Chapter 4: Risk Connectivity and Risk Networks Flashcards
What are traditional risk lists often misleading about?
They present risks as independent entities.
What is the reality of risks in relation to each other?
Risks are interrelated and interdependent.
What segmentation is often used for convenience in risk management?
Segmentation of causes and impacts.
What are risk networks also known as?
Risk connectivity or risk visualization.
What do risk networks provide insights into?
Dependencies and connections between different risks.
Who can benefit from risk networks?
All risk managers.
How does the World Economic Forum illustrate risks in its reports?
As diamonds connected by lines indicating strength of interconnections.
What do larger diamonds represent in the WEF risk visualization?
More significant risks with numerous connections.
What is an example of a risk cluster?
Climate change, weather, and food crises.
What is a trigger risk?
A risk that leads to other subsequent risks.
How should non-financial risks be managed?
By considering their interconnections.
What does understanding risk interconnections allow for?
More efficient allocation of risk management resources.
What lesson did a large mining company learn about risk management?
The importance of managing interconnected risks.
What approach did the mining company adopt after realizing the limitations of traditional risk assessment?
A risk connectivity approach.
How can the financial sector learn from the mining company’s experience?
By recognizing the importance of risk interconnections.
What can obsolete HR applications pose significant risks to?
Cybersecurity and data protection.
What does managing risks in clusters involve?
Recognizing interdependencies and prioritizing trigger risks.
What provides a comprehensive understanding of the risk landscape?
A risk connectivity view.
What is portfolio covariance?
The correlations between assets in financial asset management.
How are risks organized in a risk connectivity approach?
As a sequence of causes and consequences.
What did the board of a Southern European bank use to visualize risks?
A cascade rather than a list.
What did the cascade visualization help the board understand?
The flow of interconnected risks.
What is the rank of geopolitical risk in influencing other risks?
Fourth.
What does cybersecurity risk affect?
Various other risks including physical attacks and fraud.
What do the network poles represent?
Geopolitical and organizational pole, and regulatory pole.
What is the role of internal fraud in the risk network?
It serves as a link between regulatory and operational contexts.
What does visualizing risks as a network allow organizations to do?
Better understand interdependencies and prioritize mitigation strategies.
