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9 Cards in this Set
- Front
- Back
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How does CIMA define Risk?
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Risk is a condition in which there is exists a quantifiable dispersion in the possible outcome from any activity
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How does CIMA define Uncertainty?
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Uncertainty can be defined as the inability to predict the outcome from an activity due to lack of information about the required input/output relationship or about the environment within which activity takes place.
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Organisations can classify risks in a variety of ways?
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Business or operational risks relate to the activities carried out within an organisation.
Financial risks relate to the financial operation of a business.
Environmental risks are risks relating to changes in the political, economic, social and financial environment.
Reputation risks are risks caused by failing to address some other risk. |
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What trait of human make quantification of risk difficult?
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The reaction to risk is not (necessarily) logical. Human beings generally don't manage risk in a linear, mathematical way. Perceptions of risk are often very different to the reality of risks.
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What are Adams four 'rationalities' i.e. four different ways in which individuals can view risk:
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Fatalists—are resigned to their fate and see no point in trying to change it. Managing risks is irrelevant to fatalists.
Hierarchists—are most comfortable with a bureaucratic risk management style using various risk management techniques.
Individualists—typically manage risk intuitively rather than systematically.
Egalitarians—are most comfortable in situations of risk sharing through insurance, hedging or transfer to other organisations. |
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Give a few examples of financial Risk?
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credit risk. liquidity risk. currency risk. interest rate risk. cash flow risk. |
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How are financial risk managed generally
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by hedge item
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How can Enviromental risk be broken down?
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Social Legal Economical Political Technological |
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Fraud risk is one component of operational risk what is operational risk? |
Operational risk focuses on the risks associated with errors or events in transaction processing or other business operations. A fraud risk review considers whether these errors or events could be the result of a deliberate act designed to benefit the perpetrator
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