Study Unit 5.3: Framework, components and principles

Question 1

What are the five components and principles of ERM?

Answer 1

Governance and culture
Strategy and objective-setting
Performance
Review and Revision
Information, Communication and Reporting

Question 2

What does Governance and Culture entail?

Answer 2

Basis for all other components

Governance sets entity’s tone and establishes responsibilities

Culture is reflected in decision-making

Question 3

What does Strategy and Objective-Setting entail?

Answer 3

ERM integrated into strategy through objectives

Understanding the business context an entity can gain insight into internal- and external factors of risk

Set risk appetite in conjunction to strategy

Question 4

What does Performance entail?

Answer 4

Identify and assess risks that may affect achievement of objectives

Categorize risks according to severity and probability

Select an appropriate risk response and monitors performance

Question 5

What does Review and Revision entail?

Answer 5

Review performance relative to targets – determine effectiveness/value of ERM

Question 6

What does Information, Communication and Reporting entail?

Answer 6

Communication – continual process to obtain information and sharing it

ERM supported by internal- and external information

Organization reports on risk, culture, and performance

Question 7

What must an organization keep in mind during the assessment of ERM?

Answer 7

Components and principles are present and functioning

Components are operating together in an integrated manner

Relevant controls to apply principles are present