Chapter 7

Question 1

Who oversees the overall management and direction of any responsibility?

Answer 1

The Board members

Question 2

What is the legal requirements of company directors?

Answer 2

The UK Companies Act 2006 requires Board directors to have regard amongst other matters:
- likely long term consequences of their decisions
- interests of companys employees
- need to foster company’s business relationships with suppliers, customers
- impact of companys ops on the community and environment
- desirability of maintaining a rep for high standards of business conduct
- need to act fairly between members of the company

Question 3

What is corporate governance?

Answer 3

The way a Board sets up an organisation to achieve its objectives together with the systems it puts in place to manage and control that organisation

Question 4

What is the UK Corporate Governance Code 2024?

Answer 4

Sets out expected standards of good practice in relation to issues such as board leadership and company purpose, division of responsibilities, composition, succession and evaluation, audit, risk and internal control and renumeration

Question 5

Who is the UK Corporate Governance Code 2024 applicable to?

Answer 5

Companies with a premium listing on the London Stock Exchange, regardless of where they are incorporated

Question 6

Who are members of the Board of directors?

Answer 6

• CEO
• COO
• Director of finance
• Director of HR
• CRO

Question 7

How does the Board supervise risk management?

Answer 7

The Board appoints a risk subcommittee

Question 8

When most the risk subcommittee seek approval from the Board?

Answer 8

Its required to keep the Board informed of its activities and is expected to seek full Board approval for policies and decisions that affect the organisation in a major way

Question 9

What is the risk subcommittee responsible for?

Answer 9

• publishing the overall risk management philosophy of the organisation
• implementing risk policies
• setting up and monitoring systems to identify and assess risks
• specifying risk appetite
• reporting on risk management for the report and accounts

Question 10

What are the responsibilities of the risk manager and team?

Answer 10

• ownership of the compilation of a draft risk policy
• writing risk appetite and tolerance statement
• establishing and overseeing the approved risk management framework
• deciding on use of a published risk standards
• raising risk awareness
  …..

Question 11

What does risk management in the financial sector focus on?

Answer 11

Operational risks as well as market, credit and other types of financial risks

Question 12

What does risk management in the energy sector focus on?

Answer 12

The future price of energy7 and with exploration risk. Similar to the activities of the treasury function where hedging and other sophisticated financial techniques form the basis of the risk management effort

Question 13

What does risk management in the cyber sector focus on?

Answer 13

Any risk of financial loss, disruption or damage to the reputation of an organisation arising from its IT systems

Question 14

What is a centralised approach for risk management role?

Answer 14

A larger head office with the ops closely managed from the centre and where businesses follow well-defined management practices

Question 15

What is a decentralised risk management role?

Answer 15

The head office is small with the management and op of units assigned to the subsidary or divisional management

Question 16

What are advantages to a centralised approach to risk management?

Answer 16

Company can build a centre of excellence in risk management
Well placed to provide aggregated reporting and data analytics to support organisations in identifying systematic risks

Question 17

What are the disadvantages to a centralised approach to risk management?

Answer 17

Team in the head office will not have the same detailed knowledge of the business that unit management will have. Could lead to an inflexible and disjointed risk management approach
Can slow down decision making

Question 18

What is a hybrid risk management structure?

Answer 18

Largely decentralised structure with a small strategic risk management team, usually reporting to the CRO setting the standards required in each business unit. This is achieved through the publication of a group risk policy and a group risk management manual

Question 19

What is internal audit?

Answer 19

Provide assurance to the Board that approved systems and procedures are operating as intended

Question 20

What is the three lines of defence model?

Answer 20

• the operational team
• the risk management team
• the internal audit team

Question 21

What do loss assessors and loss adjusters have in common

Answer 21

Both offer professional expertise in negotiating insurance claims

Question 22

Who employs a loss assessor?

Answer 22

The policyholder, they never act for the insurance company

Question 23

Who employs a loss adjustor?

Answer 23

The insurance company

Question 24

What service do loss assessors provide?

Answer 24

Evaluates and negotiates claims on behalf of the policyholder

Question 25

What service do loss adjustors provide?

Answer 25

Confirms the circumstances of a policyholders claims, the extent of any damage caused and makes sure the claim is covered by the policy

Question 26

Must policyholders use a loss adjuster?

Answer 26

Yes, the loss adjustor is an agent of the insurer so the policyholder cannot refuse to cooperate

Question 27

Must insurance companies use a loss adjustor?

Answer 27

No, they can use their own claims employees to deal with the settlement of claims

Question 28

What do corporate governance consultants do?

Answer 28

They advise board members, senior directors and risk committees on the polices and procedures they must implement in order to demonstrate sound risk governance and compliance with relevant laws and regulations

Question 29

What does a BCM system involved?

Answer 29

- a business impact analysis to understand the potential effects of various types of disruption - implementation of appropriate recovery strategies and development and implementation of plans - maintaining the plan and testing it periodically

Question 30

How can Risk management information software specialists contribute to the efficient routine handling of risk management tasks?

Answer 30

- incident management - insurance claims management - exposure and asset management - managing risk controls

Question 31

What does the Health and Safety Executive do?

Answer 31

Provides guidance and tools to help businesses understand what they need to do to assess and control risks in the workplace and comply with health and safety law

Question 32

What does the Overseas Risk Service provide?

Answer 32

Geopolitical and economic analysis on overseas markets to new and expanding exporters. Information on potential risks, including human rights issues, bribery and corruption, terrorism, criminal activity and intellectual property

Question 33

What must firms do under PRA rules?

Answer 33

Hold sufficient capital and have adequate risk controls in place

Question 34

What does the FAC aim to ensure?

Answer 34

- financial industry is run with integrity - firms provide consumers with appropriate products and services - consumers can trust that firms have their best interests at heart

Question 35

What is the consumer duty?

Answer 35

Introduced by the FCA and applicable to all financial sector firms. It does exclude large corporate entities and gov bodies Make information presented in a way so that consumers can make informed decisions that are right for them with good customer support

Question 36

What are the requirements from Consumer duty?

Answer 36

- easy to switch or cancel products - provide helpful and accessible customer support - timely, clear and understandable info - provide products and services that are right for customers - focus on real and diverse needs of customers

Question 37

What is the relevance of the FCA Consumer Duty to risk management?

Answer 37

- for consumers will reduce risks associated with buying wrong insurance products - for insurers introduces and additional risk of non-compliance with regulations and potential for fines and adverse publicity

Question 38

What are the CII Code of Ethics?

Answer 38

Sets out cored duties to respond to the needs to consumers and to build trust in the profession through consistent and visible ethical practices