Why is there now a section on “Principal Risks” in annual reports and accounts of many organisations?
From the need to inform potential investors and to comply with regulations or with stock exchange rules
What are the three ways the term “risk” is used in?
- to describe the type of policy cover
- as the name for the physical object being insured
- to refer to the chance of an insured loss occurring
What is the difference between uncertainty and risk?
Risk is where the statistical probability of an event can be calculated and uncertainty has too many variables involved to make this calculation accurately
What is chance?
Suggests a loss or event that we cannot predict or prevent
What is a peril?
That which gives rise to a loss
What is a hazard?
That which influences the operation or effect of the peril
What is risk tolerance?
The level beyond which a risk seeker concludes that they are realistically unable to assume risk
The company’s qualitative and quantitative boundaries around risk taking, consistent with its risk appetite
What is risk appetite?
Documents the overall principles that a company follows with respect to risk taking, given its business strategy, financial soundness objectives and capital resources
What is risk culture?
The appetite, attitude and understanding of risks that is shared by a group of people
What is a risk mature culture?
A supportive culture in the organisation: one that recognises and accepts that uncertainty is inevitable and welcomes it as an opportunity to reap the rewards associated with effective risk management
