Introduction to risk analysis

Question 1

What is the ISO 31000 definition of Risk Analysis?

Answer 1

Process to comprehend the nature of risk and to determine the level of risk.

Question 2

What is the IIA definition of Risk Analysis?

Answer 2

The systematic use of available information to determine the likelihood of specified events occurring and the magnitude of their consequences i.e. their impact.

Question 3

What important principles to assessing risk?

Answer 3

1. Ensure there is a clearly structured process in which likelihood and impact are considered for each risk.
2. Record the assessment of risk in a way which facilitates monitoring and the identification of risk priorities.
3. Be clear about the difference between inherent and residual risk.
4. Compare the risk assessment against the risk appetite.

Question 4

What are the benefits of documenting risk analysis?

Answer 4

Creates a risk profile for the firm which makes it easier to:

1. identify risk priorities
2. capture reasons for decisions about what is tolerable or not.
3. capture how the risk is dealt with.
4. facilitate the review and monitoring of those risks.

Question 5

What is ALARP?

Answer 5

As Low As Reasonably Possible - Target level of risk

Question 6

What might be a benchmark test for significance on financial risks?

Answer 6

5% of annual profit or 0.25% of balance sheet or 0.5% of annual turnover are some examples.

Question 7

What might be a benchmark test for significance on infrastructure risk?

Answer 7

Disruption to normal operations of half a day

Question 8

What might be a benchmark test for significance on Reputational risk?

Answer 8

Share price falls by 10% due to adverse media publicity.

Question 9

What might be a benchmark test for significance on Marketplace risk?

Answer 9

Impact on balance sheet of 0.5% of turnover, or x% loss in market share.