Chapter 4 - Risk Connectivity and Risk Networks Flashcards
What’s the trouble with risk lists and risk registers
all the risks appear independent of each other
how are the impacts of operational risks defined
financial loss,
reputation damage,
compliance breach,
customer detriment
disruption of services.
Which firms see Risk networks as a promising and growing resource
firms with more mature operational risk management
how else are risk networks referred to as
risk connectivity and sometimes risk visualization
Benefit of risk networks
They highlight the dependencies and other connections between different risks
The best-known user of risk networks
the World Economic Forum
(WEF)
How often does the wef produce a global risk report
annually
what do Diamonds represent in the WEF risk report
individual risks
what do lines of different thickness joining shapes in wef risk report mean
denote the strength and intensity of the connection
where is interdependence strongest
ecology risk groups - extreme weather events, climate change, water and food crises
one of the main benefits of a risk network
the identification of clusters
Risk clusters
linked risks that should be considered holistically
Financial theory demonstrates that in a portfolio of ten
assets, the risk and return are determined by?
correlations between those assets (known as the portfolio covariance)
3 ways to represent risks
networks
clusters
cascades
highest driver/exacerbater of five other top risks
Geopolitical risk
what is most commonly cited top risk in recent years
Cyber risks
what is believed to worsen cyber risk
physical attack, organizational change, outsourcing, fraud
why is it better to represent a risk register as a network, rather than in a list,
to better highlight connectivity and prioritize mitigation effectively
