Enterprise Risk Mgmt Frameworks Flashcards
Define value for for-profit commercial entities
Value is shaped by strategies that balance market opportunities against the risk of pursuing those opportunities
Define value for not-for-profit and governmental entities
Value may be shaped by delivering goods and services that balance the opportunity to serve the broader community against any associated risk (inflows > outflows)
What is value creation?
-When benefits > costs of resources (people, capital, technology, process and brand) used
Ex: the successful and profitable launch of a new product line
What is value preservation?
When ongoing operations efficiently and effectively sustain created benefits
Ex: high customer satisfaction with profitable product lines
What is value erosion?
When inefficient/ineffective operations cause value to decline
Ex: the unsuccessful launch of a new product line
What is value realization?
When benefits created by the org are received by stakeholders in monetary or nonmonetary form
Ex: increased profitability and stock prices for owners, increased customer satisfaction, consistent product and brand usage, market leadership
What is a company’s mission?
-Represents the core purpose of the entity
-Represents why the company exists and what it hopes to accomplish (objectives)
What is a company’s vision?
Represents the aspirations of the entity and what it hopes to achieve over time (strategy)
What is a company’s core values?
-Represent an org’s beliefs and ideals and influences the behavior of the organization
-Correlates with culture and ethics
-How will the company achieve its goals?
Define risk appetite
a range of the types and amounts of risk that an org is willing to accept in pursuit of value
What is risk inventory?
all risk that could impact an entity (economic, societal, demographic)
What is reasonable expectation?
the amount of risk of having strategy and business objectives appropriate for an entity, recognizing that no one can predict risk with precision
What is business context?
the trends, events, relationships and other factors that may influence, clarify or change an entity’s current and future strategy and business objectives
Ex: economy and industry
What is risk capacity?
the maximum amount of risk that an entity is able to absorb/ is suitable in the pursuit of strategy and business objectives
What is risk profile?
a composite view of the risk assumed at a particular level of the entity or aspect of the business that positions management to consider the types, severity and interdependencies of risk and how they may affect performance relative to the strategy and objectives
Ex: product line, geographic area, customer
