Chapter 2

Question 1

Bias in project appraisal

Answer 1

IT COME BACK

I insufficient care
T Technology

C Cycle
O Optimism
M Model erros
E Experience

B Business (other)
A Assumptions (Senior management and incorrect)
C Credit for other projects
K Key risks

Question 2

Risk culture

Answer 2

A POLLOCK

A Accountability

P    Participation
OL   Organisational Learning
L      Leadership
O     Openess
C     Communication
K     Knowledge sharing

Question 3

Walker review on Corporate Governance

Answer 3

Comply or explain
Strength of Board
Independent risk committee
Engagement between fund managers and Boards
Remcos, disclosed publicly

Question 4

Avoiding bias

Answer 4

Check RIO

Checks and balances
Reference similar projects
Independent checking
Optimism bias (include)

Question 5

Central risk function

Answer 5

BRAM FAB2

B    Big Picture
RA  Risk appetite
M    Monitor risk management process
F    Focal point for staff
AB   Advise Board
Assess Business

Question 6

Internal Audit

Answer 6

I CAGE

Insurance cover
Compliance (Reg/Laws)
Accuracy of key spreadsheets
Governance in check
Error check

Question 7

Board responsibilities for Risk Management

Answer 7

GAMER

Guiding structure
Approve internal controls
Monitoring risks
Ensure implementation
Risk appetite

Question 8

Code of Conduct for internal policies

Answer 8

CRAPS

Compliance
Record keeping
Accuracy
Proactive risk response
Safe guard assets / Fraud

Question 9

Issues that should be communicated

Answer 9

Threats / opportunities
Suggestions for mitigation
Ideas --> increasing opportunities
Defective products
Operational failure