Chapter 7

Question 1

4 types of risk

Answer 1

pure
speculative
fundamental
particular

Question 2

whats a pure risk

Answer 2

the only outcome is harmful

Question 3

whats a speculative risk

Answer 3

good or harm may be the result

Question 4

whats a fundamental risk

Answer 4

those that affect society in general

Question 5

whats a particular risk

Answer 5

a risk which an individual has a measure of control

Question 6

what is risk

Answer 6

risk exists where there is movement from expectation

Question 7

what is embedding risk

Answer 7

ensuring the approach to managing risks is considered at all times and in all roles by making it part of the culture

Question 8

7 step approach to risk

Answer 8

set responsibilities
set risk appetite
identify risks
assess risks
respond to risks
monitor and review risks and amend if necessary
start again

Question 9

what do risk committees do

Answer 9

ensure system exists
set risk policy
assess risk
advise board

Question 10

who is allowed to be in remuneration, nomination and audit committee

Answer 10

only NED’s

Question 11

what is the split on the board of directors

Answer 11

50% NED’s, 50% ED’s

Question 12

what is a risk manager

Answer 12

a role that supports the board by taking the lead on risk and developing policy and practice on managing risks

Question 13

what is risk appetite

Answer 13

nature and strengths of risks that an organisation is prepared to bear

Question 14

what is risk attitude

Answer 14

directors view on desirable level of risk

Question 15

what is strategic risk

Answer 15

risk that arises from long term decisions or events

Question 16

what is operational risk

Answer 16

risk that arises from the normal day to day activity of the company

Question 17

what is a leading event indicators

Answer 17

conditions that could give rise to an event such as a customer not paying

Question 18

what are escalation triggers

Answer 18

events happening that require immediate risks

Question 19

what are related risks

Answer 19

connected risks

Question 20

what are correlated risks

Answer 20

if one gets better, the other will get worse

Question 21

formula of expected value of loss

Answer 21

probability of loss x impact or size of potential loss

Question 22

formula of expected value

Answer 22

sum of (probability of outcome occurring x value of outcome)

Question 23

whats a risk map

Answer 23

these show risks in a visual way by plotting them on a chart according to their impact and likelihood

Question 24

whats included on a risk register

Answer 24

lists and priorities of main risks, who is responsible for dealing with them, and the actions taken

Question 25

what are the axis on the tara model

Answer 25

impact on the x axis, likelihood on the vertical axis

Question 26

what is the tara chart

Answer 26

likelihood low to high on vertical, impact low to high on horizontal

Question 27

what should you do if something is low impact and high likelihood

Answer 27

Reduce

Question 28

what should you do if something is low impact and low likelihood

Answer 28

Accept

Question 29

what should you do if something is high impact and high likelihood

Answer 29

Avoid

Question 30

what should you do if something is high impact and low likelihood

Answer 30

Transfer

Question 31

what does ALARP stand for

Answer 31

as low as reasonably practical.

Question 32

what is diversification of risks

Answer 32

doing more things so the risks offset each other