Chapter 4: Internal RFW

Question 1

Key components of an ERM framework CLAP TDS

Answer 1

Corporate Governance
Line Management
Analytics of risk
Portfolio Management
Transfer of risk
Data and Tech
Stakeholder Management

Question 2

Themes of best-practice corporate governance MAPRICS

Answer 2

Meeting frequency
Appointment of the board
Performance review of the board
Remuneration of the board
Independence of the board
Communication with Stakeholders
Statutory requirements

Question 3

Role of directors in ERM: SMIRCC

Answer 3

Set risk appetite, strategy, policies
Monitor key risks
Implementation of RMF
Review lessons learnt current RMF
Compliance with requirements
Culture establishment

Question 4

Components of good risk culture COCAT REAP VIDOS

Answer 4

• Consultation
• Organisational learning/Openness
• Communication – praise good performance
• Accountability – clearly defined targets
• Top down establishment
• Reporting on risk – taxonomy, reporting processes
• Extent risk management integration
• Appetite for risk clearly articulated
• Participation is risk management across the company – Top-down culture
• Value of ERM well understood - competitive edge to business
• Improvement of risk management continually done
• Decision-makers are highly qualified and in the right positions
• Objectives of business align with risk management and remuneration
• Soft and hard side of risk management appreciated

Question 5

Role of risk subcommittee in ERM: ROTIC RIFS

Answer 5

Risk policies setting
Oversight of ERM on behalf of board
Treatment of key risk assess
ID of key risks
Compliance to GC requirements
Reporting
Implementation
Focus on risk management
Specialist knowledge on risk management provided

Question 6

Role of CRO in ERM: DIME PROMO TECCS

Answer 6

Drive buy-in to ERM
Implementation
Maintenance of RMF
Establish Leadership of ERM
Policy development and monitoring
Reporting on risk
Oversee other areas of business w.r.t. risk management – challenge!
Models and data systems developed to monitor and manage risk
Optimise risk portfolio
Trends analysis of key risks and ERM approaches
Capital allocation
Culture risk management established

Question 7

Role of Corporate Governance in ERM: CADAC SMOCARE

Answer 7

Compliance checks
Appetite, tolerance, capacity of risk setting
Direction
Accountability
Controls and processes
Strategies and policies to risk
Monitor key risks
Culture establishment
Organizational structure - roles and responsibilities, board structure
Alignment of interests
Reporting is trustworthy and accurate
Embed risk management in an organization

Question 8

Considerations when discussing remuneration of the board ROARS DROM

Answer 8

o Retain good staff
o Overcompensation avoided
o Attract good staff
o Responsibility and risk taken on reflected in remuneration
o Stock part of reward – alignment of interest ensured
o Disclosure of benefits must be done
o Risk management objectives part of remuneration
o Objectives set to executives to achieve
o Motivation of directors

Question 9

Components to consider when discussing independence of the board MOSS DIN

Answer 9

o Majority of members should be independent
o Oversee and monitor management
o Separation of CEO and chair
o Subcommittees should be non-executive – agency risk
o Day-to-day management of company avoided
o Independent meetings held by board
o Non-executive members should meet independently

Question 10

Internal risk controls ROAD FROC

Answer 10

• Risk responses are in place
• Accuracy of financial statements ensured
• Objectives are met
• Documented
• Fraud prevention
• Regular review of controls
• Operations of the company is sound
• Compliance to legislation