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Risk Management > Chapter 7 > Flashcards

Chapter 7 Flashcards

1
Q

, our approach reflects our status as a regulated utility providing essential services and operating as part of the critical national infrastructure for the UK.

A

Severn Trent Water,

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2
Q

covers all types of risk including operational, financial, legal and regulatory.

A

ERM process

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3
Q

is integrated through a framework that is divided into three core pillars

A

Sustainability and responsibility at Tim Hortons

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4
Q

three core pillars:

A

individuals, communities and the planet

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5
Q

includes a structure and supporting processes for effective sustainability and responsibility governance and accountability, and is reviewed regularly.

A

Sustainability and responsibility policy

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6
Q
  • governs sustainability and responsibility through the nominating and corporate governance committee of the board.
A

Board

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7
Q

Oversight activities include:

A

review of policy development; sustainability and responsibility strategies, including mitigation of risks; and organizational sustainability and responsibility commitments, goals and external reporting

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8
Q

resides within the Tim Hortons executive group.

A

Management accountability for sustainability and responsibility

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9
Q

Within the core department, ____ is managed actively and ______ is embedded into all departmental processes.

A

RISK
Risk Management

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10
Q

has overall responsibility for the risk management framework.

A

Corporate Committee

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11
Q

Risk Management Framework consists of three management levels at which risks are managed:

A

At the local level
At the committee level
Risks escalated by the corporate committee,

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12
Q

risk is managed and risk registers maintained by policy and operational teams and by project and programme teams across the department.

A

At the local level

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13
Q

risk is managed by the corporate committee. The committee maintains its own risk register and manages redrated operational risks within the corporate area.

A

At the committee level

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14
Q

investment committee, governance board and department-wide operational, delivery and strategic risks are managed by the executive board.

A

Risks escalated by the corporate committee

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15
Q
  • covers a very wide range of topics, and risk management is an integral part of the successful corporate governance of every organization.
A

Corporate Governance

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16
Q

For instance, companies listed on the ________ have to be guided by the UK Corporate Governance Code (2016) published by the Financial Reporting Council.

A

London Stock Exchange

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17
Q

_________ is to facilitate accountability and responsibility for effective and efficient performance and ethical behaviour.

A

purpose of corporate governance

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18
Q

There are two main approaches to the enforcement of corporate governance standards. Some countries treat corporate governance requirements as

A

‘comply or explain’.

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19
Q

should be viewed as obligations placed on the board of an organization.

A

Corporate Governance Requirements

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20
Q

Reports on corporate governance standards, concerns and activities should be received at every board meeting, and these papers will often be presented by the company secretary. Such committees may include:
.

A

risk management committee;

audit committee;

disclosures committee;

nominations committee;

remuneration committee.

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21
Q

is ‘the system by which organizations are directed and controlled’.

A

Corporate Governance

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22
Q

is therefore concerned with systems, procedures, controls, accountabilities and decision making at the highest level and throughout an organization.

A

Corporate Governance

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23
Q

is concerned with the way that senior management fulfil their responsibilities and authority.

A

Corporate Governance

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24
Q

is concerned with the need for openness, integrity and accountability in decision making, and this is relevant to all organizations regardless of size or whether in the public or private sector.

A

Corporate Governance

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25
Q

is an international organization helping governments tackle the economic, social and governance challenges of a globalized economy.

A

The Organization for Economic Cooperation and Development (OECD)

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26
Q

is based on the evidence that good governance promotes success of organizations and society.

A

The approach in BS 13500

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27
Q

goes beyond the avoidance or mitigation of problems.

A

scope of the code

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28
Q

has produced guidance on corporate governance, and the focus of that guidance is on the effectiveness of the board.

A

London Stock Exchange (LSE)

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29
Q

is about the effective management of the organization and the appropriate responsibilities and the role of the senior managers and board members within the organization.

A

corporate governance

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30
Q

are centred on the board of the organization.

A

Governance activities

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31
Q

The corporate governance framework has two main components:

A

1) the responsibilities, obligations and rewards of board members; and.

2) the fulfilment of stakeholder expectations, rights, participation and dialogue.

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32
Q

The importance of board member responsibilities, obligations and rewards are emphasized and include arrangements for:

A

determining membership of the board;

accountability of board members;

delegation of authority from the board;

remuneration of board members.

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33
Q

• The responsibilities of board members must be fulfilled in five important areas

A

strategic thinking, planning and implementation;

corporate social responsibility;

effective management of risks;

audit and risk assurance;

full and accurate disclosure

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34
Q

OECD principles and the LSE corporate governance framework provide the overall requirements and framework within which corporate governance must be delivered.

A

OECD principles and the LSE corporate governance framework

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35
Q

play an important role in corporate governance.

A

Non-executive directors

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36
Q

will be a non-executive group and represents the third line of defence.

A

audit committee

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37
Q

has resulted in banks and other financial institutions reviewing their own corporate governance standards.

A

global financial crisis

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38
Q

is the largest financial services institution listed on the national stock exchange and is among the 30 most profitable financial services organizations in the world.

A

Bank

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39
Q

robust corporate governance arrangements are usually mandatory.

A

Government Agencies

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40
Q

corporate governance and risk management are designed to assist the organization to achieve its objectives, including commercial or marketplace objectives.

A

Commercial Organizations

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41
Q

is often seen by government agencies as establishing a framework of control that supports innovation, integrity and accountability and encourages good management throughout the organization.

A

Corporate Governance

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42
Q

activities within a government department, agency or authority will be the principles of public life, often referred to as the Nolan principles.

A

corporate governance

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43
Q

Nolan principles of public life

A
  1. Selflessness
  2. Integrity
  3. Objectivity
  4. Accountability
  5. Openness
  6. Honesty
  7. Leadership
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44
Q
  • sets out policy on the identification and management of risks that it faces in the delivery of its objectives.
A

The risk policy of the Welsh Assembly Government (WAG)

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45
Q

has overall responsibility for the organization in terms of setting strategy and ensuring satisfactory governance.

A

BOARD

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46
Q

is the responsibility of the executive management, and top management.

A

Management of the organization

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47
Q

are members of the same board, this is referred to as a unitary board.

A

executive and non-executive directors

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48
Q

, and is referred to as the supervisory board.

A

non-executive directors

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49
Q

into separate committees is sometimes referred to as a two-tier board structure.

A

non-executive and executive directors

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50
Q

to be in place in charities and public-sector organizations.

A

two-tier board structure

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51
Q
  • A good organizational structure supports the effective management of risk.
A

Governance structure

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52
Q

suggests that the term ‘interested party’ is preferred, but stakeholder is an acceptable alternative.

A

ISO Guide 83

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53
Q

defines a stakeholder as a ‘person or group concerned with, affected by, or perceiving themselves to be affected by an organization’.

A

ISO Guide 73

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54
Q

There will be a wide range of stakeholders in a typical organization that can be summarized as CSFSRS, as follows:

A

customers; staff; financiers; suppliers; regulators; society.

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55
Q

is a technique to ensure that an organization has the most effective and efficient processes and operations.

A

Business process re-engineering (BPR)

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56
Q

are the high-level collections of activities that are fundamentally important to the organization.

A

Core processes

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57
Q

Data for shareholders

A
  1. General
  2. Financial data
  3. Corporate governance and CSR
  4. Shareholder information
  5. Relevant news
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58
Q
  • A clear statement of strategy and vision Corporate profile and principal markets.
A

General

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59
Q
  • Annual report and financial statements Archived financial information for the past three years.
A

Financial data

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60
Q
  • Information related to compliance with Combined Code Information on the company CSR policies.
A

Corporate governance and CSR

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61
Q
  • Shareholder analysis by size and constituent Information on directors’ share dealings
A

Shareholder information

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62
Q

Access to all news releases and presentations Developments that might affect the share value.

A

Relevant news

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63
Q

to implement and maintain procedures that promote ethical business conduct

A

Rank policy

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64
Q

has a fraud and unethical business conduct whistleblowing policy which sets out the ways in which employees can voice their concerns about suspected fraud, corruption or unethical business conduct.

A

Rank

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65
Q

During the period under review two frauds came to light within the

A

Grosvenor retail casino business.

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66
Q

deliver stakeholder expectations and are related to the internal and external context of the organization.

A

Core processes

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67
Q
  • can be defined as an event with the potential to impact the fulfilment of a stakeholder expectation.
A

Risk

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68
Q

classification of core processes as strategic, tactical and operational is acknowledged in

A

British Standard BS 31100.

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69
Q

set the future direction of the business;

A

Strategic perspectives

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70
Q

are concerned with turning strategy into action by achieving change;

A

Tactical perspectives

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71
Q
  • are related to the day-to-day operations.
A

Operational perspectives

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72
Q

are assumed to underpin the other types of core processes.

A

Compliance processes

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73
Q

is also one of the fundamental requirements of the business process re-engineering (BPR) approach.

A

analysis of stakeholder expectations

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74
Q

can be one of the most robust ways of identifying risks.

A

Analysis of stakeholder expectations

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75
Q

can be a very timeconsuming exercise when undertaken thoroughly.

A

BPR

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76
Q
  • need to be the most robust processes in the organization,
A

Strategic core processes

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77
Q

of an organization may be very different from those who are concerned with the organization’s operations.

A

Tactical stakeholders

78
Q
  • are generally large organizations with a very diverse range of stakeholders.
A

Pharmaceutical companies

79
Q
  • involves employee representatives who sit on the supervisory board, board of directors or similar structures in companies.
A

Board-level employee representation

80
Q
  • also differs from other types of indirect participation such as works councils.
A

Board-level representation

81
Q
  • may be considered to be the type of risk that will disrupt normal everyday activities.
A

Operational risk

82
Q
  • is closely related to infrastructure risks described in the FIRM risk scorecard classification system
A

Operational risk

83
Q
  • are usually hazard risks, and historically this has been an area of strong application of risk transfer by way of insurance.
A

Operational risks

84
Q
  • now has a more extensive application and a more specific definition, especially in financial institutions.
A

Operational risk

85
Q

are required to have sufficient capital reserves available to meet the actual and potential financial losses and obligations faced by the organization.

A

Financial institutions

86
Q

assessment of capital requirements.

A

Economic Capital

87
Q

that set out recommendations on banking laws and regulations,

A

Basel II is the second of the Basel Accords

88
Q

is to create an international standard.

A

The purpose of Basel II (2004)

89
Q

have long been concerned with market risk and credit risk.

A

Banks

90
Q
  • was initially defined as being any form of risk that was not market risk or credit risk.
A

Operational risk

91
Q

definition includes legal risk, but excludes strategic and reputational risk.

A

Basel II

92
Q

is a term that has a variety of meanings and that certain financial institutions use a different term or a broader definition.

A

Operational Risk

93
Q

Basel II definition identifies four types of risk categories:

A

people, process, system and external risks.

94
Q

include failure to comply with procedures and lack of segregation of duties.

A

People risks

95
Q

include process failures and inadequate controls.

A

Process risks

96
Q

include failure of applications systems to meet user requirements and the absence of built-in control measures.

A

System risks

97
Q

include action by regulators (change of regulation, but excluding enforcement or disciplinary action), unsatisfactory performance by service providers and fraud, both internal and external.

A

External Risks

98
Q

is the risk that the value of investments may decline over a period

A

Market risk

99
Q

is the risk that there will be a failure by a customer/client to repay the principal and/or interest on a loan.

A

Credit risk

100
Q

is also important for insurance companies;

A

Underwriting risk

101
Q

is at a crucial point in its development.

A

Operational risk management

102
Q

As economies and financial conditions change over time, so does the

A

operational risk exposure.

103
Q

is responsible for establishing the operational risk strategy.

A

Board

104
Q

is responsible for implementing the operational risk strategy.

A

Senior management

105
Q

attempts to protect the international financial system

A

Basel II

106
Q

aims to ensure that capital allocation is more risk sensitive.

A

Basel II

107
Q

Losses due to fraud, misappropriation or circumvention of regulations by internal party an authorized activity theft and fraud

A

Internal fraud

108
Q

Losses due to fraud, misappropriation or circumvention of the regulations by third party. System security theft and fraud

A

External fraud

109
Q

Losses arising from injury or noncompliance with the employment legislation.

A

Employees

110
Q

Losses arising from failure to meet professional obligations to clients. Disclosure and fiduciary

A

Clients

111
Q

Losses arising from loss or damage to physical assets. Disasters and other events

A

Physical assets

112
Q

Losses arising from disruption of business or system failures.

A

Systems

113
Q

Losses from failed transaction processing or process management.

A

Processes

114
Q

calculates the value of operational risk capital using a single indicator

A

Basic indicator approach:

115
Q

calculates the value for operational risk, using a broad financial indicator,

A

Standardized approach:

116
Q

uses the internal loss data and a combination of.qualitative and quantitative methods to calculate the operational risk capital.

A

Advanced approach

117
Q

are often larger, and include the loss of a customer.

A

Indirect costs

118
Q

refers to not-for-profit organizations, including charities, membership and voluntary bodies.

A

third sector

119
Q

the questions related to operational risk may well be: ‘What is the value of my assets, how do I protect them and to what extent and value (or limit of indemnity) do I need to purchase insurance?’

A

nonfinancial institution

120
Q

the questions are more likely to be: ‘What are the capital requirements attached to my assets?’ and ‘Can I afford to keep that amount of (non-productive) capital in reserve, or do I need to purchase insurance and to what value or limit of indemnity?’

A

financial sector

121
Q

is a requirement of Basel II, and financial institutions therefore have to undertake this work.

A

Calculation of operational risk exposure

122
Q

are driven by increasing regulatory demands and other corporate governance pressures.

A

Financial institutions

123
Q

has undertaken an evaluation of the causes of the global financial crisis.

A

The US-based Risk and Insurance Managers Society (RIMS)

124
Q

concluded that the global financial crisis was not a failure of ERM, but was caused by the following failures

A

RIMS

125
Q

– Failure to recruit, develop and retain suitable talent.

A

People risk:

126
Q

– A failure in processes or failure of their associated controls

A

Process risk

127
Q

Failure to invest and successfully implement, appropriate technology.

A

Technology risk

128
Q

Financial loss, data loss, business disruption or damage to reputation from failure of IT systems.

A

Cyber risk

129
Q

– Failure of products, processes or services to meet customer and regulator expectations

A

Customer outcome risk

130
Q

which is about delivering the project on time, within budget and to quality,

A

Project risk management,

131
Q

should be seen as an extension of conventional project planning

A

Project risk management

132
Q

is often defined in terms of uncertainty or deviation from the expected/required outcomes.

A

Risk

133
Q

should also be looking for opportunities that may arise when certain developments within the project are more favourable than expected.

A

project manager

134
Q

should take account of these positive developments and ensure that the structure for managing risks in projects is sufficiently flexible for the opportunities

A

Project risk management

135
Q

is a type of control management.

A

Project risk management

136
Q

is a well-developed discipline, with risk control and (especially) event management as the risk management activities that are most important.

A

Project risk management

137
Q

is the relationship between specification and performance

A

Quality

138
Q

There are risks associated with failure to obtain necessary permissions and approvals

A

(compliance risks).

139
Q

There are risks to the project that can prevent it being delivered on time and within budget

A

(hazard risks).

140
Q

There are risks to the project concerning the specification, performance and quality of the final outcome

A

(control risks).

141
Q

There are risks that can enhance the delivery of the project, such as earlier than expected availability of materials

A

(opportunity risks).

142
Q

accept uncertainty attached to each risk.

A

low-exposure/low-uncertainty risks,

143
Q

adapt activities and procedures and introduce controls, including (when appropriate) insurance.

A

high-exposure/lowuncertainty risks

144
Q

, the organization will adopt appropriate contingency plans and

A

low-risk/highuncertainty risks

145
Q

wish to avoid the uncertainty attached to the risk.

A

high-exposure/high-uncertainty risks

146
Q

plots the possible time delay that could result against the potential for cost increases associated with that even

A

Matrix

147
Q

should be populated and updated regularly throughout the duration of the project.

A

risk register or risk matrix

148
Q

can often be a cost-effective way of maintaining your risk register

A

risk management software tool

149
Q

must therefore be continually updated and reports generated at regular and frequent intervals.

A

risk register

150
Q

should provide clear visibility on the risks faced, enable prioritization of the activity and facilitate decision making.

A

Management reports

151
Q

has become one of the best-developed and respected branches of risk management.

A

Project risk management

152
Q

as applied to project management is similar to the standard risk management process

A

risk management process

153
Q

is often added as the fourth output from a project that has to be successfully delivered.

A

compliance

154
Q

is also used by some organizations as an alternative fourth output from a project.

A

Sustainability

155
Q
  • collection of projects of this sort is referred to as a programme
A

Programme

156
Q

may be for additional time to complete a task, or additional costs that may arise to ensure that the final project deliverable operates to the required specification

A

Contingency

157
Q

is a process that enables the analysis and management of the risks associated with a project

A

Project risk analysis and management

158
Q

approach represents a continuous set of activities that can be started at almost any stage in the lifecycle of a project.

A

PRAM

159
Q

There are five points in a project where particular benefit can be achieved from using the PRAM model:

A

Feasibility
Sanction
Tendering
Post-tender
During implementation:

160
Q

at this stage the project is most flexible, enabling changes to be made that can reduce the risks at a relatively low cost.

A

Feasibility:

161
Q

: the client can view the risk exposure associated with the project and check that all steps

A

Sanction

162
Q

: the contractor can ensure that all risks have been identified

A

Tendering

163
Q

: the client can ensure that all risks have been identified by the contractor

A

Post-tender

164
Q

the likelihood of completing the project to cost and timescale will increase

A

During implementation:

165
Q

has two key characteristics:

A

Built-in risk management

166
Q
  • is a set of interconnected processes and resources that starts with the sourcing of raw materials
A

Supply chain

167
Q
  • is normally undertaken because it is assumed that costs can be reduced and risks transferred.
A

Outsourcing of operations

168
Q

means that the organization will not only have to focus on its own risks but should also look at the risks associated with other links in the supply chain.

A

Outsourcing

169
Q

are interrelated. Supply chain considerations are becoming more common, as well as much more complex.

A

Supply chain management and risk management

170
Q
  • also extend to simple outsourcing decisions, such as the appointment of cleaners and caterers.
A

Supply chain issues

171
Q

can extend to strategic partnerships, joint ventures, support services

A

Scope of the supply chain

172
Q
  • are those items that are delivered to you
A

Upstream supplies

173
Q
  • refers to the goods that you deliver onwards.
A

Downstream supply chain

174
Q
  • also allows the organization to have some management control over the operation of a supplier
A

Setting up joint ventures

175
Q

arrangements may also be an appropriate way of responding to competitor

A

Joint-venture

176
Q
  • may also be a successful way of responding to technology changes
A

Joint ventures

177
Q

can ensure continuity of supply chains and also, if correctly executed, deliver competitive advantage.

A

Joint-venture operations

178
Q

will be available, including taking over the supplier or setting up a new organization jointly with your supplier as a separate jointventure organization.

A

Tactical options

179
Q

are a mechanism whereby an organization can exploit benefits but with a lower risk exposure.

A

Joint ventures

180
Q

is likely to include penalty clauses for failure to perform, but contracts that also include provisions for rewarding exceptional performance provide a greater sense of co-operation.

A

contract

181
Q

can also give rise to supply chain exposures.

A

Outsourcing of non-core operations

182
Q

is usually considered to be a mechanism for having non-core activities undertaken by a contractor.

A

Outsourcing of operations

183
Q

is often undertaken to save costs, but it may also be undertaken so that the work is fulfilled by a specialist company.

A

Outsourcing

184
Q

can cut costs by reducing overheads and having a professional perform the operation

A

Outsourcing

185
Q

The benefits of outsourcing can be divided into two types.

A

Direct Benefits and Indirect Benefits

186
Q
  • is clearly an important component when setting up supply chain contracts or deciding to outsource certain activities.
A

Risk management

187
Q
  • also enables organizations to focus on their own core operations and competencies
A

Outsourcing

188
Q
  • arrangements should be introduced only when they offer a cost
A

Outsourcing

189
Q
  • decisions based on a belief that risks are being completely transferred to a third party may prove to be incorrect
A

Outsourcing

190
Q

may be available for incidents that occur at the supplier premises Events such as poor quality of components, late delivery or the bankruptcy of the supplier are generally not insurable.

A

Insurance

191
Q

Damage to reputation may still be suffered if the outsource manufacturing activity produces substandard goods or is exposed as operating unethical business practices

A

Damage to reputation

Risk Management (5 decks)

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