Module 6

Question 1

State the distinguishing principles embedded in the UK Government’s RM framework (‘The Orange Book’) (6)

Answer 1

Key principles of this framework that distinguish it from others include:

1. the importance of linking risks to objectives
2. the distinction between the risk and its impact
3. the need to distinguish inherent and residual risks
4. prioritisation of risks is more important than quantification
5. risk appetite should be subdivided into corporate, delegated and project
6. a dedicated risk committee is recommended.

Question 2

Outline the four elements of Canada’s Integrated RM Framework

Answer 2

1. Developing the corporate risk profile
   − the importance of the establishment of a comprehensive understanding of an organisation’s risk profile, appetite and tolerance
   − the need to establish the interdependent relationship between the organisation and its operating environment
2. Establishing an integrated RMF
   − the focus on the RMF and the integration of RM activities
3. Practicing integrated RM
4. Ensuring continuous RM learning
   − the value of a continuous and supportive learning environment

Question 3

State the distinguishing principles embedded in AS/NZS 4360 (4)

Answer 3

AS/NZS 4360 is a best practice Risk Management Standard published by Standards Australia. It sets out a seven-element process (including a SWOT analysis).

Key principles of this framework include:
1. the detail on risk analysis for non-financial organisations (which can be useful for considering operational risk for financial organisations)

2. the recommendation that the risk management process is formulated into a risk management plan
3. the stressing of the importance of senior management buy-in
4. the need for adequate resources being allocated to risk management.

Question 4

Outline ISO 31000, including the distinguishing characteristics

Answer 4

• the global Risk Management Guidance Standard issued by International Organization for Standardization
• its objective is to provide generic guidelines for the principles underlying best practice risk management
• it does not deal with specific risks or sectors

Three distinguishing characteristics are:

1. emphasis on the possibility of an effect, rather than the possibility of an event
2. focus on how such effects could affect objectives
3. viewing the risk framework as being dynamic – developing through a continuous cycle (akin to the Actuarial Control Cycle).

Question 5

Outline the key features of the RAMP process (3)

Answer 5

1. mainly concerned with capital projects
2. can be made relevant to day-to-day business by regarding the business as a portfolio of projects
3. similar to AS/NZS 4360 process but also covers:
   − project launch and closedown stages
   − a go/no-go decision step