Midterm1 Flashcards
Define as a set f individual characteristics that are common across all risks in profile
risk profile
A remote storage service that does not require a direct server connection that is?
cloud computing
What are four types of loss exposure?
Property, liability, personnel and net income
define : Cloud computing
is a remote storage service that does not require a direct server connection.
The identification, analysis, assessment, control, and avoidance, minimization, or elimination of unacceptable risks
Risk Management
List 3 Benefits to organisation of Risk Management ?
Reduce the cost of hazard risk reduce the downside of risk , ability to maximise the profits
The identification, analysis, assessment, control, and avoidance, minimization, or elimination of unacceptable risks
Risk Management
List Benefit to economy for Risk Management ?
Reduce the waste of resources, Reduce the systematic risk
What are the Risk Management goals ?
Legal and regulatory compliance , survival, business continuity , earning stability
Cost of Risk
is the total costs associated with the possibility of accidental loss that is tied to particular activities or assets
Enterprise Risk Management
is defined as a specific approach in which an organization focuses on managing risks and opportunities while ensuring that stakeholders’ value is maximized. This includes the management of operational, financial, and strategic risk.
The potential for a major disruption in the function of an entire market or financial system.
Systematic Risk
is defined as a set of individual characteristics that are common across all risks in a profile
Risk Profile
the total cost incurred by an organization because of the possibility of accidental loss.
Cost of risk
including losses and failures, are an inevitable aspect of any type of business or speculative risk. Reduce downside risks, organizations can use threshold limits, which can be applied to many types of risks.
Downside risk
use sensors and wireless sensor networks for data collection, transmission, and analysis
Smart products
is the use of objects that are connected through a network and transmit data to computers
Internet of Things (IoT)
is a remote storage service that does not require a direct server connection.
Cloud computing
uses a process called data mining to confirm and verify the data, and then it time stamps the data to add to the Blockchain. The use of the Blockchain for data storage for risk management increases security, immutability, transparency, scalability, and sharing of quality data that has been verified
Blockchain
is the total costs associated with the possibility of accidental loss that is tied to particular activities or assets
cost of risk
is defined as losses and failures that are inevitable regardless of the type of business or speculative risk. Organizations that want to reduce downside risks can use threshold limits based on specific risk criteria that can be applied to various types of risk.
Downside risk
What are the two main categories of commercial insurance policies?
Property and liability
focuses on managing risk within all levels and functions of the organization, which creates a more complete risk portfolio and a profile for an organization. A holistic risk management approach can benefit an organization because this approach creates a full picture of the organization’s risk portfolio and profile, which can help managers make better decisions and improve overall outcomes
Holistic risk management
what is the difference between subjective and objective risk?
subjective - it is based on opinions with in the organization and is the perceived amount of risk.
objective - it is based on facts and data and is a measurable variation in uncertain outcomes.
Categories of Risk:
Hazard risk
Operational risk
Financial risk
Strategic risk
what is the term used to describe the size of the loss?
Severity
What is Exposure ?
Is a measurement that identifies the maximum potential damage that can be associated with any event.
Hazard risk can be categorized by:
- Personnel risk
- Property risk
- Liability risk
Value at Risk (VaR)
VaR measures the probability of a loss in an investment’s value exceeding a threshold level. In addition to working within a short time horizon, VaR is typically characterized by low prob- ability.
Property that has a physical form
tangible property
Quadrants of risks
Hazard Risk, Operational Risk, Financial Risk & Strategic risk
Non - diversifiable Risk
impacts a large section of the population. This type of risk is correlated and can include unemployment, inflation, and any type of natural disaster.
- Hazard risk can be categorized by:
- Personnel risk
- Property risk
- Liability risk
What are risk assessment of ISO 31000 ?
Risk Identification , Risk Analysis and Risk Evaluation
What is Enterprise Risk Management (ERM)
is defined as a specific approach in which an organization focuses on managing risks and opportunities while ensuring that stakeholders’ value is maximized. This includes the management of operational, financial, and strategic risk.
Two major standards in risk management
The Committee of Sponsoring Organizations’ (COSO’s) enterprise risk. (ERM) framework emphasizes the close ties between risk and strategy, as does the ISO 31000 definition
Severity
the size of a loss
Surety bonds are three-party agreements. Who do they involve?
Principal, the surety and obligee
what is the meaning of diversification?
a risk control technique that spreads loss exposure over numerous projects, products, markets or regions.
What are component of COSO Framework ?
Governance and Culture, Strategy and objective , performance, Review and revision, Information, communication and report
which are three general categories of coverage in marine insurance?
- The vessel
- Liability
- Cargo
what are the Categories of Risk
- Hazard risks
- Operational risks
- Financial risks
- Strategic risks
How many Basel 3 principle ?
11
is a useful process for understanding and solving a problem. Figure out what negative events are occurring. Then, look at the complex systems around those problems, and identify key points of failure.
root cause analysis
A document published by a recognized authority that includes principles, criteria, best practices for risk management
Risk Management Standards
foundation for applying the risk management process throughout the organization.
Risk management framework
Information used as a basis for measuring the significance of a risk
Risk criteria
can be applied to all operations and most activities and to any type of risk including hazard, operational, financial, and strategic risks.
ISO 31000
The ISO 31000 definition of risk assessment includes
- risk identification,
- risk analysis,
- risk evaluation.
Hazard
a condition that increases the frequency or severity of loss
which risk refers to a company’s ability to manage its debt and financial leverage?
financial risk
Intangible Property
property that has no physical form
the total cost incurred by an organization because of the possibility of accidental loss
cost of risk
the use of objects that are connected through a network and transmit data to computers
Internet of Things(IOT)
the chance of a loss or no loss, but there is no chance of a gain.
Pure and speculative risk
o This type of risk is specific to the possible changes in the cost of raw materials and other inputs that can impact cash flows and/or price changes in the market for outputs such as completed products
Price risk
This type of risk is most common to financial institutions and banks
Credit risk
impacts some individuals, organizations, or small groups
diversifiable risk
a large section of the population at the same time
non-diversifiable risk
is the subject of insurance and can occur from loss exposures due to property, liability, or personal loss.
Hazard risk
what is the difference between subjective and objective risk?
subjective - it is based on opinions with in the organization and is the perceived amount of risk.
Hazard risk can be categorized by:
Personnel risk
Property risk
Liability risk
GAAP
A common set of accounting standards and procedures used in the preparation of financial statements to ensure consistency of presentation and reported results.
What are Major types of Financial Risk?
- Market risk
- Credit risk
- Price risk
What is Commodity Price Risk ?
Commodity price risk affects many different types of organizations. Organizations can manage their commodity price risk through purchase of commodity futures contracts. Hedg- ing through the use of derivatives linked to the price of a commodity is a technique that some organizations use suc- cessfully to manage commodity price risk.
It is an external risk with the potential to affect an organization’s objectives and the risk can be reduced through a financial contract, such as a derivative. What type of risk are these characteristics associated with?
Financial
the three major types of financial risk
- Market risk
- Credit risk
- Price risk
What are the benefits of VAR as a RIsk Measure ?
a. The potential loss associated with an investment decision can be quantified.
b. Complex positions (typically involving multiple investments) are expressed as a single figure.
c. Loss is expressed in easily understood monetary terms.
loss of good will, failure to perform, missed opportunities are the examples of ?
net income loss exposures
Value at Risk (VaR)
VaR measures the probability of a loss in an investment’s value exceeding a threshold level. In addition to working within a short time horizon, VaR is typically characterized by low prob- ability.
what are the three major types os financial risk?
market risk, credit risk and price risk
What are component of framework model ?
Lead and establish accountability
Align and integrate
Allocate resources
Communicate and report
three major types of financial risk are
- Market risk
- Credit risk
- Price risk
what are The external environment of an organization factors
- Economic
- Political
- Legal and regulatory
- Technology
- Natural
- Competitive landscape
P-D-C-A Cycle is also known as?
The Shewhart cycle and the Deming cycle
four components of the framework mode are ?
Lead and establish accountability
▪ Align and integrate
▪ Allocate resources
▪ Communicate and report
A tool used by an organization to measure the uncertainty of meeting a strategic business objective
Key risk indicator
What are Five major steps are included in the enterprise-wide risk management process?
Scan the environment, identify risk , analyse risk, treat risk and monitor and assure
The risk that a security’s future value will decline because of changes in interest rates.
Interest rate risk
What are the two kinds of management liability insurance?
Director & officer liability and employment practices liability
What are the three categories of ocean marine insurance?
vessel, liability and cargo
risk management professional should first compare an organization’s existing risk management framework and process against that of an internationally recognized standard
GAP
How loss exposure are analysed ?
- Loss frequency—the number of losses within a specific time period
- Loss severity—the amount, in dollars, of a loss for a specific occurrence
- Total dollar losses—the total dollar amount of losses for all occurrences
during a specific time period - Timing—when losses occur and when loss payments are made
A conscious act or decision not to act that reduces the frequency and/ or severity of losses or makes
losses more predictable that is know as
risk control
