RSK2601 EXAM PACK 2021

RSK2601 EXAM PACK 2021. Risk management policy -A Risk management policy sets out how the risks ,which have been identified by the risk assessment procedure,will be managed and controlled.The risk management policy assigns responsibility for perfoming key tasks,establishes accountability with appropriate managers ,defines boundaries, limits and formalises reporting structures. 6)Risk management Process 6 -It essentially applies management policies,procedures and practices to a set of activities that are intended to establish the context,communicate and consult with stakeholders and identify,analyse,evaluate ,treat ,monitor and review the risk.All the processes are repeated through out the organisation up to the implementation of therisk response actions 7)Sources of Risks -A risk source is where risk originates and the risk source has the intrinsic potential to give rise to a risk. QUESTION 2- ENTERPRISE RISK MANAGEMENT PROCESS(10MARKS) 2.1) Briefly explain the following six(6) process activities which need to take place in the risk evaluation stage(6) BASIC CONCEPTS OF PROBABILITY -It refers to the basic principles of probability,which can be used by a business to measure expected outcomes of mutually exclusive and non mutually exclusive events SENSITIVITY ANALYSIS -It is a method that can be used by a business to assess how sensitive the project outcomes are to changes in business.The method uses one variable and examines the effect of that specific variable on the project. SCENARIO ANALYSIS -It is a useful decision making method that focuses on the consequences of events that would have been ignored by the business because it was regarded as an event that has never happened or is unlikely to happen SIMULATION -It refers to a method that is used to analyse financial or time models,where the variables may be un certain for example costs,duration,opportunities or risks. -It can be used when a business has statical software or commercially available spread sheets MONTE CARLO SIMULATION 7 -It is a method used by a business to evaluate the effect of uncertainty on a planned activity in a range of situations and uses or relies on the numbers to sample from a probability distributions. LATIN HYPERCUBE SAMPLING -It refers to a sampling method that is used to recreate the probability distributions that are specified by distribution functions accurately and is a more modern technology method.2 2.2)Distinguish between key risk indicators and key performance indicators.Use examples to elucidate your answer(4Marks) KEY RISK INDICATORS(KRIs) -It refers to captured information that makes a provision of useful views of underlying risk profiles at various levels to assist decision makers within a business. -The following are seen as types of key risk indicators: Inherent or exposure risk indicators .Control risk indicators .Composite indicators .Model risk factors .KEY PERFOMANCE INDICATORS(KPIs) -It refers to high levels snapshots of the health and performance of abusiness based on specific predefined measures for example statistical information on the business -The following are seen as key performance indicators such as GAAP or legal regulatory requirements: .Profitability per business unit or product .Exception reporting .Employee performance such assets under management or profit per customer .Competitiveness such as market share 8 .Cost management such as return on assets on IT or new delivering channel monitoring .Credit management such as time to settlement or credit exposure QUESTION 3-EXTERNAL INFLUENCES :MACRO FACTORS(6 MARKS) 3.1)Identify four(4) sources of risks embraced within economic risk(2Marks) -Fall in demand -Government policies -Movement in house prices -Exchange Rates -Inflation 3.2 Argue the importance of implementing economic risk management(4MARKS) -It provides an understanding of the impact of inflation and interest rates on demand -Improves the knowledge of where the government is planning public spending -Provides and understanding of how the shorterm behaviour of Gross Domestic Product will have an impact on employment ,prices and standard of living -Promotes rigorous market research before entering new markerts in both the domestic and international markets.