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CISI Cards - Risk in Investment > CISI Risk - Chapter 1 > Flashcards

CISI Risk - Chapter 1 Flashcards

1
Q

Why is credit, market and liquidity risk in the center of the Risk-Related regulation and policy diagram?

A

The management of these risks lies at the heart of the complex financial transactions performed by the industry.

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2
Q

What is investment risk?

A

Providing the ‘Right’ level of return to the investor

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3
Q

What is operational risk?

A

Risk arising from people, processes, systems and external events. These are the four key components of operational risk

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4
Q

What are the four key points of Operational risk?

A

People, Processes, systems and external events.

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5
Q

Difference between risk and uncertanity?

A

Risk - Variables that can be quantified
Uncertainty - Variable that can NOT be quantified

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6
Q

How is the ‘Risk Score’ calculated?

A

Probability X impact

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7
Q

Where does Risk Governance & Risk polices sit ?

A

At board level

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8
Q

Who performs risk oversight?

A

The business unit (the first line of defense)

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9
Q

Risk oversight - Who do action plans get reported to?

A

Independent Risk Management function

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10
Q

What are the four tasks performed by the Independent Risk Management function?

A

Identifying risks
Assessing Risks
Ensuring risks are appropriately controlled
Monitoring and reporting

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11
Q

Who performs Day to Day risk management?

A

Performed by the business unit, not the risk function

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12
Q

6 causes of external risk?

A

The global economy
Politics
Competitive enviroment
Social & Market forces
ESG
Technology and Cyber security

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13
Q

Types of external stakeholders and third parties (5)

A

Parent Company
Institutional Investors
Large customers
Regulators
Suppliers/Consultant
ESGs too

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14
Q

3 Main types of Political Risk

A

Rise & fall in invested markets
Increase/Decrease demand for products sold by the industry
Changes to the regulation/legislation in invested markets

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15
Q

ESG - Environmental Risks (2)

A

Climate change
Issues around the depletion of natural resources

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16
Q

ESG - Social Risks (3)

A

Reputation
Human Capital Issues
Stakeholder Opposition

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17
Q

ESG - Governance Risks (2)

A

Corporate Governance Issues
Corporate Behavior Issues

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18
Q

PESTLE Analysis - Stands for what?

A

Political
Economic
Social
Technical
Legislative
Environmental

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19
Q

What’s key process is used under Business Continuity Planning

A

Disaster Recovery

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20
Q

What are the two key impacts covered in Business Process Analysis

A

Internal and external impact on business processes

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21
Q

What are the three ways to assess external risk

A

Likelihood/Probability rating

Impact Loss rating

Risk score = Likelihood (1-5) x impacts (1-5)

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22
Q

What is strategic risk?

A

The risk of the outcome of a poor business strategy or the way in which is implemented across the firm

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23
Q

What is compliance risk?

A

Compliance with regulation and legislation

24
Q

3 components to Financial Risk

A

Revenues Vs Costs
Gearing/Leverage
BIS Three maintypes - Credit, Market & Operational

25
Q

Who is responsible for creating/drafting and amending the Simple Risk framework

A

The board - Senior Managers

26
Q

What is the identify part of the simple risk framework

A

Listing all te possible problems or hazards

27
Q

What are the four key points in risk oversight

A

Identify, Asses, Monitor & Control

28
Q

What is the Asses part of the simple risk framework

A

Grouping risks together and attempting to quantify their risk scores

29
Q

What is the Control part of the simple risk framework

A

Setting limits and mitigation practices to the risks identified in the first stage

30
Q

What is the Monitor part of the simple risk framework

A

Monitor effectivness and provide data for regualtors/board level

31
Q

Is compliance an internal or external risk?

A

Internal - A firm can choose to comply with regulations

32
Q

4 ways to asses internal drivers of business risk?

A

SWOT Analysis
Stress Testing
Scenario Analysis
Risk Assessment Workshops

33
Q

What are the two ways to externally assess risks?

A

Independent auditors
Industry best practice

34
Q

What is SWOT analysis

A

4 grid approach going through the firms weakness and successes

35
Q

What is stress testing

A

One input factor at a time

36
Q

What is Scenario analysis

A

Constructing realistic scenarios, multiple factors at a time

37
Q

6 Methods used to reduce business risk?

A

GAP Analysis
Market surveys
Market research
R & D
Liaison with regulators
Test-Marketing

38
Q

What is risk culture?

A

System of values and behaviors throughout an organization

39
Q

What is risk appetite

A

The type and amount of risk a firm is willing to accept in the pursuit of business objectives

40
Q

Who does the top-down approach involve?

A

Board and senior management

41
Q

Who does the bottom-up approach involve?

A

Line management

42
Q

What is a risk profile?

A

The type and intensity of the risks to which a firm is exposed to

43
Q

When launching a new product, how do firms often justify the strategy?

A

Cost/Benefit analysis

44
Q

What is Inherent (Gross) Risk?

A

Risk without mitigating controls

45
Q

What is residual (Net) risk

A

Firms exposure after taking mitigating controls

46
Q

What is market risk

A

Changes in value of financial instruments

47
Q

What is funding liquidity risk?

A

Firm can not obtain necessary funds to meet their obligations

47
Q

What specific product is exposed to interest rate risk?

A

Balance Sheets

48
Q

What is the purpose of an ICO? (Initial Coin Offering)

A

Raise Capital

48
Q

What is interest rate risk?

A

Exposure to adverse movements in interest rates

49
Q

What is RegTech?

A

Regulation surrounding FinTech activities and products

50
Q

What is the fine for breaking the GDPR?

A

4% or 40 million.

51
Q

What is sovereign risk?

A

Government defaulting on their loans

52
Q

What is a ‘Hot’ site

A

Online storage site of crypto. Asset and encryption key stored SEPERATELY

53
Q

What is a ‘Cold’ site

A

Offline storage of crypto assets in bunkers and vaults.

54
Q

What is enterprise risk management ?

A

Enterprise risk management is a method of providing the firm with a succinct view of all its key risk information, thus enabling the senior team to make balanced, firm-wide risk decisions.

55
Q
A

CISI Cards - Risk in Investment (19 decks)

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