Enterprise Risk Management

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Questions and Answers

What is a key aspect of ERM that organizations must consider when implementing it?

Risk tolerance

What was the main concern for organizations regarding ERM by 2005?

How to implement it correctly

What is a common challenge in defining ERM, which leads to multiple definitions?

Its broad and complex nature

What are the three categories of ERM definitions?

Strategic, functional, and process definitions Signup and view all the answers

Why did ERM implementation stall despite its recognized importance?

Multiple definitions of ERM Signup and view all the answers

What is the primary goal of ERM, according to its proponents?

Coordinating the management of risk Signup and view all the answers

What is the primary goal of enterprise risk management (ERM) according to the text?

To reduce surprises and get many of them under control. Signup and view all the answers

What is the limitation of how people usually discuss risk?

They only consider the possibility of loss, ignoring the upside of risk. Signup and view all the answers

What led to the need for new approaches to manage risk and seize opportunity?

Recent developments in technology and communications. Signup and view all the answers

What is the key insight about risk management?

Risk has an upside, and a lost opportunity is just as much a financial loss as damage to people and property. Signup and view all the answers

What did the first edition of the book focus on?

How to do a better job of risk identification. Signup and view all the answers

What is the main message of the text about enterprise risk management?

It is not complex or expensive, but it does add value to businesses when done correctly. Signup and view all the answers

What are the two main categories of risks that an organization faces?

External risks and internal risks. Signup and view all the answers

What is the importance of assigning an owner or owners in the risk management process?

To establish clear accountability and match every important risk with a functional area, business unit, or key initiative. Signup and view all the answers

What are the three key considerations when assessing the impact of a risk?

The expected frequency of the risk, the likelihood of loss, and the level of damage severity under different assumptions. Signup and view all the answers

What are the four main options for mitigating a risk?

Retaining, avoiding, reducing, or transferring the risk. Signup and view all the answers

Why is it important to monitor and revise the risk management process?

To ensure flexibility and adapt to changing conditions or new information. Signup and view all the answers

What is the conceptual basis of an effective Enterprise Risk Management (ERM) program?

The seven contributions outlined in Figure 3-4, which include assigning an owner, assessing impact, evaluating mitigation options, and implementing, monitoring, and revising the risk management process. Signup and view all the answers

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