Module 1 - Unit 1 Concepts And Definitions Of Risk And Risk Management Flashcards
ISO 31000 Definition of Risk
The effect of uncertainty on objectives
Definition of Risk Management
Coordinated activities to direct and control an organisation with regard to risk
Definition of Key Dependencies
Key things the organisations need to be successful. They can be internal/external.
E.g., : retaining a licence to operate in a particular teritory or maintaining a credit rating
What are Core Processes?
Core processes are a collection of activities that deliver stakeholder expectations. They also ensure the continuity of a business.
E.g., deliver healthcare
Definition of Stakeholder Expectations
Stakeholders are parties who have an interest in a business or are affected by what it does.
E.g., investors, suppliers, customers
What is Credit Risk?
Credit Risk is the risk of loss; a party fails to pay
E.g., counterparty failure
What is Market Risk?
Market Risk arises from fluctuations in values or income from assets.
What is the difference between Control Risk, Compliance Risk, Opportunity Risk and Hazard Risk?
Control Risk (or uncertainy) - impact is uncertain - e.g., economic recession
Compliance Risk (or mandatory) - mandatory obligations - e.g., breach of Law
Opprtunity Risk (or speculative) - potentially positive impact, embrace benefits - e.g., expansion
Hazard Risk (or pure) - negative impact - e.g., fire in the office
What is Operational Risk?
Refers to failure of internal procedures/processes, people or systems - e.g., cyber attack
What is Liquidity Risk?
Refers to Insufficient resources to pay out liabilities when due
Hopkin’s 4 types of Risk
Compliance Risk
Hazard Risk
Control Risk
Opportunity Risk
4 FIRM Risk Categories
Financial risk
Infrastructure risk
Reputational risk
Marketplace risk
What are the 3 ways that risk can be attached?
Key dependencies
Core Processes
Stakeholders
What does STOC stands for?
Strategy
Tactics
Operations
Compliance
What are 4 P’s sources of Hazard Risk?
People - e.g., Lack of skills, resouces
Premises - e.g., damage,, theft
Process - e.g., IT or comms failure
Products - e.g., Poor service quality
What is Residual Risk?
A risk AFTER risk management actions have been taken.
What is Hazard Risk?
Risk associated with sources of harm
5 Principles of a Risk Management Framework (PACED)
Proportionate to the level of risk
Aligned with other b/s activities
Comprehensive, systematic & structured
Embedded within b/s procedures and protocols
Dynamic, interactive and responsive to change
What are the aims/benefits of MADE2?
Mandatory obligations are met
Assurance that significant risks are managed
Decisions are properly considered regarding risk
Effective core processes (STOC)
What described best the term ‘mandatory’ in MADE2?
To ensure conformity with rules, regulations and obligations
What are the 4 T’s?
Tolerate
Treat
Transfer
Terminate
What are the 4 Levels of Risk Management Sophistication?
INFORM - unaware of obligations
REFORM - awareness of non-complance
CONFORM - actions to ensure compliance
PERFORM - achieve business opportunities
DEFORM - inactivity caused by obsession
What are the 4 E’s of Opportunity Risk Management?
Explore
Expand
Exploit
Exist
