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Compliance Chapter 5 - Governance, Risk & Compliance > Risk > Flashcards

Risk Flashcards

1
Q

Risk and Uncertainty

A

Risk = Can be quantified

Uncertainty = cannot be quantified

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2
Q

Risk formula

A

Impact x likelihood

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3
Q

Strategic Risk

A

Internal risk

based on strategy being right one + being implemented properly

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4
Q

Operational Risk

A

Internal Risk

Difficult to quantify

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5
Q

Legal and Regulatory Risk

A

Internal Risk

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6
Q

Reputational Risk

A

Internal Risk

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7
Q

Financial Risk

A

Internal Risk

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8
Q

Technological Risk

A

External Risk

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9
Q

Competitive Risk

A

External Risk

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10
Q

Stakeholder Risk

A

External Risk

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11
Q

Shocks and natural events

A

External Risk

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12
Q

Social and market Risk

A

External Risk

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13
Q

Economic Risk

A

External Risk

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14
Q

Political Risk

A

External Risk

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15
Q

Credit and Market RISK

A

Risks

Financial Risks too

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16
Q

Business and operational risk

A

uncertainties

17
Q

Operational issues and legal (breaking law)

A

not financial risk

considered as separate risks

18
Q

Assessment of Risks -

External Risks

A 
PESTLE 
Political 
Economic
Social
Technological
Legal 
Environmental
19
Q

Assessment of Risks -

Internal Risks

A 
SWOT 
Strengths 
Weaknesses 
Opportunities 
Threats
20
Q

Effective Risk Framework

A
  • Identify
  • Assess
  • Control of risk
  • Monitor & report on risk and controls
  • Day to day risk management
21
Q

Risk assessment matrix

A

Impact vs likelihood and ranked

Ranking/prioritised part of risk register (assess)

22
Q

Risk appetite

A

Quantifiable risk

  • tolerance for direct losses
  • special risk measures e.g. value at risk (VaR)

Less Quantifiable risk

  • Disaster recovery
  • Reputational risk tolerance
23
Q

Approaches to assessing risk appetite

A

Top Down
- Start with strategy and objectives of firm to identify risks

Bottom up

  • Look at the risks that crystallise
  • Base risk tolerance on those

Scenario analysis

  • Subjective method
  • looks extreme events, future events and questions what impact might be
  • Also known as stress testing = unexpected events
24
Q

Risk Register

A
  • Objectives
  • Description of risk
  • Risk ranking
  • Lead person or department
  • Action plan
  • Target and completion dates
  • Oversight
  • Mitigating controls
25
Q

responsible for banks risk management & internal control systems

A

Internal audit function

Board and senior managers enhance this

Compliance Chapter 5 - Governance, Risk & Compliance (3 decks)

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