Chapter 7 Flashcards
4 types of risk
pure
speculative
fundamental
particular
whats a pure risk
the only outcome is harmful
whats a speculative risk
good or harm may be the result
whats a fundamental risk
those that affect society in general
whats a particular risk
a risk which an individual has a measure of control
what is risk
risk exists where there is movement from expectation
what is embedding risk
ensuring the approach to managing risks is considered at all times and in all roles by making it part of the culture
7 step approach to risk
set responsibilities set risk appetite identify risks assess risks respond to risks monitor and review risks and amend if necessary start again
what do risk committees do
ensure system exists
set risk policy
assess risk
advise board
who is allowed to be in remuneration, nomination and audit committee
only NED’s
what is the split on the board of directors
50% NED’s, 50% ED’s
what is a risk manager
a role that supports the board by taking the lead on risk and developing policy and practice on managing risks
what is risk appetite
nature and strengths of risks that an organisation is prepared to bear
what is risk attitude
directors view on desirable level of risk
what is strategic risk
risk that arises from long term decisions or events
what is operational risk
risk that arises from the normal day to day activity of the company
what is a leading event indicators
conditions that could give rise to an event such as a customer not paying
what are escalation triggers
events happening that require immediate risks
what are related risks
connected risks
what are correlated risks
if one gets better, the other will get worse
formula of expected value of loss
probability of loss x impact or size of potential loss
formula of expected value
sum of (probability of outcome occurring x value of outcome)
whats a risk map
these show risks in a visual way by plotting them on a chart according to their impact and likelihood
whats included on a risk register
lists and priorities of main risks, who is responsible for dealing with them, and the actions taken
what are the axis on the tara model
impact on the x axis, likelihood on the vertical axis
what is the tara chart
likelihood low to high on vertical, impact low to high on horizontal
what should you do if something is low impact and high likelihood
Reduce
what should you do if something is low impact and low likelihood
Accept
what should you do if something is high impact and high likelihood
Avoid
what should you do if something is high impact and low likelihood
Transfer
what does ALARP stand for
as low as reasonably practical.
what is diversification of risks
doing more things so the risks offset each other
