Lecture 2 Flashcards
Desirable characteristics of objectives
specific, measurable, achievable, relevant, timescaled (SMART)
types of objectives
strategic
operational
enterprise risk management
strategic
an org’s mission, goals, strategic plan
operational
day to day activities that will achieve the organization’s strategy
enterprise risk management
ensure ability o meet operational objectives and therefore to achieve strategic objectives across entire org
Communication of objectives
- internal documents: mission statement, employee handbook, etc
- external communication: ads, news releases, spokesperson, etc
examples of RM objectives
- survive
- continue operations
- hold variability below some level (earnings stability)
- maintain expenses below some level
- possess cash sufficient to undertake value-enhancing investments
- meet outside responsibility
- be socially responsible
tradeoffs between/among objectives
manage variability v/ manage expenses
what’s the right level?
exposures
- underlying assets that may experience variability in value (typically focus on loss)
- ultimately want to identify the existence of an exposure and its value
- physical, financial, intangible, personnel
perils
specific causes of variability (loss)- how likely.frequent is the event?
hazards
conditions that increases the likelihood (frequency) and/pr size of severity of loss
types of hazards
physical (stairs)
economic (stock market changes)
cultural (social, political, regulatory, legal)
cognitive and behavioral (moral hazard)
moral hazard
behavior that makes negative outcomes more likely and/or larger, induced by fact that costs are not born by the actor; not necessarily intentional
methods to identify RM problems
document analysis
compliance review
inspections/interviews
expertise outside the org
