Chapter 5

Question 1

Briefly explain the four activities of planning, monitoring, informing, and coordinating in the context of risk management.

Answer 1

Planning: Defining risk management objectives, strategies, and measures.
Monitoring: Regularly observing and analyzing risks and the effectiveness of risk management measures.
Informing: Providing relevant information about risks and risk management activities to stakeholders.
Coordinating: Ensuring that risk management activities are aligned and integrated across the organization.

Question 2

What is the purpose of a risk inventory?

Answer 2

A risk inventory is a systematic documentation of all identified risks, including their description, assessment, and planned response measures. It serves as a central database for managing risks and provides an overview of the company’s risk landscape.

Question 3

What is a risk map and what is its purpose?

Answer 3

A risk map is a graphical representation of risks, typically displaying their probability of occurrence and potential impact on two axes. It helps to visualize and prioritize risks, facilitating communication and decision-making in risk management.

Question 4

What is the idea of the threshold that could be included in the risk map?

Answer 4

The threshold represents the company’s risk appetite, separating acceptable risks from those that require specific attention or mitigation measures. Risks above the threshold exceed the company’s willingness to bear risk and necessitate action.

Question 5

What is the purpose of a risk inventory and what key information should it contain?

Answer 5

A risk inventory is a systematic documentation of all identified risks. It should contain:
1. Risk description
2. Risk category
3. Probability of occurrence
4. Potential impact
5. Risk owner
6. Current risk response measures
7. Planned additional measures

Question 6

What are the main components of an effective risk reporting system?

Answer 6

An effective risk reporting system should include:
1. Regular reports on key risk indicators
2. Ad-hoc reporting for significant risk events
3. Clear communication channels
4. Defined reporting thresholds
5. Tailored reports for different stakeholders (e.g. board, management, regulators)

Question 7

How can risk management be integrated into the overall organizational structure?

Answer 7

Risk management can be integrated by:
1. Establishing a dedicated risk management function
2. Incorporating risk considerations into strategic planning
3. Including risk management in performance evaluations
4. Implementing risk-aware decision-making processes
5. Fostering a risk-aware culture throughout the organization