Risk Management and Corporate Governance

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Questions and Answers

What is risk?

Risk is the likelihood or the probability of experiencing some type of harm, or losing something that one values.

What are the consequences of risk?

Negative consequences include the chance or possibility of danger, loss, injury, or other adverse consequences. Positive consequences relate to the uncertainty of outcome.

How is risk defined by the ISO Guide 73 and ISO 31000?

Risk is defined as the effect of uncertainty on objectives. This effect may be positive, negative, or a deviation from the expected.

What is the Institute of Risk Management's definition of risk?

Risk is the combination of the probability of an event and its consequence. Consequences can range from positive to negative. Signup and view all the answers

According to the Orange Book from Her Majesty's Treasury, how is risk described?

Risk is described as the uncertainty of outcome within a range of exposure, arising from a combination of the impact and the probability of potential events. Signup and view all the answers

What are the different types of risk factors mentioned in the text?

The text mentions biological, environmental, psychological, natural, and technical risk factors. Signup and view all the answers

What is risk?

The uncertainty of an event occurring that could have an impact on the achievement of the objectives. Signup and view all the answers

Name one type of risk mentioned in the text.

Compliance Risks Signup and view all the answers

What are risk sources?

Factors or conditions that can cause or contribute to the occurrence of a risk. Signup and view all the answers

Give an example of an internal risk source.

Poor management decisions, Inadequate financial controls, and Operational inefficiencies. Signup and view all the answers

What is risk evaluation?

Risk evaluation attempts to define what the estimated risk actually means to people concerned with or affected by the risk. Signup and view all the answers

What is risk identification?

The process of documenting any risks that could keep an organization or program from reaching its objective. Signup and view all the answers

Give an example of a risk mentioned in the text.

Theft, business downturns, accidents, lawsuits, or data breaches. Signup and view all the answers

What is risk assessment?

The identification of hazards that could negatively impact an organization’s asset, loan, or investment. Signup and view all the answers

Why do companies, governments, and investors conduct risk assessments?

Before embarking on a new project, business, or investment. Signup and view all the answers

What is the first step in risk assessment?

Identify the hazard. Signup and view all the answers

Study Notes

Risk Definition

Risk is a situation involving exposure to danger, uncertainty, or loss.
According to the ISO Guide 73 and ISO 31000, risk is the effect of uncertainty on objectives.
The Institute of Risk Management defines risk as the combination of the likelihood and impact of an event or situation that, if it occurs, will have an effect on the achievement of the organization's objectives.
The Orange Book from Her Majesty's Treasury describes risk as an uncertainty of outcome, whether positive or negative, that can have an impact on the achievement of objectives.

Types of Risk Factors

Internal risk factors
External risk factors
Financial risk factors
Operational risk factors
Strategic risk factors
Compliance risk factors
Reputational risk factors

Risk Sources

Risk sources are the origins of risk, such as people, processes, technology, or environment.
Example of an internal risk source: employee error.

Risk Assessment

Risk assessment is a systematic process to identify, evaluate, and prioritize risks.
Risk assessment is conducted to identify potential risks, estimate their likelihood and impact, and prioritize them to take informed decisions.
The first step in risk assessment is risk identification, which involves identifying potential risks that could impact the organization's objectives.
Risk evaluation is the process of determining the level of risk by analyzing the likelihood and impact of the identified risks.
Risk assessment is important for companies, governments, and investors to make informed decisions, minimize losses, and maximize returns.

Example of Risk

One example of a risk mentioned in the text is employee error.

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Description

Test your knowledge of risk management, corporate governance, and internal audit principles with this quiz. Learn about the likelihood of harm or loss, risk factors, negative consequences, and more.