Enterprise Risk Management

Question 1

What the four areas where ERM can assist entity to achieve objectives?

Answer 1

Strategic objectives - high level goals
Operations objectives - focus on productivity and efficiency
Reporting objectives - assure reporting is reliable
Compliance objectives - assure entity is in compliance with laws and regulations

Question 2

What are the eight components of ERM?

Answer 2

Internal Environment
Objective Setting
Event Identification
Risk Assessment
Risk Response
Control Activities
Info and Communication
Monitoring

Question 3

What is the balance sheet approach for risk assessment?

Answer 3

Entity identifies the resources within its control and determines which ones might be vulnerable and the degree of vulnerability

Question 4

What is the process approach for risk assessment?

Answer 4

Entity evaluates processes that are used to achieve entity’s objectives

Question 5

What is the event identification approach for risk assessment?

Answer 5

Entity seeks to identify events that might affect its customers, suppliers, competitors, potential entrants into market, and substitutes

Question 6

What are the four risk responses?

Answer 6

Acceptance - no action
Sharing - insurance
Reducing - changing environment
Avoidance - avoid activity