Chapter 8 - Enterprise Risk Management

Question 1

Steps to minimize risk

5 points

Answer 1

1. Risk identification and assesment
2. Risk quantification and measurement
3. Risk Analysis , Monitor and reporting
4. Capital Allocation
5. Risk Management and Mitigation

Question 2

Various decisions for managing risk

9 points

HRA DTH PSR

Answer 2

1. Handling
2. Reduction
3. Avoidance
4. Retention
5. Transfer
6. Hedging
7. Diversification
8. Sharing
9. Pooling

Question 3

Objectives of Risk mgmt

5 points
OCD AF

Answer 3

1. Anticipating- uncertainty-
2. Channelizing - events
3. Setting right - deviations
4. Ensuring - objectives- alternatives
5. Event-frustrated- damage minimal

Question 4

Benefits of risk mapping
7 points
AIDS

Answer 4

1. Awareness-significant risks- ranking
   2 Enables- delivery-solutions- entire chain
2. Serves- aid- strategic planning
3. Aids- action plan- effective mgmt of risk
4. Assigns clear resp- particular areas
5. Provides - opp- lev risk mgmt as Comp Advantage
6. Supports- client ins prog development

Question 5

Need for implementation of ERM

5 points

Answer 5

1. Reduce- variability
2. Allign and intergrate- various views
3. Enhance - CG
4. Successful response- changing business env
5. Allign strat and corp culture

Question 6

Risk retention

4 points

Answer 6

1. Risk increases return- operational risk
   2 Risk- small-ignored/phased out
2. Useful-prob is low -reserves- eg: credit risk
3. Subject- Awareness of risk - preparedness

Question 7

Steps to prevent corporate failure

4 points

Answer 7

1. Appointment of non executive directors
2. Audit Committees
3. Development of environment learning
4. Focus on RandD

Question 8

Perf related measures in CRM

Answer 8

1. ROE
2. Operating earnings
3. EBIT
4. CFROI
5. WACC
6. EVA