Study Unit 4:
SELF ASSESSMENT
(1) Discuss the importance of risk identification in the ERM process.
Risk identification is the process of determining which risks may
affect the project as well as establishing their characteristics.
Risk identification is a crucial step in the ERM process. As discussed in
Study Unit 3, it is important for a business to understand the business
activities and context. In the second stage, it is important to be able to
identify the risks in the business and understand how they fit into the
overall business context.
Through risk identification, the business will be able to identify the key
risks and risk events associated with the business. The business will
constantly change and grow as well as the risks associated with the
business. The business will need to indentify risks on a constant basis
and identify the opportunities that may arise in order to enhance its
objectives as well as risks that may reduce the likelihood of the business
achieving its objectives. Risk can also be based on two main outcomes
namely the upside and downside of risk
(2) Facilitation is an important process to use in the risk identification stage. Discuss
the responsibilities of a facilitator.
Facilitation
It is important to have techniques that can be used to best identify the risks and op-
portunities to suit every circumstance. Facilitation needs to be conducted through
interactive workshops to inform the business on how to identify the risks. Thus, the
responsibilities for a facilitator in an interactive workshop are as depicted in Figure 4
below.
, (3) Discuss probability as a process mechanism for the risk analysis stage.
Process Mechanisms for Stage 3: Risk Analysis
Probability is the main process mechanism used in the risk
analysis’s process. Probability is shown on a scale of 0 to 1. If there is no
chance of an event occurring, the probability will be 0, and if there is a
chance of the event occurring, the probability will be 1.
(4) Draw a graph, which illustrates the utility function within the risk evaluation stage.
(5) Define investment appraisal as a concept in the risk evaluation stage.
SELF ASSESSMENT
(1) Discuss the importance of risk identification in the ERM process.
Risk identification is the process of determining which risks may
affect the project as well as establishing their characteristics.
Risk identification is a crucial step in the ERM process. As discussed in
Study Unit 3, it is important for a business to understand the business
activities and context. In the second stage, it is important to be able to
identify the risks in the business and understand how they fit into the
overall business context.
Through risk identification, the business will be able to identify the key
risks and risk events associated with the business. The business will
constantly change and grow as well as the risks associated with the
business. The business will need to indentify risks on a constant basis
and identify the opportunities that may arise in order to enhance its
objectives as well as risks that may reduce the likelihood of the business
achieving its objectives. Risk can also be based on two main outcomes
namely the upside and downside of risk
(2) Facilitation is an important process to use in the risk identification stage. Discuss
the responsibilities of a facilitator.
Facilitation
It is important to have techniques that can be used to best identify the risks and op-
portunities to suit every circumstance. Facilitation needs to be conducted through
interactive workshops to inform the business on how to identify the risks. Thus, the
responsibilities for a facilitator in an interactive workshop are as depicted in Figure 4
below.
, (3) Discuss probability as a process mechanism for the risk analysis stage.
Process Mechanisms for Stage 3: Risk Analysis
Probability is the main process mechanism used in the risk
analysis’s process. Probability is shown on a scale of 0 to 1. If there is no
chance of an event occurring, the probability will be 0, and if there is a
chance of the event occurring, the probability will be 1.
(4) Draw a graph, which illustrates the utility function within the risk evaluation stage.
(5) Define investment appraisal as a concept in the risk evaluation stage.
