Risk - Technical Notes

Question 1

What should management do for risk

Answer 1

Identify
Determine if risk is acceptable with appetite
Assess likelihood it will materialise
Cost v benefits

Question 2

What are the categories of risk?

Answer 2

Strategic

Operational

Question 3

What are examples of strategic risks?

Answer 3

Market
Credit
Liquidity
Technological
Legal
Outsource
Health and safety
Reputation

Question 4

Draw TARA diagram

Answer 4

Impact low to high
Probability low to high

Transfer > Avoid > Reduce > Accept

Question 5

When would you transfer

Answer 5

House fire - insurance

Question 6

When would you reduce

Answer 6

Internal controls, shop lifting > CCTV

Question 7

When would you avoid

Answer 7

Exchange rate risk - hedging

Economic downturn - diversification

Question 8

What are the characteristics of information?

Answer 8

Accurate
Complete
Cost beneficial
User targeted
Relevant
Authoritative
Timely
Easy to use