ERM Flashcards
What is ERM?
Enterprise Risk Management
the culture, capabilities, and practices, integrated with strategy-setting and performance, that organizations rely on to manage risk in creating, preserving, and realizing value.
What is risk?
The possibility that events will occur and affect the achievement of strategy and business objectives.
What is value creation?
when benefits of value exceed the cost of resources used.
Resources: people, financial capital, tech, etc.
What is value preservation?
when ongoing operations efficiently and effectively sustain created benefits.
High customer satisfaction
What is value erosion?
when faulty strategy and inefficient/ineffective operations cause value to decline
What is value realized?
when benefits created by the org are received by stakeholders in either monetary or nonmonetary form (customer satisfaction)
What is inherent risk?
the risk to an entity in the absence of any direct or focused action by management to alter the severity
Natural level of risk
What is target residual risk?
the amount of risk that an entity prefers to assume in pursuit of its strategy of business objectives knowing that management will implement or has implemented direct or focused actions to alter the severity of the risk
What is actual residual risk?
the risk remaining after management has taken action
What is event risk?
the risk that an unexpected (and infrequent) event will occur that will have an adverse impact on the org
What does the mission represent?
the core purpose of the entity, including why it exists and what it hopes to accomplish.
What does the vision represent?
the aspirations of the entity and what it hopes to achieve over time.
What do the core values represent?
an orgs beliefs and ideals about what is good or bad, and acceptable and unacceptable; they influence the behavior of the org
What is the ERM Framework?
GO PRO
Governance & Culture
Stratefy & Objective-Setting
Performance
Review & Revision
Information, Communication, and Reporting
What are the 4 prinicples of Strategy & Objective-Setting?
SOAR
- evalutes alternaitve STRATEGIES
- formulates bisuness OBJECTIVES
- ANALYZES business contect
- defines RISK context
What are the 5 principles of Government & Culture?
DOVES
- defines DESIRED culture
- exercises boad OVERSIGHT
- demonstrates commitment to core VALUES
- attracts, develops, and retains capable individuald (EE’s)
What are the 5 principles of Performance?
VAPIR
- developes portfolio VIEW
- ASSESSES severity of risk
- PRIORITIZES risk
- IDENTIFIES risks (events)
- implements risk RESPONSES
What are the 3 principles of Revision & Review?
SIR
- assesses SUBSTANTIAL change
- pursues IMPROVEMENT in ERM
- REVEIWS risk and performance
What are the 3 principales of Ongoing Informaiton, Communiction, and Reporting?
TIP
