Midterm1 Flashcards by Daisy Loh

Define as a set f individual characteristics that are common across all risks in profile

risk profile

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A remote storage service that does not require a direct server connection that is?

cloud computing

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What are four types of loss exposure?

Property, liability, personnel and net income

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define : Cloud computing

is a remote storage service that does not require a direct server connection.

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The identification, analysis, assessment, control, and avoidance, minimization, or elimination of unacceptable risks

Risk Management

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List 3 Benefits to organisation of Risk Management ?

Reduce the cost of hazard risk reduce the downside of risk , ability to maximise the profits

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The identification, analysis, assessment, control, and avoidance, minimization, or elimination of unacceptable risks

Risk Management

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List Benefit to economy for Risk Management ?

Reduce the waste of resources, Reduce the systematic risk

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What are the Risk Management goals ?

Legal and regulatory compliance , survival, business continuity , earning stability

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Cost of Risk

is the total costs associated with the possibility of accidental loss that is tied to particular activities or assets

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Enterprise Risk Management

is defined as a specific approach in which an organization focuses on managing risks and opportunities while ensuring that stakeholders’ value is maximized. This includes the management of operational, financial, and strategic risk.

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The potential for a major disruption in the function of an entire market or financial system.

Systematic Risk

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is defined as a set of individual characteristics that are common across all risks in a profile

Risk Profile

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the total cost incurred by an organization because of the possibility of accidental loss.

Cost of risk

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including losses and failures, are an inevitable aspect of any type of business or speculative risk. Reduce downside risks, organizations can use threshold limits, which can be applied to many types of risks.

Downside risk

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use sensors and wireless sensor networks for data collection, transmission, and analysis

Smart products

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is the use of objects that are connected through a network and transmit data to computers

Internet of Things (IoT)

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is a remote storage service that does not require a direct server connection.

Cloud computing

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uses a process called data mining to confirm and verify the data, and then it time stamps the data to add to the Blockchain. The use of the Blockchain for data storage for risk management increases security, immutability, transparency, scalability, and sharing of quality data that has been verified

Blockchain

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is the total costs associated with the possibility of accidental loss that is tied to particular activities or assets

cost of risk

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is defined as losses and failures that are inevitable regardless of the type of business or speculative risk. Organizations that want to reduce downside risks can use threshold limits based on specific risk criteria that can be applied to various types of risk.

Downside risk

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What are the two main categories of commercial insurance policies?

Property and liability

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focuses on managing risk within all levels and functions of the organization, which creates a more complete risk portfolio and a profile for an organization. A holistic risk management approach can benefit an organization because this approach creates a full picture of the organization’s risk portfolio and profile, which can help managers make better decisions and improve overall outcomes

Holistic risk management

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what is the difference between subjective and objective risk?

subjective - it is based on opinions with in the organization and is the perceived amount of risk.
objective - it is based on facts and data and is a measurable variation in uncertain outcomes.

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Categories of Risk:

Hazard risk Operational risk Financial risk Strategic risk

what is the term used to describe the size of the loss?

Severity

What is Exposure ?

Is a measurement that identifies the maximum potential damage that can be associated with any event.

Hazard risk can be categorized by:

1. Personnel risk 2. Property risk 3. Liability risk

Value at Risk (VaR)

VaR measures the probability of a loss in an investment’s value exceeding a threshold level. In addition to working within a short time horizon, VaR is typically characterized by low prob- ability.

Property that has a physical form

tangible property

Quadrants of risks

Hazard Risk, Operational Risk, Financial Risk & Strategic risk

Non - diversifiable Risk

impacts a large section of the population. This type of risk is correlated and can include unemployment, inflation, and any type of natural disaster.

3. Hazard risk can be categorized by:

1. Personnel risk 2. Property risk 3. Liability risk

What are risk assessment of ISO 31000 ?

Risk Identification , Risk Analysis and Risk Evaluation

What is Enterprise Risk Management (ERM)

Two major standards in risk management

The Committee of Sponsoring Organizations' (COSO’s) enterprise risk. (ERM) framework emphasizes the close ties between risk and strategy, as does the ISO 31000 definition

Severity

the size of a loss

Surety bonds are three-party agreements. Who do they involve?

Principal, the surety and obligee

what is the meaning of diversification?

a risk control technique that spreads loss exposure over numerous projects, products, markets or regions.

What are component of COSO Framework ?

Governance and Culture, Strategy and objective , performance, Review and revision, Information, communication and report

which are three general categories of coverage in marine insurance?

1. The vessel 2. Liability 3. Cargo

what are the Categories of Risk

1. Hazard risks 2. Operational risks 3. Financial risks 4. Strategic risks

How many Basel 3 principle ?

is a useful process for understanding and solving a problem. Figure out what negative events are occurring. Then, look at the complex systems around those problems, and identify key points of failure.

root cause analysis

A document published by a recognized authority that includes principles, criteria, best practices for risk management

Risk Management Standards

foundation for applying the risk management process throughout the organization.

Risk management framework

Information used as a basis for measuring the significance of a risk

Risk criteria

can be applied to all operations and most activities and to any type of risk including hazard, operational, financial, and strategic risks.

ISO 31000

The ISO 31000 definition of risk assessment includes

1. risk identification, 2. risk analysis, 3. risk evaluation.

Hazard

a condition that increases the frequency or severity of loss

which risk refers to a company's ability to manage its debt and financial leverage?

financial risk

Intangible Property

property that has no physical form

the total cost incurred by an organization because of the possibility of accidental loss

cost of risk

the use of objects that are connected through a network and transmit data to computers

Internet of Things(IOT)

the chance of a loss or no loss, but there is no chance of a gain.

Pure and speculative risk

o This type of risk is specific to the possible changes in the cost of raw materials and other inputs that can impact cash flows and/or price changes in the market for outputs such as completed products

Price risk

This type of risk is most common to financial institutions and banks

Credit risk

impacts some individuals, organizations, or small groups

diversifiable risk

a large section of the population at the same time

non-diversifiable risk

is the subject of insurance and can occur from loss exposures due to property, liability, or personal loss.

Hazard risk

what is the difference between subjective and objective risk?

subjective - it is based on opinions with in the organization and is the perceived amount of risk.

Hazard risk can be categorized by:

Personnel risk Property risk Liability risk

GAAP

A common set of accounting standards and procedures used in the preparation of financial statements to ensure consistency of presentation and reported results.

What are Major types of Financial Risk?

1. Market risk 2. Credit risk 3. Price risk

What is Commodity Price Risk ?

Commodity price risk affects many different types of organizations. Organizations can manage their commodity price risk through purchase of commodity futures contracts. Hedg- ing through the use of derivatives linked to the price of a commodity is a technique that some organizations use suc- cessfully to manage commodity price risk.

It is an external risk with the potential to affect an organization’s objectives and the risk can be reduced through a financial contract, such as a derivative. What type of risk are these characteristics associated with?

Financial

the three major types of financial risk

1. Market risk 2. Credit risk 3. Price risk

What are the benefits of VAR as a RIsk Measure ?

a. The potential loss associated with an investment decision can be quantified. b. Complex positions (typically involving multiple investments) are expressed as a single figure. c. Loss is expressed in easily understood monetary terms.

loss of good will, failure to perform, missed opportunities are the examples of ?

net income loss exposures

Value at Risk (VaR)

VaR measures the probability of a loss in an investment’s value exceeding a threshold level. In addition to working within a short time horizon, VaR is typically characterized by low prob- ability.

what are the three major types os financial risk?

market risk, credit risk and price risk

What are component of framework model ?

Lead and establish accountability Align and integrate Allocate resources Communicate and report

three major types of financial risk are

1. Market risk 2. Credit risk 3. Price risk

what are The external environment of an organization factors

* Economic * Political * Legal and regulatory * Technology * Natural * Competitive landscape

P-D-C-A Cycle is also known as?

The Shewhart cycle and the Deming cycle

four components of the framework mode are ?

Lead and establish accountability ▪ Align and integrate ▪ Allocate resources ▪ Communicate and report

A tool used by an organization to measure the uncertainty of meeting a strategic business objective

Key risk indicator

What are Five major steps are included in the enterprise-wide risk management process?

Scan the environment, identify risk , analyse risk, treat risk and monitor and assure

The risk that a security’s future value will decline because of changes in interest rates.

Interest rate risk

What are the two kinds of management liability insurance?

Director & officer liability and employment practices liability

What are the three categories of ocean marine insurance?

vessel, liability and cargo

risk management professional should first compare an organization’s existing risk management framework and process against that of an internationally recognized standard

GAP

How loss exposure are analysed ?

1. Loss frequency—the number of losses within a specific time period 2. Loss severity—the amount, in dollars, of a loss for a specific occurrence 3. Total dollar losses—the total dollar amount of losses for all occurrences during a specific time period 4. Timing—when losses occur and when loss payments are made

A conscious act or decision not to act that reduces the frequency and/ or severity of losses or makes losses more predictable that is know as

risk control