1. What is ERM?

Question 1

Define risk management

Answer 1

Process of:
* Identifying risks faced
* Assessing likelihood of risks materialising and the impact
* Deciding how to deal with each risk

Question 2

What is the objective of risk management?

Answer 2

• Optimise risk-adjusted returns

Question 3

Define ERM

Answer 3

• Structured and consistent application of risk management across whole org. It …
• Considers all risk faced by org (upside, downside, quantifiable and unquantifiable) and their interactions with each other.
• Interactions between risks will be taken into account when deciding how best to deal with risks faced. It …
• Integrates risk measurement and management into business processes, so that risk info can influence all strategic business decisions.

Question 4

What is the objective of ERM?

Answer 4

• Improve processes and decision making to create value

Question 5

What are the 5 key ERM concepts?

Answer 5

• Holistic approach
• Downside and upside risks
• Risk measurement - quantifiable risks
• Risk measurement - unquantifiable risks
• Risk responses

Question 6

What is the holistic approach when it comes to ERM?

Answer 6

o Consider risks as a whole and not consider individual risks in isolation…
o allowing for concentration of risk to be identified and diversifying effects to be allowed for

Question 7

What are the four risk responses

Answer 7

• Retain
• Remove
• Reduce
• Transfer