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Accounting /Risk Management Concepts

Risk Management Concepts

Accounting20 CardsCreated 3 months ago

This deck covers key concepts in risk management, including definitions, calculations, and principles related to managing uncertainty in organizations.

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What is risk position?

An organization's desired gain or acceptable loss in value.
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Key Terms

Term
Definition
What is risk position?
An organization's desired gain or acceptable loss in value.
Define residual risk.
The amount of uncertainty that remains after all risk management efforts have been exhausted.
How is annualized loss expectancy (ALE) calculated?
ALE is calculated by multiplying single loss expectancy by the annualized rate of occurrence.
What are key risk indicators (KRIs)?
Metrics that provide an early signal of increasing risk exposures for an enterprise.
What is a hazard?
A potential for harm, often associated with a condition or activity that can result in injury or illness if left uncontrolled.
What does risk control involve?
Action taken to manage a risk.
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Risk Management Concepts
TermDefinition
What is risk position?
An organization's desired gain or acceptable loss in value.
Define residual risk.
The amount of uncertainty that remains after all risk management efforts have been exhausted.
How is annualized loss expectancy (ALE) calculated?
ALE is calculated by multiplying single loss expectancy by the annualized rate of occurrence.
What are key risk indicators (KRIs)?
Metrics that provide an early signal of increasing risk exposures for an enterprise.
What is a hazard?
A potential for harm, often associated with a condition or activity that can result in injury or illness if left uncontrolled.
What does risk control involve?
Action taken to manage a risk.
Define risk tolerance.
The amount of uncertainty an organization is willing to pursue or accept to attain its risk management goals.
What is risk?
Uncertainty that has an effect on an objective, where outcomes may include opportunities, losses, and threats.
What is risk appetite?
The amount of uncertainty an organization is willing to pursue or accept to attain its risk management goals.
How is single loss expectancy (SLE) calculated?
SLE is calculated by multiplying asset value by the exposure factor.
What is whistleblowing?
The reporting of an organization's violations of policies and processes by employees.
Explain moral hazard.
A situation where one party engages in risky behavior knowing it is protected against the risk because another party will incur any resulting loss.
What is a risk scorecard?
A tool used to gather individual assessments of various characteristics of risk, such as frequency of occurrence and degree of impact.
Describe the principal-agent problem.
A situation where an agent makes decisions for a principal potentially based on personal incentives that may not align with the principal's incentives.
What is the duty of care principle?
Organizations should take all steps reasonably possible to ensure the health, safety, and well-being of employees and protect them from foreseeable injury.
Define risk management.
A system for identifying, evaluating, and controlling actual and potential risks to an organization.
What is a contingency plan?
A protocol that an organization implements when an identified risk event occurs.
What is a conflict of interest?
A situation where a person or organization may benefit from undue influence due to outside activities, relationships, or investments.
What is the difference between risk appetite and risk tolerance?
Risk appetite is the amount of risk an organization is willing to pursue, while risk tolerance is the amount of risk it is willing to accept.
How does moral hazard relate to insurance?
Moral hazard occurs when individuals take more risks because they know they are protected by insurance.