Corporate Governance 2.
Address uncertainty and
assumptions
Chapter 11: Risk Management 3. Be an integral part of the
REVIEW QUESTIONS organizational processes and
decision-making
4. Be dynamic, iterative,
1. What is "Risk Management"? transparent, tailorable, and
▪ Risk management is the process responsive to change
of measuring or assessing risk 5. Create capability of continual
and developing strategies to improvement and enhancement
manage it. considering the best available
information and human factors
6. Be systematic, structured and
2. What is the basic approach in continually or periodically
managing risks? reassessed.
▪ The basic approach in managing
risks involves identifying and
analyzing risks, evaluating their 5. Enumerate the steps in the ISO 31000
potential impact, implementing risk management process?
risk mitigation strategies, and ▪ 1. Establishing the context
monitoring and reviewing the 2. Identification of potential risks
effectiveness of these 3. Risk assessment
strategies.
6. What are the elements of the risk
3. How does ISO 31000 define “Risk management process?
Management”? ▪ 1. Identification, characterization,
▪ Risk Management is the and assessment of threats
identification, assessment, and 2. Assessment of the
prioritization of risks followed by vulnerability of critical assets to
coordinated and economical specific threats
application of resources to 3. Determination of the risk
minimize, monitor and control 4. Identification of ways to
the probability and/or impact pf reduce those risks
unfortunate events and to 5. Prioritization of risk reduction
maximize the realization of measures based on a strategy
opportunities.
7. What are the key elements that the
4. What are the basic principles of risk company-wide risk management
management? system should possess?
▪ 1. Creates value
▪ A company-wide risk often have a more risk-taking
management system should attitude, focusing on innovation
possess several key elements to and growth.
effectively identify, assess, and
mitigate risks. These elements
include: 2. What is the advantage of defining the
1. Risk Governance categories into which risks fall?
2. Risk Identification ▪ Defining the categories into
3. Risk Assessment which risks falls allows for a
4. Risk Mitigation more structured analysis and
5. Risk Monitoring reduces the chances of a risk
6. Risk Communication being overlooked.
7. Risk Reporting
8. Continuous Improvement
3. Explain how the following types of risk
catalyst might trigger risk.
MULTIPLE CHOICE QUESTIONS ▪ Technology
• Technological
1. B. 6. A.
advancements or
2. C. 7. D. disruptions can
introduce new risks or
3. A. 8. C.
impact existing
4. A. 9. D. processes.
▪ Organizational Change
5. D.
• Changes in the
structure, culture, or
Chapter 12: Practical Guidelines in Reducing leadership of an
and Managing Business Risks organization can create
uncertainty and
REVIEW QUESTIONS increase risk.
▪ Processes
• Inefficient or outdated
1. Explain the difference in attitude to processes can lead to
risk between European and US errors, delays, or other
Companies. operational risks.
▪ The difference in attitude to risk ▪ People
between European and US • Human factors such as
companies is that European employee behavior,
companies tend to have a more skills, or motivation can
conservative approach to risk, contribute to risks in
prioritizing stability and long- areas like compliance,
term sustainability. US
companies, on the other hand,
security, or overall goals and objectives of
performance. the organization.
▪ External Factors b. Market conditions: Assessing
• Economic conditions, the current and future market
market trends, trends, competition, and
regulatory changes, or customer demands.
natural disasters can all c. Risk tolerance:
influence risk levels. Understanding the
organization's risk appetite and
capacity to take on financial
4. The typical area of financial risk risks.
includes the following except: d. Regulatory environment:
▪ Poor brand management Considering the legal and
(Commercial Risk) regulatory requirements that
▪ Treasury risks may impact financial decisions.
▪ Accounting decisions and e. financial resources:
practices Evaluating the availability and
▪ Fraud allocation of financial resources
to support the strategy.
5. What are the stages in managing the
enterprise-wide risk? 7. What are some of the financial tools
▪ 1. Assess and analyze the risks that can be applied in making strategic
resulting from a decision by financial decision affecting
systematically identifying and profitability?
quantifying them. (Risk ▪ Variance Analysis
Assessment and Analysis) ▪ Assessment of Market Entry and
2. Consider how best to avoid or Exit Barriers
mitigate them. (Risk ▪ Break-even Analysis
Management and Control) ▪ Controlling Costs
3. In parallel with the second
stage, take action to manage
control and monitor the risks. 8. Enumerate and explain at least (7)
(Controlling and Monitoring practical technique to improve
Enterprise-Wide Risk) profitability.
▪ Focus decision-making on the
most profitable areas.
6. What factors should be considered • Concentrating on
when setting and reviewing financial products and services
strategy? with the best margin will
▪ a. Business objectives: Aligning protect or enhance
financial strategy with the profitability.
▪ Decide how to treat the least • involves a combination
profitable products. of customer-centric
• Turn around a poor strategies, product
performer product by innovation, pricing
reducing costs, raising optimization,
prices, altering operational efficiency
discounts or changing improvements, and
the product or abandon data-driven decision-
it to prevent drain on making to drive
resources and sustainable growth and
reputation. profitability for the
▪ Make sure new products business.
enhance overall profitability ▪ Consider how to increase
• Means ensuring that profitability by managing
any new products people.
introduced by a • Successful leadership is
company contribute prerequisite for
positively to its overall profitability.
financial success.
▪ Manage development and
production decisions
• Refers to the process of
overseeing and making
strategic choices
related to the creation
and manufacturing of
products or services
within a company.
▪ Set the buying policy
• consider techniques for
controlling delivery
charges, monitoring
exchange rates.
improving quality
control, reducing
inventory and improving
production lead times.
▪ Consider how to create greater
value from existing customers
and products to enhance
profitability
