Mnemonics Flashcards

Question

fat sir : Risk mitigation techniques in project appraisal

Answer 1

further research avoid transfer share insure reduce

Answer 2

further research avoid transfer

Answer 3

share insure reduce

Answer 4

smoothing of results avoid large losses diversification limit exposure to risk, single events and/or accumulations increase capacity to accept risk financial assistance expertise

Answer 5

smoothing of results avoid large losses diversification

Answer 6

limit exposure to risk, single events and/or accumulations increase capacity to accept risk financial assistance expertise

Answer 7

``` competition and the underwriting cycle regulation and legislation environmental issues accounting standards tax economic outlook ``` ``` governance risk management requirements experience from overseas adequacy of capital trends demographic trends ``` ``` lifestyle considerations institutional structure social trends technology state benefits ```

Answer 8

``` competition and the underwriting cycle regulation and legislation environmental issues accounting standards tax economic outlook ```

Answer 9

``` governance risk management requirements experience from overseas adequacy of capital trends demographic trends ```

Answer 10

``` lifestyle considerations institutional structure social trends technology state benefits ```

Answer 11

``` renewal administration asset management profits initial administration design of the contract ``` commission overheads sales and advertising terminal claims expenses

Answer 12

``` renewal administration asset management profits initial administration design of the contract ```

Answer 13

commission overheads sales and advertising terminal claims expenses

Answer 14

give confidence in the system reduction in crime inefficiencies in the market corrected, and promote efficient and orderly markets protect consumers and the public

Answer 15

setting sanctions enforcing regulations reviewing and influencing government policy vetting and registering firms and individuals investigating breaches "checking funding levels, management and conduct of providers " educating consumers and the public

Answer 16

``` moral hazard eliminated as far as possible ultimate limit on liability undertaken data needed to price the risk exists pooling a large number of similar risks independent risk events small probability of occurrence ```

Answer 17

``` size absolute or relative size of assets objectives uncertainty of the liabilities nature of the liabilities diversification existing portfolio return expected long term return ``` tax treatment of assets and investor, e.g. high income tax vs low CGT tax restrictions statutory, legal or voluntary restrictions accrual of future liabilities currency of the existing liabilities term of the existing liabilities other strategies adopted by other funds or competitors risk appetite solvency requirements

Answer 18

types extent currency hold single custodianship amount mismatching

Answer 19

details insufficient risk risk factors are coded in different ways differences difference in target market, administration systems, underwriting, geographical areas, distribution channels, data recording outdated not not everyone contributes errors quality the quality is only as good as the contributors

Answer 20

``` valid adequately rigorous inputs arbitrage behaviour length easy ``` ``` communicable reflects independent sensible parameters simple ``` clear a refineable developable

Answer 21

mismatching domestic liabilities tax volatility of currency custodian needed accounting differences time delays expenses expenses incurred and expertise needed regulation poor political problems and instability information asymmetries, information is scarce and harder to obtain language difficulties liquidity problems administration additional administration required repatriation repatriation problems and restrictions on asset ownership

Answer 22

mismatching domestic liabilities tax volatility of currency

Answer 23

custodian needed accounting differences time delays expenses expenses incurred and expertise needed regulation poor political problems and instability information asymmetries, information is scarce and harder to obtain language difficulties liquidity problems administration additional administration required repatriation repatriation problems and restrictions on asset ownership

Answer 24

details insufficient | risk risk factors are coded in different ways

Answer 25

differences difference in target market, administration systems, underwriting, geographical areas, distribution channels, data recording outdated not not everyone contributes errors quality the quality is only as good as the contributors

Answer 26

``` size absolute or relative size of assets objectives uncertainty of the liabilities nature of the liabilities diversification existing portfolio return expected long term return ```

Answer 27

* Is the loan an acceptable risk, given risk tolerance, other exposure etc? * Are repayment terms (eg interest rate charged) acceptable?

Answer 28

* Is the borrower able to service and repay the debt when due? * How certain is the source of repayment? * What margin of safety has been built into the projections and assumptions

Answer 29

* To what use will the monies be put? * Is the borrower in a sector where there are concerns, or where the total exposure is already sufficient? * Is the project acceptable on ethical/moral grounds? * Will the lending be subject to country, currency, environmental, resource, technological or other inherent risk? * Are there controls to ensure that the monies are correctly applied?

Answer 30

Is there any security in place should the borrower fail?

Answer 31

* Is the amount borrowed reasonable, taking into account the stated purpose? * How much does the borrower contribute? Who stands to lose most if the project fails?

Answer 32

* Is the borrower (and/or its principals) known, competent and trustworthy? * Do key personnel have the required depth and spread of skills and experience? * If someone is found to have lied/intentionally mislead, do not lend * Who introduced them? Can references be obtained?

Answer 33

overall impact on distribution f npvs feasibility and cost further mitigation to respond to secondary risks effect on frequency, severity and correlation resulting secondary risks

Answer 34

substandard lives are identified and offered special terms avoid anti-selection financial underwriting is done to reduce the risk of over insurance on large policies experience does not depart too much from that assumed in the pricing basis risk classification ensures that all risks are treated fairly

Answer 35

``` management control systems underwriting and claims control systems reinsurance diversification ART ```

Answer 36

``` discounted covers integrated risk covers post loss funding securitisation insurance derivatives swaps ```

Answer 37

``` choice risk investments security expenses surplus ```

Answer 38

consistency in the accounting treatment from year to year avoid distortions resulting from the contribution fluctuations realistic recognise the realistic costs of accruing benefits disclosure of appropriate information

Answer 39

complex or complicated products rubbish incompetent advisor integrity the advisor lacks integrity driven by sales related remuneration model and parameter errors errors data relating to memebers is incorrect state state encouraged but inappropriate actions

Answer 40

confidence given to stakeholders opportunities identified and can be taken advantage of stability and quality of business improved - we avoid bad risks and business is better for it synergy opportunities arbitrage opportunities capital better allocated surprises avoid surprises

Answer 41

``` tables e.g. actuarial mortality tables reinsurers abroad data from overseas contracts industry data national statistics experience experience investigations on the existing contract regulatory regulatory reports and company accounts similar contracts ```