CISI Risk - Chapter 10 Flashcards
What is ERM
A method of providing the firm with a succinct view of all its key risk information.
The aggregation of the complete set of risk of the firm, would relate to what?
ERM
Integrated risk management or firm wide risk management is also know as?
ERM
Pillar 2 guidance expects what from directors? (4)
- Understand firm-wide risk profile
- Aggregate firm-wide exposure information in a timely manner
- Define the risk appetite in a way that considers long term performance
- Set clear incentives across the firm in relation to appetite
What will an increase in volatility usually be accompanied by?
increase in buy and sell, therefore an increase in back-office activity
What risk structure would allow a senior manager to see a single view of the firms risk profile
ERM
What does Sound Practice recgognise?
Operational, credit and market risks are often linked
Who is ultimately responsible for risk?
Board and Senior Managers - ERM assists this
What three risk types should not be treated in isolation?
Credit, Operational and Market
What are the four main goals of an ERM programme
Designing and implementing methods for collating firm wide data
Enabling descion making through aggregated risk reporting
Allowing comparison of firms risk profile to available risk capital
Setting clear accountability
Challenges of implementing ERM - Measurement (2)
Consistency of confidence level and time frame
Comparison of risks on a like-like basis
Challenges of implementing ERM - Aggregation (3)
Risk Boundaries
Avoid inflating the risk profile by x counting risk
Firm risk Vs Client risk
Challenges of implementing ERM - Timescale (2)
Many complex requirements with numerical and narrative analysis
Challenges of implementing ERM - Cultural (3)
Common language and processes
Collaboration between the various risk experts
Allocation of responsibilities and accountabilities
4 challenge GROUPS of implementing ERM
Measurment, Aggregation, Timescale, Cultural
