Lecture 2 Flashcards

1
Q

Desirable characteristics of objectives

A

specific, measurable, achievable, relevant, timescaled (SMART)

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2
Q

types of objectives

A

strategic
operational
enterprise risk management

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3
Q

strategic

A

an org’s mission, goals, strategic plan

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4
Q

operational

A

day to day activities that will achieve the organization’s strategy

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5
Q

enterprise risk management

A

ensure ability o meet operational objectives and therefore to achieve strategic objectives across entire org

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6
Q

Communication of objectives

A
  • internal documents: mission statement, employee handbook, etc
  • external communication: ads, news releases, spokesperson, etc
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7
Q

examples of RM objectives

A
  • 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
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8
Q

tradeoffs between/among objectives

A

manage variability v/ manage expenses

what’s the right level?

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9
Q

exposures

A
  • 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
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10
Q

perils

A

specific causes of variability (loss)- how likely.frequent is the event?

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11
Q

hazards

A

conditions that increases the likelihood (frequency) and/pr size of severity of loss

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12
Q

types of hazards

A

physical (stairs)
economic (stock market changes)
cultural (social, political, regulatory, legal)
cognitive and behavioral (moral hazard)

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13
Q

moral hazard

A

behavior that makes negative outcomes more likely and/or larger, induced by fact that costs are not born by the actor; not necessarily intentional

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14
Q

methods to identify RM problems

A

document analysis
compliance review
inspections/interviews
expertise outside the org

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