Risk Management and Organisational Threats

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What is a key reason why risk management in organisations often fails to identify and assess multiple simultaneous risks?

Risk management is only focused on independent risks

The techniques of risk management are too complex to accommodate multiple simultaneous failures (correct)

The human mind is not capable of processing complex risk scenarios

The organisation's culture is not conducive to risk management

What is a key consideration for organisations in terms of managing multiple simultaneous risks?

Focusing on the most likely risk to occur

Assessing the likelihood of multiple untoward events happening at the same time (correct)

Developing a crisis management plan for individual risks

Identifying a single critical risk that could bring down the organisation

Why is it important for organisations to consider multiple simultaneous risks?

Because it is a best practice in risk management

Because organisations often fail or almost fail due to multiple simultaneous risks materialising (correct)

Because it is a requirement for audit compliance

Because it is a key aspect of organisational culture

What is an example of multiple simultaneous risks materialising?

A change in government policy and an increase in interest rates Signup and view all the answers

What is a challenge in risk management when dealing with multiple simultaneous risks?

The complexity of the techniques involved Signup and view all the answers

What is the role of human intuition in managing multiple simultaneous risks?

It is capable of processing complex risk scenarios intuitively Signup and view all the answers

What was the consequence of the 'flight to quality' by depositors?

The home loans company's share price collapsed by about 99 % Signup and view all the answers

What should organisations do in addition to identifying and responding to threats?

Apply risk management tools to opportunities as well Signup and view all the answers

What can occur if an organisation misses an opportunity?

A threat that has not been avoided is created Signup and view all the answers

What did the home loans company declare to their own banks?

A material adverse change in circumstances had occurred Signup and view all the answers

What is the purpose of identifying opportunities in risk management?

To position the organisation to exploit opportunities Signup and view all the answers

What is illustrated in Figure 5.15?

An opportunity missed as a threat that has not been avoided Signup and view all the answers

What is the primary purpose of a risk matrix?

To visualize and prioritize multiple risks Signup and view all the answers

What is the difference between inherent risk and gross risk?

Inherent risk is the level of risk before mitigation, while gross risk is the level after mitigation Signup and view all the answers

What is the term for the level of risk remaining after mitigating actions have been introduced?

Residual risk Signup and view all the answers

What is the risk appetite of an organization?

The level of risk that an organization is willing to accept in pursuit of its mission or vision Signup and view all the answers

What happens when an organization has to accept a level of risk beyond its risk appetite?

The organization must accept the risk temporarily until mitigation is possible Signup and view all the answers

What is the benefit of plotting multiple risks on a single risk matrix?

It enables the organization to prioritize risks more effectively Signup and view all the answers

Risk Management and Organisational Threats

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