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Traditional ERM > Module 4 - Quiz 2 > Flashcards

Module 4 - Quiz 2 Flashcards

1
Q

2017 COSO ERM Framework

A
  1. mission, vision, and core values = governance and culture
  2. strategy development = strategy & objective setting
  3. business objective formulation = performance
  4. implementation and performance = review and revision
  5. enhanced value = information, communication, and reporting
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2
Q

Four Principles of strategy & objective setting

A
  1. Analyze Business Context
  2. Define Risk Appetite
  3. Evaluate Alternative Strategies
  4. Formulate Business Objectives
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2
Q

By integrating ERM into the strategy-setting phase

A

you gain insights into the risk profile associated with each strategy and business objective

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3
Q

COSO ERM: Component 2

A

Strategy & Objective Setting

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4
Q

Five Principles of governance and culture

A
  1. Board exercises risk oversight
  2. Establishes operating structures
  3. Defines desired culture
  4. Commitment to core values
  5. Attracts, develops and retains capable individual
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5
Q

Five Principles of performance

A
  1. Identifies Risk
  2. Assesses Severity of Risk
  3. Prioritizes Risks
  4. Implements Risk Responses
  5. Develops Portfolio View
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6
Q

Three Principles of review and revision

A
  1. Assesses Substantial Change
  2. Reviews Risk and Performance
  3. Pursues improvement in Enterprise Risk Management
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7
Q

Three Principles of information, communication, and reporting

A
  1. Leverages Information and Technology
  2. Communicates Risk Information
  3. Reports on Risk, Culture, and Performance
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8
Q

COSO ERM: Component 1

A

Governance & Culture

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9
Q

What is the “business context”?

A

Factors that influence current and future strategy and business objectives

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10
Q

What are examples of “business context”?

A

Trends, political landscape, customers, suppliers

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11
Q

How should it “business context” be viewed?

A

In three stages: Past, Present & Future

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12
Q

When should “business context” be considered?

A

In all five components of the COSO ERM Framework

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13
Q

State of the World (Reality)

A

VUCA – Volatility, Uncertainty, Complexity, Ambiguity [ascending order of risk]

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14
Q

Aspects of business context

A

✓ Dynamic: Risks can emerge at any time
✓ Complex: Interconnected / interdependent
✓ Unpredictable: Changes happen quickly / can be unanticipated

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15
Q

Two types of business contexts

A

External Environment & Internal Enviornment

16
Q

CATEGORIES OF EXTERNAL BUSINESS
ENVIRONMENT

A

PESTLE
- Political
- Economic
- Social
- Technological
- Legal
- Environment

17
Q

CATEGORIES OF INTERNAL BUSINESS
ENVIRONMENT

A
  • Capital
  • People
  • Process
  • Technology
18
Q

Principle 7

A

Define Risk Appetite

19
Q

Principle 6

A

Analyze Business Context

20
Q

How is “Risk Appetite” defined?

A

The types and amount of risk, on a broad level, an organization is willing to accept in pursuit of value

21
Q

Risk appetite is expressed in a form of

A

a risk appetite statement

22
Q

Risk Capacity

A

Maximum amount of risk entity is able to absorb in pursuit of strategy and business objectives

23
Q

Risk Profile

A

Composite view of the risks assumed by the entity at a particular time

24
Q

ERM capabilities & maturity

A

Strength of ERM practices within the entity

25
Q

How is Risk Appetite governed?

A
  • Management with Board input (sometimes) develops risk appetite; Board approves
  • Management is responsible for communicating
    & disseminating
  • Management, with Board oversight, continuously
    monitors risk appetite and makes changes, when needed
  • Mission, vision, and prior strategies provide significant inputs into risk appetite development
26
Q

Can strategy and risk appetite be developed in
parallel?

A

Yes

27
Q

The approaches used to communicate risk appetite

A
  1. Create an overall risk appetite statement
  2. Communicate risk appetite for each major class of organizational objectives
  3. Communicate risk appetite for different categories of risk
28
Q

Steps in Defining Risk Appetite

A
  1. Develop Risk Appetite
  2. Communicate Risk Appetite
  3. Monitor & Update Risk Appetite

Traditional ERM (10 decks)

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