Module 2 - Unit 1 The Global Business Environment

Question 1

Define key control indicator

Answer 1

A key control indicator measures whether a risk control is being implemented ( eg., number of loans which did not receive appropriate authorisation)

Question 2

Define key risk indicators

Answer 2

There are techniques available to measure the changes in business performance, such as KPI (increase in sales). Indicators are useful since they help us understand how the risk profile is changing and act as a warning signal (e.g., number of complaints as measured of risk of customer dissatisfaction)

Question 3

What is meant by vision and values in an organisation?

Answer 3

Explains what the company wants to achieve and its core values (e.g., be the insurance company of choice). Values include quality, clear communication, customer commitment

Question 4

What is tone from the top?

Answer 4

Senior management and board showing leadership in risk management setting standards and carrying out the required risk activities in line with those standards. Helps establish risk correct culture.

Question 5

Give 5 reasons why bank and insurance companies are similar from a risk management perspective:

Answer 5

1. They share common risks
2. They are heavily regulated
3. People are moving between sectors
4. They are both seeing trends towards globalisation and consolidation
5. They are significant to the global economy
6. They are both being impacted by the development of new technology as a threat and opporunity

Question 6

Give 3 main sources of risk from a banking business model

Answer 6

1. Through taking CREDIT RISK (arising out of the provision of credit to customers)
2. Through INVESTING assets held (market risk on investments)
3. Failure of core processes (OPERATIONAL Risk)

Question 7

Give 3 main sources of risk from an insurance company business model:

Answer 7

1. Insurance risk (exposure to death or fire)
2. Investment risk (investing assets)
3. Operational risk (fraud or financial crime risk)

Question 8

5 emerging risks that could impact a bank or insurance company

Answer 8

Banks:
• Artificial intelligence
• Open Banking
• Firtech disruption
• Regulatory changes
• Crowdfunding

Insurance companies
• Artificial Intelligence
• Climate change
• Cyber
• Insurtech disruption
• Regulatory changes

Question 9

5 risks identified by the World Economic Forum

Answer 9

1. Extreme weather events
2. Natural disasters
3. Cyber attacks
4. Data fraud and theft
5. Failure of national governance

Question 10

3 ways technology is impacting financial services

Answer 10

Cyber risk (data security)
Artificial Intelligence (application, ethics)
Open banking
Mobile
Internet of things

Question 11

3 ways geographical issues impact banks and insurance companies

Answer 11

1. Natural catastrophes
2. Political unrest
3. War and terorism