Section 2: Risk Management and the Organization Flashcards
3 Governing Docs of a RM Program
Mission Statement
Policy Statement
Risk Management Manual
3 Elements of a Mission Statement
Target Audience
Product or Service being provided
Distinction from Competitors
Risk Management Policy Statement (Length, 2 purposes)
Up to 2 pages in length
Purposes:
Who’s responsible for what (no duplications of effort)
Risk tolerance described
Risk Management Manual - 4 Key Purposes
RESP (get the RESPect from your employees)
References for all procedures, safety protocol, messaging, reporting of incidents
Expectations for performance and cooperation
Support from Senior management for RM program to all employees
Procedures conveyed to employees to familiarize with
3 Ways an Organizational Culture is Formed
Lead / Incentivize / Repeat (LIP)
- Leadership attitudes are expressed through behavior
- Incentivize desirable behaviors
- Repetition of desired behavior
Organizational Risk Culture Definition
Collection of values, expectations and practices that guide and inform the actions of all individuals in the org
Importance of ORC (3)
ORC
- Operational Performance
- Risk Management Effectiveness
- Compliance
4 Characteristics of an Effective ORC
CTEA
Corporate Governance: Clear responsibility for Risk Management. Transparency and timeliness of risk info
Tone at the Top: Leaders acting in the way they command
Effective decision making
Authority and Accountability: Embedding RM abilities and responsibilities within the organization
7 General Classes of Risk
LETS P JP
Legal: Compliance or arise from common law and statutory liability.
Economic: Arise from operations or economic, financial marketplace, or entrepreneurial activities. Unemployment, bank failures, etc.
Technological: Arise from growing dependence upon and use of technology, as well as those created by emerging technologies.
Social: Arise from public relations, loss of reputation, damage to brand, cultural issues, social direction or social media.
Physical: Property, People or Information. Can be common perils or other less impactful events.
Juridical: Arise from jury or judge’s decision or from court or jury attitudes.
Political: Changes in the law, re-interpretations or changes in government policy, politics and diplomacy
Factors That Influence Risk Appetite and Risk-Taking Ability
5 Internal and 5 External
5 Internal (FP POS) Predict Future Or See the Past?
- Financial Status
- Predictability of losses including frequency and severity
- Past Experience with Risk Taking
- Organizational objectives
- Stage of Orgs Life?
5 External Factors (CArtMPS)
- Competition and the need to take a biz risk
- Alternatives for risk transfer available?
- Market Position
- Public Image
- Stakeholder perception of risk