SU 2 Flashcards
(22 cards)
What is corporate governance (5)
System by which companies are directed & controlled to ensure
- Transparency
- Accountability
- Responsibility
- Fairness
to all stakeholders of company
Explain integrated reporting (2)
- How organisation creates value over time
- Optional for all companies, except companies listed on JSE
What are the 6 capitals of integrated reporting according to the King IV report
- Financial
- Intellectual
- Human
- Social & relational
- Manufactured
- Natural
Explain ‘financial’ as part of integrated reporting
Any money
Explain ‘natural’ as part of integrated reporting
Ethical situations
Explain ‘intellectual’ as part of integrated reporting
Technology & technological changes
Explain ‘human’ as part of integrated reporting
Employee skills & training
Explain ‘social & relational’ as part of integrated reporting
Community
Explain ‘manufactured’ as part of integrated reporting
Infrastructure
What is risk (3)
- Uncertain events, & the likelihood of them occurring, & their positive / negative effect on achievement of company objectives
- Inevitable & inherent to any company
- Needs to be effectively managed
What is business risk
Any events that threaten achievement of organisation’s objectives
Who needs to manage risks & what should they do (2)
- Those charged with governance (can delegate)
- Need to implement proper controls to address risks
3 steps of risk management
- Risk identification
- Risk evaluation
- Risk response
What is risk identification
Identify risk entity is exposed to
What is risk evaluation
Determine significance of risk
What is risk response
Course of action to address risk
Steps of risk evaluation (4)
- Likelihood of risk occurring
- Impact when it occurs
- Rank and prioritise risks on risk register
- Likelihood, impact, rank differs from company to company
(study risk classification matrix)
Components of risk response (TARAE)
- Transfer (to 3rd party)
- Accept (react when & if occurs)
- Reduce (mitigate by implementing controls)
- Avoid (eliminate risk)
- Exploit (opportunity created by risk that entity takes advantage of)
What is residual risk
Level of risk remaining after responding to risk
Why does residual risk exist
- Always risk because the way of reacting to risk is subjective
- Uncertain whether risk will occur / not
What is risk appetite
How much risk business is willing to accept to achieve objectives
Explain risk tolerance (4)
- Specific limit of risk entity will tolerate to achieve objectives
- Above limit = not accepted
- Below limit = accepted
- At limit = subjective response (accept / not)
