Introduction to Risk Management Flashcards
What is “Risk”?
(1) Exposure to uncertainty.
(2) The chance of a loss or adverse outcome as a result of an action, inaction, or external event.
What is “Risk Exposure”?
The state of being exposed or vulnerable to a risk.
The extent to which an organization is sensitive to underlying risks.
What is “Risk Management”?
The process of identifying the level of risk an organization wants, measuring the level of risk the organization currently has, taking actions that bring the actual level of risk to the desired level of risk, and monitoring continuous risk.
What is “Risk Management Framework”?
The infrastructure, process, and analytics needed to support effective risk management in an organization.
What is “Risk Governance”
The top-down process and guidance that directs risk management activities to align with and support the overall enterprise.
What is “Enterprise Risk Management”?
An overall assessment of a company’s risk position.
A centralized approach to risk management sometimes called firmwide risk management.
What is “Financial Risk”?
The risk arising from a company’s capital structure and, specifically, from the level of debt and debt-like obligations.
What are “Non-Financial Risks”?
Risks that arise from sources other than changes in the external financial markets, such as changes in accounting rules, legal environment, tax rate.
What is a “Market Risk”?
The risk that arises from movements in interest rates, stock prices, exchange rates, and commodity prices.
What is “Credit Risk”?
the expected economic loss under a potential borrower over the life of the contract.
What is “Operational Risk”?
The risk that arises from inadequate or failed people, systems, and internal policies that are beyond the control of the organization but that affect its operations.
What is “Solvency Risk”?
The risk that an organization does not survive or succeed because it runs out of cash, even thought it might otherwise be solvent.
What is “Beta”?
A measure of the sensitivity of a given investment portfolio to movements in the overall market.
What is “Delta”?
The relationship between the option price and the underlying price, which reflects the sensitivity of the price of the option to changes in the price of an underlying.
What is “Gamma”?
A numerical measure of how sensitive an option’s delta is to a change in the price of an underlying.
