke product on which the org’s own productionline has a high and urgent dependancy. It will look at these dependencies and other events that may cause failure or loss

121
Q

For Fault trees and supply chain the questions are asked to gain

A

The view of risk and dependencies theseqns can be equally valid within the org and for supplier of critical parts, the issue is continued supply of quality ingredients

122
Q

How will the fault tree help risk managers

A

Fault tree can highlight individual exposures that help the risk manager to prioritise attention to those risk incidents most likely to occur or risk incidents that would have most signigficant impact

123
Q

What is the Hazard and Operability studies(HAZOP)

A

This is a metod of quantifting risk that can work well alongside the fault tree

124
Q

How are Hazard and Operability studies(HAZOP)

A

They are rigorous, detailed and usually contain computerised fault tree analysis of safety critical systems or system components often conducted during their design

125
Q

Where did the Hazard and Operability studies(HAZOP) concept originate

A

It originated in the chemical industry, it is a qualitative equiry in the operation of a plant from the point of view of hazard

126
Q

Where did the Hazard and Operability studies(HAZOP) addresses the belw 4 questions

A

-What is the part INTENDED to achieve
-What deviations are possible from the usually expected delivery
-What could be the causes of those variations
-What could be the consequences of thse variations

127
Q

When examining the causes in HAZOP, risk department needs to ask 2 important questions

A

-What event/cause could cause a deviation to that degree?
-What combination of events could cause a decation to that degree?

128
Q

When is HAZOP type study most appropriately carried

A

It’s carried out on a piece of equipment that is understood to be important or to possess safety dangers. This equiment is important to the safety of employees,visitors/neighbours or key pat of a hain of events that delvers the final prouct or service

129
Q

HAZOP studies are often desinged to

A

They are designed specifically to identify potential worst case scenerios

RISK MANAGMENT (5 decks)

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