ERM Intro

Question 1

ERM

Answer 1

Discipline by which an organization any industry assesses, controls, exploits, finances, and monitors risks from all sources for the purpose of increasing the organization’s short- and long-term value to its stakeholders

Question 2

ERM framework

Answer 2

A way to conceptualize ERM is two dimensions: one spanning the types, the other RM process

Question 3

Defense Line 1: Operational Management

Answer 3

Own and manage risks

Question 4

Defense Line 2: RM and Compliance Function

Answer 4

Monitor the risks, oversee noncompliance

Question 5

Defense Line 3: Internal audit

Answer 5

Provide independent assurance

Question 6

Criterion 1

Answer 6

Enterprise-wide Scope. Though most ERM program is focusing on the part where generating most revenue

Question 7

Criterion 2

Answer 7

All risks. Major difficulty operational and strategy risk

Question 8

Criterion 3

Answer 8

Key Risk focus. Focus on a relatively small list of risk, 10 to 30

Question 9

Criterion 4

Answer 9

Integrated across Risk Types

Question 10

Criterion 5

Answer 10

Aggregate Metrics. Aggregate exposure metrics and risk decision making to the enterprise level. Calculated metric of aggregate risk exposure + decision defining the target level of aggregate risk exposure

Question 11

Criterion 6

Answer 11

Decision making. Responding to risk, managing it, make decisions. Many risk management programs merely identify and report, no decision making

Question 12

Criterion 7

Answer 12

Balances risk and return management

Question 13

Criterion 8

Answer 13

Appropriate risk disclosures (important to shareholders, they are aware if drop in share price)

Question 14

3 core challenges

Answer 14

1. Inability to quantify strategic and operational risk
2. Unclear definition of risk appetite
3. Lack of integration of ERM into decision making