Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

ERM > Unit 1 > Flashcards

Unit 1 Flashcards

0
Q

Define risk profile

A

overall risk exposure currently faced by the organisation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
1
Q

Define ERM

A
  • no 1 definition
  • RM conducted throughout the organisation
  • In a structured & consistent way
  • considers all risks faced & their interactions
  • integrates risk measures into business reporting
  • allowing to influence strategic decisions
  • CRF lead by CRO
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Define risk appetite

A

Desired level of risk the organisation wishes to take on, on an on-going basis.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is the risk profiling process

A
  1. Identify risks
  2. assess likelihood and impact
  3. Decide how to deal with risks
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Describe the 5 ERM concepts

A
  1. Holistic approach
    Consider enterprise as a whole
  2. Upside and downside risks
    Not just consider downside, seize opportunities
  3. Quantify risks
    Use to determine whether a risk is acceptable or not
  4. Unquantifiable risks
    Class into subjective categories
    Nature of risk makes it difficult to assess
  5. Respond to risks
    When ID & measured, need to determine a response
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What are the Benefits of ERM?

A 
- better Risk reporting
increase business efficiency 
- Improve business performance
-- loss reduction
-- uncertainty management
-- performance optimisation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Board’s responsibility in ERM?

A
  • define risk profile
  • skill themselves to be able to successfully implement ERM strategies
  • guiding decision as to the most appropriate approach to ERM for the organisation
  • set direction, structure and culture
  • approve suitable internal controls
  • actively monitor risk reporting
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What’s the line managers responsibility in ERM?

A
  • implement board decisions
  • set up processes for ERM
  • integrate risk reporting into business reporting
  • understand risks they are taking
  • and extent of risk taking power
  • supported with thorough documentation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Describe stakeholder management

A

Communicate effectively with stakeholders
Internal Comms to board and relevant committees
– they are fully aware of risks
– consistent “risk language” to ensure no risk is left out or doubled up
External Comms with regulator/ supervisory body

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

what are the 5 steps in RM Process?

A

ID risks faced
Risk analysis to quantify risks
Evaluating info-risks compared to limits
How to manage risks and implement actions
Monitoring processes - risks and management actions continually reviewed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What organisational structures help to set a good risk culture?

A

Set from the top
Codes of honesty and fair dealing
Clear organisational responsibility for the ID And management of risks
Every employee sees it as their job to ID new risks/ increases in risks

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are the main ideas to setting a good risk culture?

A 
Consultative leadership 
Participation in decision-making
Openness
Accountability rather than blame
Organisational learning 
Knowledge sharing
Good internal communications
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

List the 5 aims of internal controls

A

Accurate and adequate record keeping
Prevent fraud and safeguard the company assets
Guarantee accuracy of financial statements
Respond to risks
Ensure compliance with law and legislation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Key to excellence in corporate governance

A 
Communication with stakeholders
Independence of board
Board performance
Board compensation arrangements
*fairness
*social responsibility
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

6 points that should be covered when a risk committee is set up

A 
1 purpose
2 responsibility 
3 membership
4 performance assessment 
5 frequency of meetings
6 resources available
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Outline an audit committees role?

A

Monitor integrity of financial statements
Monitor and review internal functions
- financial control
- risk management
- internal audit
Recommend, monitor and review external auditors

17
Q

Responsibility of an internal audit function.

A

Check financial transaction information
Review risk management function
Monitor compliance with law and regulations
Check for system errors
Non-observance of internal governance
Examine key spreadsheets for errors
Examine procedures for paying insurance premiums on time and observance of insurance conditions

18
Q

Responsibilities of an external Audit function

A

validation of the risk management function by a separate entity

  • Maybe required by regulator
  • Potentially provides an additional source of learning
19
Q

List the types of bias

A

Intentional - deliberately underestimates a risk to achieve a specific personal goal
Unintentional - error due to lack of experience or time

20
Q

how can bias be introduced into a project?

A
  • insufficient care/time
  • Key risk left out, intentionally or accidentally
  • incorrect assumption about risk’s independence
  • likelihood of disaster underestimated
  • cash flows deliberately biased towards optimistic
  • calculations / spreadsheets containing errors potentially leading to incorrect evaluations
21
Q

What types of bodies can exercise supervision and control?

A
  • Industry bodies
  • Industry regulator
  • Professional bodies
  • Professional Regulator
  • Government authority
22
Q

What are the two different types of regulators?

A

Functional - different authorities oversee different actions

Unified - single regulator covers a range of actions

23
Q

What considerations should be given to managing a relationship with a regulator?

A
  • Their aims and objectives
  • Insurers reputation
  • Proactive and Engaging as early as possible
  • transparency of communications
  • accountability for relationship mangement
24
Q

Define Market Risk

A

Risk arising from changes in investment market values or other features correlated with investment markets, such as inflation or interest rates

25
Q

Define Operational Risk

A

All risk of loss associated with failure of people processes and systems (Basel - includes legal excludes reputational and strategic)

26
Q

What are the tests for internal models?

A
  • the use test
  • statistically qualitative standards
  • calibrate standard - output to calculate the SCR
  • profit and loss attribution
  • validation standards
  • documentation standards
27
Q

Minimum capital requirement for Solvency II?

A

E 3m + margin (premium/reserve)

- achievable over 1 year with a 80-90% confidence interval

28
Q

Key features of Sarbane-Oxley?

A
  • Public accountability oversight board to inspect published accounts of quoted firms
  • Increased accountability for CFOs and CEOs of public accounts
  • published reports must contain an internal control report
  • require external auditors to report in the assessment made by the management
  • illegal for management to interfere with audit process
  • illegal to destroy records or documents with intent to influence investigation
29
Q

What is the role of credit rating agencies in evaluating risk management?

A

to provide credit rating as an indication of credit worthiness

30
Q

What is the risk management grading criteria?

A
  1. Risk management culture
  2. risk control
  3. extreme event management
  4. risk models and economic capital models
  5. strategic risk management

ERM (5 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions