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Questions and Answers
What is the characteristic of uncontrollable risks?
What is the characteristic of uncontrollable risks?
What is the relationship between positive risks?
What is the relationship between positive risks?
What does a correlation coefficient close to +1 indicate?
What does a correlation coefficient close to +1 indicate?
Which type of risks do not usually have a direct financial impact on the business?
Which type of risks do not usually have a direct financial impact on the business?
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Which type of risk is related to the long-term effect of key strategic decisions?
Which type of risk is related to the long-term effect of key strategic decisions?
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What is the main characteristic of operational risks?
What is the main characteristic of operational risks?
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What is the fundamental concept of risk?
What is the fundamental concept of risk?
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How is risk typically measured?
How is risk typically measured?
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What does the formula 'RISK = HAZARD x EXPOSURE' imply?
What does the formula 'RISK = HAZARD x EXPOSURE' imply?
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What is a hazard?
What is a hazard?
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What distinguishes natural hazards from human-caused hazards?
What distinguishes natural hazards from human-caused hazards?
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Which statement best describes uncertainty?
Which statement best describes uncertainty?
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Which of the following is an example of an external environmental factor that can impact an organization's operations?
Which of the following is an example of an external environmental factor that can impact an organization's operations?
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What does the term 'IMPLI' in the text indicate?
What does the term 'IMPLI' in the text indicate?
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Which of the following is an example of a technological external factor that can impact an organization's operations?
Which of the following is an example of a technological external factor that can impact an organization's operations?
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Which of the following is a factor to consider when assessing the relevance of a risk to an organization's strategy or business objectives?
Which of the following is a factor to consider when assessing the relevance of a risk to an organization's strategy or business objectives?
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Which of the following is an example of a personnel external factor that can impact an organization's operations?
Which of the following is an example of a personnel external factor that can impact an organization's operations?
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What is the purpose of the 'risk analysis' stage described in the text?
What is the purpose of the 'risk analysis' stage described in the text?
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What is the first component of the COSO 2017 ERM Framework?
What is the first component of the COSO 2017 ERM Framework?
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Which component of the COSO 2017 ERM Framework deals with identifying, assessing, and responding to risks?
Which component of the COSO 2017 ERM Framework deals with identifying, assessing, and responding to risks?
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Which of the following is NOT a principle within the Strategy and Objective-Setting component?
Which of the following is NOT a principle within the Strategy and Objective-Setting component?
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What does the acronym 'FADE' stand for in the COSO 2017 ERM Framework?
What does the acronym 'FADE' stand for in the COSO 2017 ERM Framework?
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Which principle within the Performance component is concerned with developing a portfolio view of risk?
Which principle within the Performance component is concerned with developing a portfolio view of risk?
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What does the acronym 'RAP' stand for in the COSO 2017 ERM Framework?
What does the acronym 'RAP' stand for in the COSO 2017 ERM Framework?
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What is fraud commonly perpetrated through?
What is fraud commonly perpetrated through?
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Which of the following is NOT a commonly used standard in managing risk?
Which of the following is NOT a commonly used standard in managing risk?
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Which of the following is an example of how corruption can spread within an organization's network?
Which of the following is an example of how corruption can spread within an organization's network?
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What is the primary objective of risk management?
What is the primary objective of risk management?
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Study Notes
Concepts of Risk
- Risk is the combination of the probability of occurrence of harm and the severity of that harm.
- Risk is the possibility of an event occurring that will have an impact on the achievement of objectives.
- Risk is measured in terms of impact and likelihood.
- Risk can be positive or negative, and it is a deviation from expectations.
Hazard vs. Risk
- Hazard is a source of potential harm or danger.
- Hazard is qualified in order to define the origin of the hazard or the nature of the expected harm.
- Hazard may remain the same even if the risk is minimized.
- Risk is the possibility that harms or injury might occur when exposed to a hazard.
- Risk can be eliminated by identifying the hazard and the potential harm it can cause.
Types of Hazards
- Natural hazards (MBG):
- Geological (e.g. earthquake, tsunami, landslide)
- Meteorological (e.g. floods, storms, wildfire)
- Biological (e.g. pandemic diseases)
- Human-caused hazards (AI):
- Accidental (e.g. chemical spills, release of flammable corrosives)
- Intentional (e.g. terrorist attack)
Uncertainty vs. Implication
- Uncertainty refers to external factors that can affect the organization, such as changes in market conditions or government regulations.
- Implication refers to the potential impact of uncertainty on the organization's objectives.
Risk Analysis
- Risk analysis is the process of identifying and assessing risks that could impact the organization's objectives.
- Factors to consider in risk analysis include:
- Likelihood of events and consequences
- Nature and magnitude of consequences
- Complexity and connectivity
- Time-related factors and volatility
- Effectiveness of existing controls
- Sensitivity and confidence levels
Categories of Risks
- Based on correlation:
- Positive risks (direct correlation)
- Negative risks (inverse correlation)
- Based on impact:
- Financial risks (direct financial impact)
- Non-financial risks (no direct financial impact)
- Based on drivers:
- Operational risks (relate to day-to-day business operations)
- Strategic risks (relate to business strategy and objectives)
Risk Management Process
- The risk management process involves:
- Identifying risks
- Assessing the severity of risks
- Prioritizing risks
- Implementing risk response
- Developing a portfolio view
- Reviewing and revising the risk management process
Components of COSO 2017 ERM
- Governance and culture
- Strategy and objective-setting
- Performance
- Review and revision
- Information, communication, and reporting
Coso 2017 ERM - Integrating with Strategy and Performance
- SIR-PG: Strategy-Informed Risk Management-Performance Governance
- Examples of risks include:
- Corruption risk
- Environmental risk
- Reputation risk
- Fraud risk
- Probity risk
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Description
Learn about the fundamental concepts of risk, including the effect of uncertainty on objectives, probability of harm occurrence, and impact on achievement of objectives. Explore the difference between hazard as a source of potential harm and risk as the possibility of an event with impact.
