Module 2. The 5 Key Elements of Risk Management Flashcards
What are the 5 key elements of risk management?
(1) Identify the risk
(2) Analyze the risk
(3) Evaluate the Risk and Risk Assessment
(4) Treat the risk
(5) Monitor and Review the Risk
This is the initital step in the risk management process, which assess the risk that the business is exposed to in its operating environment.
Identify the Risk
After identifying the risk, what is the next step that involves determining the scope of the risk and understanding how it connects to various factors within the organization.
Analyze the risk.
Analyzing the risk involves assessing the ___________ of the risk, you need to see how many business functions it affects. Some risks could halt the entire business, while others might only cause minor inconveniences.
severity
By analyzing the risks, we can MAP out the situtation…
M- minimize the impact of negative events
A - assess if the project’s benefit outweigh its risks before starting.
P - plan the company’s response to emergencies.
Steps in Analyzing the risk
- Identify the risk
- Define levels of uncertainty
- Estimate the impact of uncertainty
- Complete the risk analysis model
- Analyze the results
- Implement the solution
In evaluating the risk and risk assessment, risks needs to be _________ and __________.
ranked and prioritized
Most risk management solutions have different categories of risks, depending on the _________ of the risk.
severity
A risk that may cause some inconvenience is rated _______.
lowly
Risk are rated the highest when it can result to a __________
catasstrophic loss
It is important to ran risks because it allows the organization to gain a holistic view of the risk exposure of the whole organization.
Evaluate the risk and risk assessment
True or False
The business my be vulnerable to several low-level risks, but it may not require upper management intervention.
True
On the other hand, just one of the highest-rated risks is enough to require _______________.
intermediate intervention
There are two types of risk assessment:
(1) Qualitative Risk Assessment
(2) Quantitative Risk Assessment
Evaluating the risks that can’t easily be measured with numbers. Based on opninions and no hard data.
Qualitative Risk Assessment
Evaluating the risk that can be measured with numbers. Easy to automate and has concrete data.
Quantitative Risk Assessment
Treating the risks involves: (3)
- Risk Elimination or Containment
- Manual Risk Management
- Risk Management Solution
Eliminating or containing the rissk and collaboration with experts.
Risk Elimination or Containment
Setting up meetings, fragmented communication
Manual Risk Management
Involves system notifications, centralized discussion, management oversight, direct updates
Risk Management Solution
Ensures that everything within that process together with the risks that is seeking to address are working effectively and efficiently.
Monitor and review the risk
are strategies implemented to address and mitigate identiied rissks.
Remedies/Solutions
What are the four remedies or strategies in risk management?
- Risk Avoidance
- Risk Retention/Acceptance
- Risk Reduction
- Risk Transfer
Where in the organization seeks to eliminate the potential risk and the potential for damages and financial consequences of a threatening event.
Examples of this as part of the risk treatment strategy are to change your processes, equipment, or materials
Risk Avoidance
Acknowledgment of a risk as a given. Usually, this
is a cost to help offset larger risks down the road. In many cases, businesses choose to pay their losses out of pocket instead of purchasing insurance.
Risk Retention/Acceptance
Minimize the loss, rather than completely eliminate it. While accepting the risk, it stays focused on keeping the loss contained and preventing it from spreading. An example of this are medical care, installing safety equipment
and enhancing cybersecurity measures
Risk Reduction
is related to passing a specific portion of the threat to another party to reduce its likelihood or impact on the organization. However, it’s vital that another party - for example, an insurance company - is informed about the consequences of the sharing, the impact of the risk, and the expected transfer cost.
Risk Transfer
Examples of risks in financial institutions
- Credit risk
- Operational risk
A bank conducts rigorous credit assessments before granting loans, evaluating factors such as the borrower’s credit score, income stability, and debt-to-income ratio. This thorough vetting process helps the bank minimize the likelihood of
defaults.
Credit Risk Assessments
A bank implements a comprehensive risk management framework that includes regular
training programs for employees on risk awareness and compliance. It also uses advanced risk management software to detect and respond to potential operational risks in realtime
Operational risk
Examples of Common risks
- Health risk - injuries, illness, poor lifestyle
- Financial risks - job loss, debt, unexpected expenses and investment losses.
- Environmental risks - naural disasters, pollution, and climiate change impacts.
4, Emotional risks - stress, grief, burnot from life’s pressures. - Legal risks - accidental lawbreaking, legal disputes and contract issues.
- Social risks - relationship conflicts, peer pressure, and social isolation.
