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Week 4 Flashcards

1
Q

what is risk mitigation

A

implementing measures to reduce
the likelihood and impact of
identified risks

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2
Q

Importance of Risk mitigation

A
  • Protects from losses.
  • business continuity.
  • operational resilience.
  • regulatory compliance.
  • stakeholder confidence.
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3
Q

4 risk mitigation strategies

A

Avoidance - eliminate chance
Reduction - reduce likelihood
Sharing - with other parties
Acceptance - no controls added

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4
Q

4 types of risk controls

A

Preventative - reduce likelihood
detective - detect during or just after occurrence
directive -
corrective - mitigate the after impacts

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5
Q

What is the most rigorous test in control testing

A

Reperformance - replicating control processes on sample transactions, high risk environments

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6
Q

what is four-eyes check

A

> 1 person reviewing the same information

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7
Q

solution to slips

A

improving workspaces, reducing noise, and clarifying responsibilities

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7
Q

what are Slips

A

errors due to distraction, inattention, or poor work environments

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7
Q

how can mistakes be categorized

A

Rule based - Flawed/conflicting rules
Knowledge based - Lack of training

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8
Q

solution to knowledge based mistakes

A

training, escalation procedures, and
job guidance.

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8
Q

what are Violations

A

Deliberate disregard for rules

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9
Q

mitigation for violations

A

supervision and strong organizational culture

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9
Q

What are active errors

A

Direct operator actions (e.g., pressing the wrong button)

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10
Q

What is Risk transfer

A

Mitigating risk by transferring it, (insurance or outsourcing)

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10
Q

what are latent errors

A

Flawed processes that manifest later (e.g., poor incentive leading to internal fraud)

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11
Q

solutions to human error

A

Checklists,
Communication protocols,
Standardization,
Improved work environments.

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12
Q

how is human error seen in engineering

A

as a process failure, not a
personal failure.

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13
Q

what does Insurance cover/ not cover

A

covers operational losses not reputational

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14
Q

benefit of outsourcing

A

reduce costs or outsource non-core
activities to specialists.

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15
Q

why is outsourcing not considered risk transfer

A

reputational risk remains

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16
Q

How can human error be reduced

A

Process Redesign: Improve reliability

Checklists

Strong Communication Protocols

Standardization: reduce procedure variability.

Better Work Environments: Enhance operational efficiency.

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17
Q

when is Self-insurance used

A

small losses, external insurance used for larger ones

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18
Q

Definition of risk transfer

A

Moving the consequence or causes of a risk to another party

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19
Q

considerations of risk transfer

A
  • Cost vs. risk reduction.
  • Reputation risk cannot be outsourced.
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20
two methods of risk transfer
insurance and outsourcing
20
components of risk mitigation plans
Risk Description Mitigation Measures Responsibilities Resources Timeline
21
what is Root Cause Analysis (RCA)
systematic process used to identify the underlying causes of problems or incidents
22
Effective Monitoring and Review Practices for mitigation measures
continuous monitoring regular reviews feedback loops adjustments and updates
23
Steps in the Root Cause Analysis Process
Define problem Collect data Identify causes Analyse Develop solutions Implement and monitor
23
Best Practices for Implementation of risk mitigation
Prioritization Resource Allocation Training Documentation
24
where is RCA essential
significant operational risk events and near misses
24
Purpose of RCA
pinpoints why an issue occurred and prevents its recurrence
25
what is Systematic root cause analysis
drawing links across incidents to implement organization-wide solutions
25
Second Line of Defense involvement in RCA
Monitors, tracks, escalates
25
First Line of Defense involvement in RCA
Leads root cause analysis and creates action items - Uses a standardized template
25
how is a bow-tie tool laid out
risk event in centre Preventive controls on left Detective and corrective controls on right
26
3 steps to RCA
1, Decompose problem 2. Create timeline 3. Check logic and facts
26
What is conduct
behavior of individuals within the organization and how they adhere to policies
26
Bow-tie analysis
an effective tool for root cause analysis
26
Importance of Root Cause Analysis
True cause identification Long Term solutions Recurrence reduction operational efficiency
27
Tools and Techniques for RCA
* 5 Whys * Fishbone Diagram (Ishikawa) * Pareto Analysis * Failure Mode and Effects Analysis (FMEA)
27
what are the 5 whys in RCA
asking why repeatedly to drill to root cause
27
What does the imbalance of preventive and corrective controls in a bow -tie tool lead to
Leads the firm to “fire-fight” and remediate, while feeling overwhelmed by workload
28
Challenges of action plans
Disconnect between appetite and action plan can waste/misallocated resources
28
what is a fishbone diagram in rca
Visual tool that categorizes potential causes of problems
28
what is the Failure Mode and Effects Analysis (FMEA) in RCA
evaluating processes to identify where and how they might fail
29
what is the Pareto Analysis in RCA
identifying the most significant causes using the 80/20 rule
30
Action Plan Purpose
reduce risk levels, typically following incidents /near misses that exceed risk appetite
31
Second Line of Defense Role in action plans
design action plans and support follow-up, ensuring business lines don't underplay risks
31
Key elements of action plans
*Clear ownership and accountability * Deadlines *Consistency with risk appetite
32
Best Practices for Implementing Action Plans
Communication Resource Training Monitoring Documentation
32
components of an effective action plan
Problem Statement Objectives Actions/Responsibilities Resources timeline evaluation
33
Effective Monitoring and Review Practices for action plans
Check-Ins KPIs Feedback Improvement
33
Benefits of Root Cause Analysis and Action Plans
Long-Term Solutions Enhanced Problem-Solving Efficiency Better Decision Operational Excellence
34
Future of RCA and Action Plans
advanced analytics and machine learning refinement of RCA - new tech adapt RCA processes to changing risk Bow-Tie Analysis for better RCA
34
What is culture
shared values, beliefs, and norms that influence how employees think
35
Importance of culture and conduct
critical for establishing a strong risk management framework
36
what are conduct and culture critical for
establishing a strong risk management framework
37
what influences a firms Risk Culture
history, ethos, vision, and leadership.
37
Elements of a Strong Risk Culture
Leadership committed Clear Values Training Communication Accountability
38
Why are Conduct and Culture Important
Integrity and Ethics Risk Awareness Stakeholder Trust Sustainable Success
38
How to Achieve Change
Willingness and Ability Training Clarifying Basics
39
what is the Risk Function's Aspiration
trust and respect with the first line
40
Desirable risk behaviours
Encouraging staff to speak up about risks Overcoming "blame culture"
40
How to Achieve Change through incentive levels
Personal Motivation Social Motivation Structural Motivation Effective Change
40
what is effective change
combining all three levels of motivation
41
How to Achieve Change through personal values
Promoting Positive Change Consultation
42
who should be involved before implementing changes.
opinion leaders/ influencers - their agreement helps promotion of ideas
43
what builds an influencing environment
Propinquity Occupational Propinquity Consistency
43
who are Influencers
Respected for their competence and empathy, not always SM but helps
44
drawback of Virtual propinquity
less effective than physical proximity
45
Rules of an Influencing Environment
Incentive Structures Positive Reinforcement Risk-Based Performance Measures Negative Reinforcement
46
How to Assess Progress of an Influencing Environment
Define Success Measurable Behaviors Track Regularly
47
what is Conduct Risk
risk of inappropriate, unethical, or unlawful behavior by employees
48
Examples of Conduct Risk
Fraud, insider trading, bribery, harassment, discrimination
49
Impact of Conduct Risk
legal penalties, reputational damage, financial losses, erosion of stakeholder trust
50
Methods for Assessing Conduct Risk
Employee Surveys and Questionnaires Incident Reporting Systems Audits and Reviews Behavioral Analytics
51
Strategies for Promoting Ethical Conduct
Code of Conduct Leadership by Example Reward and Recognition Whistleblower Protection Training
51
whats the Role of Leadership in Shaping Culture
Vision and Values Behavioral Expectations Engagement and Inclusion Consistent Actions Feedback and Improvement
51
5 Tools for Measuring Culture and Conduct
Surveys Focus Groups Metrics Exit Interviews 360-Degree Feedback
52
what are the Benefits of a Strong Conduct and Culture Framework
Enhanced Reputation Employee Engagement Risk Mitigation Regulatory Compliance Organizational Performance
53
what are the Future Trends in Conduct and Culture
Behavioral Regulation Integration with Risk Management Continuous Improvement

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