Chapter 4 - The Risk Management Process

Question 1

When was he first factory inspections appointed?

Answer 1

The Industrial revolution

Question 2

What changed in risk perception in the 1950’s?

Answer 2

The idea that risk can be managed ad reduced as opposed to being accepted

Question 3

When was the concept of Financial Risk Management revolutionised?

Answer 3

1970’s

Question 4

What is an insurance derivative?

Answer 4

Financial instruments to to remove/transfer risk

Question 5

What are the steps in the Risk Management Process?

Answer 5

1. Establish the context
2. Identify risks
3. Analyse risks
4. Evaluate risks
5. Treat risks

Question 6

What are the ongoing activities at all stages of the risk management process?

Answer 6

1. Monitor and review agreed risk levels, risk analysis and evaluation as the organisation evolves and changes
2. Communicate the information on risk and risk changes

Question 7

How do we know the extent which risk management is embedded?

Answer 7

The process of observations, audit and interviews.

Question 8

Common used Risk Management Standards

Answer 8

1. A risk management standard (UK)
2. Enterprise Risk Management - Integrating with strategy and performance (US)
3. Management of Risk in Gov. (UK)
4. ISO 31000 Risk Management

Question 9

Characteristics of traditional risk management

Answer 9

• Preservation of assets
• Analyse risk in isolation
• Reactive
• Concerned with traditional risks
• Report to financial director

Question 10

Characteristics of Enterprise Risk Management (ERM)

Answer 10

• Focus on risk taking
• Interconnectivity of risks
• Proactive
• Concerned with insurable and uninsurable risks
• Overview of risk is a more senior position

Question 11

Does ERM balance a focus between opportunity (chance) of gain as well as loss?

Answer 11

Yes

Question 12

Emergence of ERM approach introduced…

Answer 12

Managing risk according to the needs of each business function

Question 13

What are the issues in working in silos?

Answer 13

• Little sense for one division to buy insurance or hire risk specialists if a different department takes a differing approach

Question 14

What is risk analysis

Answer 14

Identifying how often threats to the organisation can cause damage

Question 15

When were the earliest developments in managing business risk by passing it onto the insurer?

Answer 15

Marine insurance, Italy, 13th centaury

Question 16

Describe two ways the industrial revolution influenced business ideas on what risks needed to be managed

Answer 16

1. Moved from awareness of risk and transfer by contract to physical and procedural steps to eliminate risk
2. Move to protecting people

Question 17

How were the 1950’s a major milestone in the evolution of Risk Management in America

Answer 17

Insurance was costly and incomplete, There was a move to self-protect, self-insure and mutual schemes

Question 18

What are the characteristics of a risk mature organisation

Answer 18

• Observation, audit and interviews

- Clearly defined risk policy

Question 19

Why are there so many risk standards?

Answer 19

• Different organisations have different needs

Question 20

What are the objectives of ERM?

Answer 20

• RM process implements across an organisation with silo mentality broken down
• Balanced focus on chance of gain and loss