Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Business, Technology, and Finance > Introduction to Risk Management > Flashcards

Introduction to Risk Management Flashcards

You may prefer our related Brainscape-certified flashcards:
Series 66 flashcards SIE Exam flashcards Series 63 flashcards Series 79 Top-Off Exam flashcards Series 7 Top-off Exam flashcards CFA flashcards Series 65 flashcards
1
Q

Define risk in general terms

A

The possible variation in an outcome from what is expected to happen

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Define variation

A

Range of possible outcomes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Define expectation

A

What we expect to happen

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Define outcomes

A

What actually does happen

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Define risk according to COSO

A

The possibility than an event will occur and adversely affect the achievement of objectives

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Define opportunity according to COSO

A

The possibility than an event will occur and positively affect the achievement of objectives

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Define uncertainty

A

The inability to predict outcomes because of a lack of information

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are the two types of non-business risk?

A
  1. Financial risk

2. Operational risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Define strategy risk

A

Choosing and implementing the wrong corporate strategy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Define enterprise risk

A

Success or failure of a business operation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Define product risk

A

Customers do not buy the anticipated amount of product

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Define economic risk

A

Unexpected changes in economic conditions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Define property risk

A

Losing property or losses arising from accidents

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Define business risk

A

Risks that arise from the nature of the entity’s business, its industry, and the conditions it operates in

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What are examples of business risk?

A

PEEPS

  1. Property risk
  2. Enterprise risk
  3. Economic risk
  4. Product risk
  5. Strategy risk
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What are examples of controllable financial risks?

A
  1. Gearing risk
  2. Credit risk
  3. Liquidity risk
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is an example of uncontrollable financial risk?

A

Market risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Define gearing risk

A

Increased interest charges due to high debt levels

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Define credit risk

A

The economic loss suffered due to the default of a customer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Define liquidity risk

A

An unexpected shortage of cash

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Define market risk

A

Exposure to changes in market prices or rates

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What are examples of operational risk?

A
  1. Process risk
  2. People risk
  3. Systems/cyber risk
  4. Event risk
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Define process risk

A

Company’s processes are ineffective or inefficient

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Define people risk

A

Arising from staff constraints, incompetency, or dishonesty

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Define systems/cyber risk

A

The risk of financial loss, business disruption, or reputation damage that are a consequence of accidents and poor systems integrity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Define event risk

A

Loss due to single events that are unlikely but serious

27
Q

What are examples of cyber risk?

A
  1. Phishing
  2. Webcam manager
  3. File hijacker/ransomware
  4. Keylogging
28
Q

Define phishing

A

Bogus emails that ask for personal or security information

29
Q

Define webcam manager

A

Where the user’s webcam is taken over

30
Q

Define file hijacker/ransomware

A

Where the user’s files are hijacked and held to ransom

31
Q

Define keylogging

A

Where criminals record what users type

32
Q

What are examples of event risk?

A
  1. Disaster risk
  2. Regulatory risk
  3. Reputation risk
  4. Systemic risk
33
Q

Define disaster risk

A

Catastrophe occurs such as a fire, flood, etc

34
Q

Define regulatory risk

A

New laws or regulations are introduced

35
Q

Define reputation risk

A

Risk of damage to the business’s reputation

36
Q

Define systemic risk

A

Failure by a participant in the business’s supply chain

37
Q

Define risk management

A

The identification, analysis, and economic control of risks that threaten the assets or earning capacity of a business

38
Q

What are the stages of the risk management process?

A
  1. Risk awareness and identification
  2. Risk assessment and measurement
  3. Risk response and control
  4. Risk monitoring and reporting
39
Q

Define risk identification

A

The identification of the whole range of possible risks and the likelihood of losses occurring as a result of these risks

40
Q

What are examples of techniques to identify risk?

A
  1. PEST analysis
  2. SWOT analysis
  3. External advisors
  4. Interviews
  5. Questionnaires
  6. Internal audit
  7. Brainstorming
41
Q

What is the purpose of risk assessment?

A

To consider the nature of each risk and the implications it might have for the business achieving its objectives

42
Q

What is the purpose of risk measurement?

A
  1. To identify the probability of the risk occurring
  2. To quantify the resultant impact
  3. Calculates the amount of potential loss using expected values for gross risk
43
Q

Define gross risk

A

The potential loss associated with the risk, calculated by combining the impact and probability of the risk before taking any control measures into account

44
Q

What is the equation for calculating gross risk?

A

gross risk = probability x impact

45
Q

Define probability

A

Measures likelihood

46
Q

Define impact

A

Measures the size of the loss

47
Q

Define exposure

A

A measure of the way in which a business is faced by risks

48
Q

Define volatility

A

A measurement of the variability of a risk factor

49
Q

What are the five different categories of loss?

A
  1. Property loss
  2. Liability loss
  3. Personnel loss
  4. Pecuniary loss
  5. Interruption loss
50
Q

What is a risk assessment map used for?

A

To assess each risk

51
Q

What are the key responses to high likelihood, low impact risks?

A
  1. Reduction

2. Sharing

52
Q

What are the key responses to high likelihood, high impact risks?

A
  1. Avoidance
  2. Reduction
  3. Sharing
53
Q

What is the key response to low likelihood, low impact risks?

A

Acceptance

54
Q

What is the key response to low likelihood, high impact risk?

A

Reduction

55
Q

Define risk-averse attitude

A

An investment would be chosen if it has more certainty but possibly a lower return than an alternative less certain, potentially higher return investment

56
Q

Define risk-neutral attitude

A

An investment would be chosen according to its expected return, irrespective of the risk

57
Q

Define risk seeker attitude

A

An investment would be chosen based on it offering higher levels of risk, even if its expected return is lower than an alternative no-risk investment with a higher expected return

58
Q

Define crisis

A

An unexpected event that threatens the wellbeing of a business or a significant disruption to the business and its normal operations that impact on its customers, employees, investors, and other stakeholders

59
Q

What are examples of crisis?

A
  1. Natural event
  2. Industrial accident
  3. Product or service failure
  4. Public relations disaster
  5. Business crisis
  6. Management crisis
  7. Legal/regulatory crisis
60
Q

Define crisis management

A

The identification of a crisis, planning a response to the crisis and confronting and resolving the crisis

61
Q

What are the features of crisis management?

A
  1. Contingency plans

2. Crisis prevention

62
Q

Define disaster

A

When the business’s operations, or a significant part of them, break down for some reason leading to potential losses of equipment, data, or funds

63
Q

What are the two types of disaster?

A
  1. A major crisis causing a breakdown in operations and resultant losses
  2. An event that results in serious consequences
64
Q

What are the main components of a disaster recovery plan?

A
  1. Define responsibilities
  2. Prioritise actions
  3. Establish back-up and standby arrangements
  4. Communicate with staff
  5. Establish PR
  6. Risk assessment

Business, Technology, and Finance (8 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions