B1 - M2: ERM Frameworks

Question 1

What are the components of Enterprise Risk Management?

Answer 1

GO PRO; G-overnance and Culture, O-bjective Setting and Strategy, P-erformance, R-eview and Revision, O-ngoing Communication and Reporting of Information

Question 2

What are the principles of G-overnance and Culture?

Answer 2

DOVES; D-esired Culture, O-versight of the Board, V-alues, E-mployees, S-tructure of the Organization

Question 3

What are the principles of O-bjective Setting and Strategy?

Answer 3

SOAR; S-trategy Evaluation and Alternatives, O-bjectives (Business), A-nalyze the Business Context, R-isk Appetite

Question 4

What are the principles of P-erformance?

Answer 4

VAPIR; V-iew Portfolio of activity, A-ssess Risk, P-rioritize Risk, I-dentify Risk, R-espond to Risk

Question 5

What are the principles of R-eview and Revision?

Answer 5

SIR; S-ubstantial Changes Inventory, I-mprovements to ERM, R-eview, R-eview of of Risk and Performance

Question 6

What are the principles of O-ngoing Communication and Reporting of Information?

Answer 6

TIP; T-echnology (IT), I-nformation about Risk is communicated, P-erformance about Risk is communicated

Question 7

ERM - What is Target Residual Risk?

Answer 7

Target Residual Risk is the amount of risk the entity PREFERS to assume.

Question 8

ERM - What is Actual Residual Risk?

Answer 8

Actual Residual Risk is the amount of risk that REMAINS AFTER management has taken actions to reduce risk

Question 9

ERM - What is Inherent Risk?

Answer 9

Inherent Risk is the amount of risk present WHEN NOTHING IS DONE to reduce risk

Question 10

ERM - What is Detection Risk?

Answer 10

Detection Risk is the risk that audit procedures fail to detect a material misstatement to the financial statements.

Question 11

ERM - What is Event Risk?

Answer 11

Event Risk is the risk that an unexpected (and infrequent) event will occur and adversely impact the organization

Question 12

Is avoiding adverse publicity and damage to the entity’s reputation an ERM function?

Answer 12

No, this is a Public Relations function

Question 13

The mission and vision of an organization are most closely tied to its ______?

Answer 13

Strategy aligns with Mission and Vision. Culture alligns with VALUES which precede Strategy.

Question 14

Risk Appetite has generally been Exceeded when ______?

Answer 14

The likelihood and impact of events SIGNIFICANTLY exceed residual risk

Question 15

What is Organizational Sustainability?

Answer 15

The ability to withstand the impact of large-scale events

Question 16

Does Human Resources play a role in effective Internal Control over the Financial Statements?

Answer 16

Yes, because HR must ensure COMPETENCY for roles and responsibility of staff is appropriate.

Question 17

How do you prioritize Risk Mathematically?

Answer 17

For each event, apply the %Percentage of Likelihood to the $ Amount of Severity (e.g. 8.2% X $20,235). The resulting amounts can then be ranked from greatest to lowest.