Important Concepts (CH 5)

Question 1

Four differences between RM and ERM

Answer 1

1. Risk categories
2. Strategic integration
3. Performance metrics
4. Organizational structure

Question 2

Upside risk

Answer 2

the risk that an organization with outperform its strategic goals

Question 3

RM focuses on what type of risks?

Answer 3

Pure risks and hazard risks

Question 4

Attributes of ERM’s exposure spaces model

Answer 4

Resources, events, and impacts

Question 5

Why is a strategic plan developed?

Answer 5

it is understood that a company’s business model will not survive indefinitely

Question 6

Steps of integrating ERM

Answer 6

1. Develop ERM goals
2. Analyze, evaluate, and prioritize critical risks
3. Treat critical risks, considering priority
4. Monitor critical risks

Question 7

Techniques for treating risks to strategy

Answer 7

1. Avoid
2. Accept
3. Transfer
4. Mitigate
5. Optimize/exploit

Question 8

ERM helps with:

Answer 8

1. Advanced decision making - people have the full risk picture
2. Improved risk communication - this can ultimately lead to stakeholder acceptance. Internally, the stakeholders build acceptance, external stakeholders feel confident the company’s reputation and assets are protected

Question 9

ISO 2009

Answer 9

provides an international standard for risk management applicable within any industry sector. Consists of three major parts:
Principles, a framework, and processes for managing risks

Question 10

BS 31100

Answer 10

British standard for principles/terminology of risk management and provides recommendations for the model, framework, process, and implementation of risk management

Question 11

COSO II

Answer 11

published in 2004, defines ERM as a process that comes from a company’s BOD that establishes an enterprise-wide strategy to manage risks within the risk appetite

Question 12

FERMA

Answer 12

Federation of European Risk Management Associations - establishes consistent terminology, process by with RM is executed, an organized structure, and RM goals

Question 13

Basel II

Answer 13

issued by the Basel committee in 2004. Established an international standard that banking regulators can use when creating regs for the amount of capital banks need to keep in reserve to guard against financial and operational risks

Question 14

Solvency II

Answer 14

established in 2007. Consists of regulatory requirements for insurance firms that operate in the EU

Question 15

Business Model

Answer 15

the core aspects of an organization including its vision, mission, strategies, infrastructure, policies, offerings, and processes