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The process of measuring or assessing risk and developing strategies to manage it.
Risk Management
It is a risk associated with investment that is associated with the uncertainty created by the inability to sell the investment quickly for cash.
Liquidity Risk (book, 168)
True/False: Risks can be reduced or mitigated by sharing them.
True (book, 186)
It is the enemy of cost control.
Casualness (book,190)
Are an active tool to help make financial decisions.
Budgets (book, 192)
True/False: It is more difficult to assess the risks inherent in a business decision than to identify them.
True (book, p184)
It should be actively managed and given a high priority across the whole organization.
Risk (book, 185)
This refers to when sales cover costs, where neither a profit nor a loss is made.
Break-Even Point (book,189)
TRUE/FALSE: Reducing a risk may also mean that the cost of insuring against it goes down.
TRUE (book, 186)
TRUE/FALSE: Risk management performance does not need to be monitored on a continuing basis, and organizations should not prioritize innovation in their approaches to align with changing trends.
False — Risk management performance must be monitored on a continuing basis and organizations must be ready to innovate their approaches to be in line with the changing line. (book, 176)
What are the five most significant types of risk catalysts?
technology,
organizational change,
processes,
people, &
external factors (book, p183)
True/False: At least one member of the committee must have relevant thorough knowledge and experience on risk and risk management.
True (book, 174)
TRUE/FALSE: Risks with little likelihood of occurring in the next five years are not important to a company focused on meeting shareholders' shorter-term expectations.
True (book, 184)
True/False: Modern business firms face less risk due to advancements in technology and globalization.
False – "The levels of risk faced by business firms have increased because of the fast-growing sophistication of organization, globalization, modern technology..." (book, p164)
TRUE/FALSE: Getting the best value means achieving a balance between the price paid and the quantity received
FALSE - price paid and the quality received. (book, 190)
It is used to decide whether to continue developing a product, alter the price, provide or adjust a discount, or change suppliers to reduce costs.
cost-volume-profit or CVP analysis (book, 189)
The lifeblood of a business, heavily influencing strategies and decisions at every level.
Finance (book, 188)
TRUE/FALSE: Risks that lead to frequent losses are harder to quantify. Unusual or infrequent losses can often be solved using past experience.
False (book, 184)
It is used to monitor and manage the results of past decisions, assess the current situation and highlight solutions.
Variance analysis (book, p189)
TRUE/FALSE: According to ISO 31000, risk management is about avoiding all risks completely.
False – "ISO 31000:... to minimize, monitor and control the probability and/or impact of unfortunate events and to maximize the realization of opportunities." (book, p164)
It provides a starting point for cash flow forecasts and revenues, and they also play an essential role in monitoring costs and revenues.
Budgets (book, 190)
What are the inclusions of risk organizational structure?
formal charters,
levels of authorization reporting lines, and
job description (book,175)
These are as much about attitude as skill.
Entrepreneurial flair and financial rigour (book, 188)
TRUE/FALSE: Creation of a risk management committee at the board level will not necessarily demonstrate the firm’s commitment to adopting an integrated company-wide risk management system.
FALSE - Creation of a risk management committee at the board level will demonstrate the firm’s commitment to adopting an integrated company-wide risk management system. (book, page 175)
TRUE/FALSE: When markets are difficult or costly for competitors to enter and relatively easy and affordable to leave, firms can achieve low, stable returns, while still being able to leave for other opportunities.
FALSE -achieve high, stable returns (book, 189)