Module 2 - Unit 3 Risk Culture, Appetite And Tolerance Flashcards

1
Q

What is meant by fit and proper?

A

Fit an proper refers to persons holding key functions (CRO or FCO). The person has to be ‘fit’ for purpose taking account of the respective duties allocated; this includes consideration of qualification, knowledge and relevant experience. ‘Proper suggests appropriate conduct (transparency in dealing with regulators)

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2
Q

What is risk appetite?

A

Risk appetite is a way of articulating how much risk the business is willing to take in order to achieve their objectives.

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3
Q

What is Risk Culture?

A

Risk culture is a term describing the values, beliefs, knowledge and understanding about risk shared by a group of people with a common purpose.

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4
Q

Describe Chief Risk Officer

A

The chief risk officer (CRO) is responsible for supporting the board in its engagement and oversight of the development of the risk appetite and for translating the risk appetite into a risk limits structure.

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5
Q

What is Conduct Risk?

A

Conduct risk describes any risk to fair customer outcomes or market integrity (e.g., misseling of products to customers)

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6
Q

What is Risk Tolerance?

A

Risk tolerance is the amount of risk an organisation can deal with.

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7
Q

Explain how to achieve a risk aware culture (LILAC)

A

A risk aware culture using LILAC:
• Leadership
• Involvement
• Learning
• Accountability
• Communication

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8
Q

Competencies required by a risk manager (RIMS)

A
  • conceptual skills
  • technical skills
  • core competency skills
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9
Q

Conduct Rules - FCA (Senior Manager)

A
  1. Business controlled effectively
  2. Business comply with regulations
  3. Any delegation of your responsibilities is to an appropriate person
  4. Disclose appropriately any information to the regulator
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10
Q

Conduct Rules - FCA (Individual)

A
  1. You must act with integrity
  2. You must act with due skill, care and diligence
  3. You must be open and co-operative with the FCA, PRA and other regulators
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11
Q

What are the 4 tasks of a risk function?

A
  • Monitoring overall risk position
  • Recommending RM framework to Board
  • Recommending risk appetite to Board
  • Responsible for the internal model
  • Providing ad-hoc risk analysis
  • Undertaking risk assessments
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12
Q

5 barriers to a successful risk culture:

A
  • lack of understanding
  • lack of senior support
  • seen as “just another initiative”
  • benefits not seen
  • time consuming
  • complicated
  • unclear responsibilities
  • RM seen as a static activity
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13
Q

Rules of behaviours to reduce conduct risk

A
  • act with integrity
  • act with due skill, care and diligence
  • being open and co-operative with regulators
  • taking steps to ensure business is controlled effectively
  • taking steps t ensure the business complies with regulatory requirements
  • taking reasonable steps when delegating authority
  • disclosing information that regulators would expet
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14
Q

3 attributes of a successful risk culture

A
  • setting the tone from the top
  • remuneration policy
  • link between personal objectives and risk management
  • transparency of risk information within decisions and performance management
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15
Q

Identify 2 risk management technical skills associated with planning risk management strategy

A
  1. Design strategy
  2. Evaluation status
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16
Q

Identify 3 risk management technical skills associated with implementing risk management architecture

A
  1. Design architecture
  2. Develop process
  3. Build awareness
17
Q

4 Risk Management people skills

A
  1. Communication
  2. Relationship
  3. Analytical
  4. Management
18
Q

Key features of risk training:

A
  • effective data security
  • safe working methods
  • how to avoid waste
  • how to tackle money laundering
  • how to ensure efficiency of operations
  • how to represent the organisation and protect its reputation