Study Unit 5.5: Component 2: Strategy and Objective Settring

Question 1

List the principles

Answer 1

6. Analyses business context
7. Defines risk appetite
8. Evaluate alternative strategies
9. Formulates business objectives

Question 2

Principle 6: Define analyses business context

Answer 2

The organization considers potential effects of business context on risk profile

Question 3

Principle 6: What falls under this principle?

Answer 3

Understanding business context
Considering External Environment and Stakeholders
Considering Internal Environment and Stakeholders
How Business Context Affects Risk Profile

Question 4

Principle 6: Define Business context?

Answer 4

refers to trends, relationships, etc. that influence current and future strategy and business objectives

Question 5

Principle 6: What does business context include?

Answer 5

Dynamic, where new risks disrupting the status quo
Complex, many interconnections and inter-dependencies
Unpredictable, quick unanticipated change

Question 6

Principle 6: Define external environmental and stakeholders

Answer 6

environment is anything outside the entity to influence strategy and business objectives

Question 7

Principle 6: What are environmental factors characterized by?

Answer 7

Political - Nature and extend of government intervention
Economical - Interest rates, inflation, exchange rates
Social - Customer needs or expectation, population demographics
Technological - R&D activities, automation, rate of technological changes
Legal - Laws
Environmental - Nature or human caused catastrophies

Question 8

Principle 6: Elaborate environmental stakeholders

Answer 8

Are affected by the entity (customers, suppliers, competitors)
Influence the entity’s business environment (government, regulators)
Influence the entity’s reputation, brand and trust (communities, interest groups)

Question 9

Principle 6: Define Internal environmental and stakeholders

Answer 9

is anything inside the entity to influence strategy and business objectives

Question 10

Principle 6: What is internal environmental and stakeholders characterized by?

Answer 10

Capital - assets to include cash, equipment and property
People - Knowledge, skills, attitudes, relationships
Process - Activities, tasks, policies, change in management
Technology - New, amended and/or adopted technology

Question 11

Principle 6: How Business Context Affects Risk Profile

Answer 11

The effect of business context on an entity may be viewed in 3 stages – past, present, and future
Past provides insight into risk profiles
Present provides insight into current trends, relationships, etc.
Future provides insight into evolution of risk profile in relation to where it wants to go

Question 12

Principle 7: Define risk appetite

Answer 12

The organization defines risk appetite in the context of creating, preserving, and realizing value

Question 13

Principle 7: What falls under risk appetite?