Module 1 Unit 5 Risk Culture and Appetite Flashcards
Determine the appropriate level of risk that an organisation can take in relation to its risk culture (94 cards)
Which of the following are determinants of the organisational attitude to risk?
- Opportunity pursuit.
- Business maturity.
- Area of activity.
- Decision-making
Option 2 is correct. The attitude to risk is often different “when an organisation is a start-up operation rather than a mature organisation”.
Option 3 is correct. The “attitude of the organisation to risk will depend on the sector … within which it operates” and area of activity is another term for sector.
Risk Doctor quote on what is Culture
Values and beliefs and knowledge and understanding shared by a group of people with a common purpose.
What is the definition of risk culture?
Risk culture is similar to organizational culture but focuses on how people perceive, understand, and manage risks.
It emphasizes the collective attitudes and behaviors regarding risk within an organization.
According to Hopkin and Thompson, what does risk culture reflect?
Risk culture reflects the overall attitude of management, influences individual behaviour, and defines how people feel obliged to act.
This highlights the importance of leadership in shaping risk perceptions.
How does the IRM define risk culture?
Risk culture is the values, beliefs, knowledge, and understanding about risk shared by a group of people with a common purpose, especially employees within an organization.
This definition emphasizes the collective aspect of risk management.
What is a virtuous cycle in the context of risk culture?
A virtuous cycle is when positive actions and behaviours reinforce the desired risk culture.
This leads to a healthier organizational environment regarding risk management.
What constitutes a vicious cycle in risk culture?
A vicious cycle occurs when dysfunctional behaviours create a damaging, negative risk culture.
This can lead to increased risks and negative outcomes for the organization.
List three strategies for establishing a positive risk culture.
- Communication
- Employee Buy-In
- Involvement
These strategies are essential for fostering a supportive risk management environment.
What role does communication play in establishing a positive risk culture?
Communication involves clearly communicating the organization’s expectations through various channels (policies, presentations, newsletters, etc.).
Effective communication ensures that all employees understand risk management practices.
Why is employee buy-in important for risk culture?
Employee buy-in convinces employees of the personal benefits of good risk management practices.
When employees see personal advantages, they are more likely to engage in positive risk behaviors.
What is the significance of involving employees in the risk identification process?
Involving employees helps in recognizing potential risks and fosters a sense of ownership and responsibility.
This collaborative approach can enhance the effectiveness of risk management strategies.
What is the purpose of training programs in establishing a positive risk culture?
Training programs are provided to instil the right practices and knowledge regarding risk management.
Continuous education is vital for maintaining an informed workforce.
What does Deloitte suggest about a strong risk culture?
A strong risk culture enables people to consistently do the right thing in a rapidly changing, complex world.
This adaptability is crucial for effective risk management.
How does a strong risk culture support management?
It helps management make tough trade-off decisions and balance positive and negative impacts.
This support is essential for navigating complex organizational challenges.
Fill in the blank: A _______ cycle occurs when positive actions reinforce the desired risk culture.
[virtuous]
Fill in the blank: A _______ cycle is created by dysfunctional behaviours in risk culture.
[vicious]
What is Risk Culture?
Assess how people’s attitudes and behaviors influence the risk management process.
A successful risk culture is crucial for the success of both the risk management process and the organization.
Why is Risk Culture important?
Establishing the right risk culture is essential for effective risk management.
A strong risk culture can mean the difference between success and failure for the organization.
What do Risk Appetite and Tolerance refer to?
The amount of risk an organization can and is willing to take to achieve its objectives.
This helps determine which risks are relevant and how much effort is needed to manage them.
How does understanding Risk Appetite help organizations?
Helps organizations understand their capacity for risk.
Guides the practical management of risks to ensure they are kept at acceptable levels.
What is required for managing risks effectively?
Changes in attitude, behaviour, and risk culture within the organization.
Ensures that risks are assessed and managed appropriately to create and protect value and support the achievement of objectives.
Fill in the blank: A successful _______ is crucial for the success of both the risk management process and the organization.
[risk culture]
True or False: A strong risk culture can lead to organizational failure.
False
A strong risk culture can mean the difference between success and failure for the organization.
Fill in the blank: Risk Appetite helps determine which risks are _______ and how much effort is needed to manage them.
[relevant]
