Risk Management: Hybrid Approach & Four-Step Model
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Risk Management: Hybrid Approach & Four-Step Model

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Questions and Answers

Which step in the four-step model involves understanding both internal and external contexts?

  • Define context and objectives (correct)
  • Assess the risks
  • Monitor, Review and Report
  • Manage the risks

    • What does the step 'Manage the risks' focus on?

  • Implementing controls to mitigate risks (correct)
  • Changing the objectives to reduce risks
  • Only identifying opportunities without taking action
  • Communicating risk findings to stakeholders

    • In the four-step model, what is implied if the answer to achieving stated objectives is 'no'?

  • All risks are unmanageable
  • No changes are necessary
  • Objective achievement is guaranteed
  • Consider increasing resource management or changing objectives (correct)

    • What primary question does the four-step risk management process answer?

    <p>How can objectives be achieved given current risks?</p> Signup and view all the answers

    How can the four-step risk management process be applied within an organization?

    <p>At all levels and tailored to specific situations</p> Signup and view all the answers

    Which aspect is crucial for effective risk reporting according to the four-step model?

    <p>Communicating status and management effectiveness of risks</p> Signup and view all the answers

    What does a 'control' refer to in the context of managing risks?

    <p>An act or system that modifies a risk</p> Signup and view all the answers

    What might be a reason to change objectives during the risk management process?

    <p>When current objectives are too easy or difficult to achieve</p> Signup and view all the answers

    What role does Enterprise Risk Management (ERM) play in relation to an organization's strategy?

    <p>ERM integrates with strategic planning to enhance decision making.</p> Signup and view all the answers

    How can boards enhance the effectiveness of their governance in light of emerging risks?

    <p>By adopting an integrated Governance, Risk, and Compliance (GRC) approach.</p> Signup and view all the answers

    Which of the following is NOT a benefit of risk management according to Chapman?

    <p>Financial profitability</p> Signup and view all the answers

    What is a key factor for Enterprise Risk Management to add value to an organization?

    <p>There must be a clear connection between ERM and strategic planning.</p> Signup and view all the answers

    What does corporate governance primarily focus on?

    <p>How companies are governed and accountability of power.</p> Signup and view all the answers

    What is the consequence of a disconnect between ERM and strategic planning?

    <p>ERM is seen as irrelevant in decision making.</p> Signup and view all the answers

    Which of the following is a main component of effective governance in risk management?

    <p>Ensuring stakeholder confidence and accountability.</p> Signup and view all the answers

    What aspect of risk management is emphasized by the EY (2019) paper?

    <p>Risk-informed decision-making should be a Board priority.</p> Signup and view all the answers

    What is the primary purpose of the Group Governance Manual (GGM) in risk management?

    <p>To set out principles for governance, risk management, and internal control</p> Signup and view all the answers

    Which aspect of risk management is primarily the responsibility of the Board?

    <p>Determining acceptable levels of principal risks</p> Signup and view all the answers

    What role does the Risk Committee play in Prudential's risk management framework?

    <p>Reviewing and approving the Group’s risk management framework</p> Signup and view all the answers

    Why is it insufficient to simply add more personnel to a risk management team?

    <p>Effective embedding of risk management requires clear roles and responsibilities</p> Signup and view all the answers

    What is a key component of the Group Risk Framework mentioned in Prudential's reporting?

    <p>Processes for identifying and assessing risks</p> Signup and view all the answers

    How does Prudential ensure accountability in risk management across the organization?

    <p>By having unit-level responsibility for risk management and reporting</p> Signup and view all the answers

    In terms of risk reporting, what is a primary focus of the Risk Committee?

    <p>Monitoring effectiveness of the risk management framework</p> Signup and view all the answers

    What is the significance of establishing a Group-wide approach to risk management?

    <p>It creates uniformity across diverse and international operations</p> Signup and view all the answers

    Study Notes

    Risk Management: Hybrid Approach

    • Large, international organizations often implement a hybrid risk management structure.
    • This approach balances a central risk management function with accountability at unit level.
    • Prudential plc utilizes this model.
    • The Group Governance Manual (GGM) defines their approach to governance, risk, and control.
    • The Board is ultimately responsible for ensuring an effective risk management system.
    • The Group Risk Framework mandates that all businesses identify, assess, manage, control, monitor, and report their risks.

    Four-Step Risk Management Model

    • The four-step risk management model was developed by Satarla.
    • The model consists of defining context and objectives, assessing risks, managing risks, and monitoring, reviewing, and reporting.
    • The model applies to all levels of an organization.
    • It aims to keep the organization in balance with its objectives and risks.

    Benefits of Risk Management

    • Risk management offers several benefits, including improved strategy and governance, enhanced organizational performance, and improved human resources.
    • Risk-informed decision-making should be a board priority.
    • Enterprise Risk Management (ERM) should play an increasing role in setting and implementing strategy.

    Corporate Governance and Risk

    • Corporate Governance Institute (CGI) defines governance as rules, practices, and processes for directing and controlling a company.
    • Effective governance ensures accountability, decision-making, and achieving objectives.
    • Boards should focus on fast-evolving business environments and emerging risks.
    • An integrated Governance, Risk, and Compliance (GRC) approach combines compliance, risk management, internal controls, and internal audit.

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    Related Documents

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    Description

    This quiz covers the hybrid approach to risk management utilized by organizations like Prudential plc, along with the four-step risk management model developed by Satarla. Explore how these frameworks help integrate risk management at all organizational levels, emphasizing the balance between objectives and risks.

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