10. Risk Management Flashcards

1
Q

What are some examples of risk management policies for a large organisation?

A
  1. Corporate codes of conduct
  2. Environmental policies
  3. Health and safety policies
  4. Financial controls
  5. Information systems controls and cyber security measures
  6. Personnel controls
  7. Internal audit processes
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2
Q

What are the six components of the risk management model?

A
  1. Risk appetite
  2. Risk identification
  3. Risk analysis
  4. Risk evaluation and response
  5. Risk monitoring and reporting
  6. Review process and feedback
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3
Q

What are four types of managerial culture according to Miles and Snow?

A
  1. Defenders
  2. Prospectors
  3. Analysers
  4. Reactors
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4
Q

What are some influences on risk appetite?

A
  1. Expectations of shareholders
  2. Organisational attitudes
  3. National origin of the organisation
  4. Regulatory framework
  5. Nature of ownership
  6. Personal views
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5
Q

Give examples of entity risks?

A
  1. Business risk
  2. Strategic risk
  3. Operational risk
  4. Hazard risk
  5. Financial risk
  6. Compliance risk
  7. Cyber risk
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6
Q

What are the main problems of break-even analysis?

A
  1. Non-linear relationships
  2. Stepped fixed costs
  3. Multi-product businesses
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7
Q

What items are typically excluded from relevant cash flows?

A
  1. Sunk costs
  2. Accounting entries that do not have a cash flow impact
  3. Unavoidable costs
  4. Finance costs - If a firm has applied a DCF, the discount rate will already reflect the cost of capital, including interest costs

Specifically include: ALL opportunity costs and revenues

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8
Q

What are some limitations of expected values?

A

Evaluating decisions by using expected values has a number of limitations.
(a) The probabilities used when calculating expected values are likely to be estimates. They may therefore be unreliable or inaccurate.
(b) Expected values are long-term averages and may not be suitable for use in situations involving one-off decisions. They may therefore be useful as a guide to decision making.
(c) Expected values do not consider the attitudes to risk of the people involved in the decision-making
process. They do not, therefore, take into account all of the factors involved in the decision.
(d) The time value of money may not be taken into account: £100 now is worth more than £100 in 10 years’ time.

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