Chapter 1: Introduction to Risk Management - Vocabulary Flashcards
(24 cards)
Risk profile
A set of characteristics common to all risks in a portfolio
Smart product
An innovative item that uses sensors; wireless sensor networks; and data collection, transmission, and analysis to further enable the item to be faster, more useful, or otherwise improved
Internet of Things (IoT)
A network of objects that transmit data to computers
Cloud computing
Information, technology, and storage services contractually provided from remote locations, through the internet or another network, without a direct server connection
Telematics
The use of technological devices in vehicles with wireless communication and GPS tracking that transmit data to businesses or government agencies; some return information for the driver
Text mining
Obtaining information through language recognition
Systemic risk
The potential for a major disruption in the function of an entire market or financial system
Cost of risk
The total cost incurred by an organization because of the possibility of accidental loss
Value at risk
A threshold value such that the probability of loss on the portfolio over the given time horizon exceeds this value, assuming normal markets and no trading in the portfolio
Exposure
Any condition that presents a possibility of gain or loss, whether or not an actual loss occurs
Volatility
Frequent fluctuations, such as in the price of an asset
Law of large numbers
A mathematical principle stating that as the number of similar but independent exposure units increases, the relative accuracy of predictions about future outcomes (losses) also increases
Time horizon
Estimated duration
Correlation
A relationship between variables
Pure risk
A chance of loss or no loss, but no chance of gain
Speculative risk
A chance of loss, no loss, or gain
Credit risk
The risk that customers or other creditors will fail to make promised payments as they come due
Subjective risk
The perceived amount of risk based on an individual’s or organization’s opinion
Objective risk
The measurable variation in uncertain outcomes based on facts and data
Diversifiable risk
A risk that affects only some individuals, businesses, or small groups
Non-diversifiable risk
A risk that affects a large segment of society at the same time
Market risk
Uncertainty about an investment’s future value because of potential change sin the market for that type of investment
Liquidity risk
The risk that an asset cannot be sold on short notice without incurring a loss
Enterprise risk management
An approach to managing all of an organization’s key business risks and opportunities with the intent of maximizing shareholder value. Also known as enterprise-wide risk management
