RMIN EXAM 2 STUDY GUIDE
Traditional Risk Management - Answers :-risks evaluated in a "silo" approach (looking
at each risk individually)
- loss exposures are usually insurable, pure risks
In Traditional Risk Management, what are the loss exposures that are usually insurable,
pure risks? - Answers :- personal risks
- liability risks
- property risks
- net income risks
Enterprise Risk Management (ERM) - Answers :a strategic business discipline that
supports the achievement of an organization's business objectives by addressing the
full spectrum of its risks and managing the combined impact of those risks as an
integrated risk portfolio
Example of Enterprise Risk Management - Answers :a hurricane is coming to home
depot. they'll bring products inside and take their products (wood) to protect their other
products. they'll have massive sales after, so they'll have increased inventory coming to
store
* bad event could lead to additional sales
Enterprise Risk Management (ERM) Program - Answers :- considers all risks of an
organization takes across the entire enterprise
- holistic/interconnected view of risk
- typically headed by Chief Risk Officer (CRO) and used in large organizations
- creates a "risk culture" within the organization in which everyone is responsible for
identifying and managing risk
An ERM program requires... - Answers :corporate commitment
What are the 4 types of risks within ERM? - Answers :1) Hazard (pure) Risk
2) Operational Risk
3) Financial Risk
4) Strategic Risk
Hazard Risk - Answers :Traditional Risk Management types of risks -property, liability,
etc. (pure risks).
Risk Management Techniques for Hazard Risks - Answers :- insurance
- noninsurance transfer
- retention
- loss prevention/ loss reduction
,Operational Risk (includes?) - Answers :risks arising from day-to-day business
operations:
- supply chain
- manufacturing
- customer service
- cybersecurity
- employment practices
Risk Management Techniques for Supply Chain - Answers :- have multiple suppliers
(diversification)
- duplication
Risk Management Techniques for Manufacturing Defects - Answers :- quality assurance
- maintenance on machines
- training factory workers
- funded reserve
- duplication
- insurance
- product testing
- recalling defected products
Risk Management Techniques for Customer Service - Answers :- free trials
- trained employees on how to treat situations
- call centers
Risk Management Techniques for Cyber Security - Answers :- firewall
- data protection
- duplication
- keep important docs on higher level in building (In case of flood, etc)
- system identification
- hire hackers to see if its hackable
Risk Management Techniques for Employment Practices - Answers :- background
checks
- periodically review employees
- HR department
- fire people the right way
- interviews
- sexual harassment protocols
- drug testing
- DEI training
Financial Risk (includes?) - Answers :risk arising from changing conditions within
financial markets:
- commodity prices
- interest rates
, - foreign exchange rates
Risk Management Techniques for Commodity Prices - Answers :if prices go up, your
prices go up?
Risk Management Techniques for Interest Rates - Answers :if interest rates are up, cost
of borrowing money is greater?
Risk Management Techniques for Foreign Exchange Rates - Answers :can update your
prices to react?
Strategic Risk - Answers :uncertainty regarding an organization's goals and objectives,
and the organization's strengths, weaknesses, opportunities, and threats (SWOT)
Examples of Strategic Risk - Answers :- product implementation
- company ethics
- location
Company ethics example - Answers :bank tries to get old people to take out more loans
just so they can make money even though the old people don't understand
Examples of using location in relation to strategic risk - Answers :- be strategic about
where to build a new Chick Fil A
- for amazon, they chose a populated area (GA), huge airport, savannah, cheaper cost
of land\
- target expanded into Canada, but didn't account for different consumer taste, or
difficulty getting inventory
- Atlanta Braves building new stadium in Cobb county because its closer to where fans
actually live, to build the battery, Cobb Co. basically paid for stadium, they wanted to
build smaller stadium so it looks fuller
Other ERM Program Risks - Answers :- regulatory/ compliance
- reputational
-terrorism
- climate change
Regulatory/Compliance RISK - Answers :Certain laws and regulations that businesses
have to deal with and comply with
Regulatory/ Compliance Risk Examples - Answers :- if minimum wage increases by $5,
company could increase prices, fire workers, etc. (company must comply with increase
in minimum wage)
- must be 21 to buy alcohol
- company must comply with taxes
Traditional Risk Management - Answers :-risks evaluated in a "silo" approach (looking
at each risk individually)
- loss exposures are usually insurable, pure risks
In Traditional Risk Management, what are the loss exposures that are usually insurable,
pure risks? - Answers :- personal risks
- liability risks
- property risks
- net income risks
Enterprise Risk Management (ERM) - Answers :a strategic business discipline that
supports the achievement of an organization's business objectives by addressing the
full spectrum of its risks and managing the combined impact of those risks as an
integrated risk portfolio
Example of Enterprise Risk Management - Answers :a hurricane is coming to home
depot. they'll bring products inside and take their products (wood) to protect their other
products. they'll have massive sales after, so they'll have increased inventory coming to
store
* bad event could lead to additional sales
Enterprise Risk Management (ERM) Program - Answers :- considers all risks of an
organization takes across the entire enterprise
- holistic/interconnected view of risk
- typically headed by Chief Risk Officer (CRO) and used in large organizations
- creates a "risk culture" within the organization in which everyone is responsible for
identifying and managing risk
An ERM program requires... - Answers :corporate commitment
What are the 4 types of risks within ERM? - Answers :1) Hazard (pure) Risk
2) Operational Risk
3) Financial Risk
4) Strategic Risk
Hazard Risk - Answers :Traditional Risk Management types of risks -property, liability,
etc. (pure risks).
Risk Management Techniques for Hazard Risks - Answers :- insurance
- noninsurance transfer
- retention
- loss prevention/ loss reduction
,Operational Risk (includes?) - Answers :risks arising from day-to-day business
operations:
- supply chain
- manufacturing
- customer service
- cybersecurity
- employment practices
Risk Management Techniques for Supply Chain - Answers :- have multiple suppliers
(diversification)
- duplication
Risk Management Techniques for Manufacturing Defects - Answers :- quality assurance
- maintenance on machines
- training factory workers
- funded reserve
- duplication
- insurance
- product testing
- recalling defected products
Risk Management Techniques for Customer Service - Answers :- free trials
- trained employees on how to treat situations
- call centers
Risk Management Techniques for Cyber Security - Answers :- firewall
- data protection
- duplication
- keep important docs on higher level in building (In case of flood, etc)
- system identification
- hire hackers to see if its hackable
Risk Management Techniques for Employment Practices - Answers :- background
checks
- periodically review employees
- HR department
- fire people the right way
- interviews
- sexual harassment protocols
- drug testing
- DEI training
Financial Risk (includes?) - Answers :risk arising from changing conditions within
financial markets:
- commodity prices
- interest rates
, - foreign exchange rates
Risk Management Techniques for Commodity Prices - Answers :if prices go up, your
prices go up?
Risk Management Techniques for Interest Rates - Answers :if interest rates are up, cost
of borrowing money is greater?
Risk Management Techniques for Foreign Exchange Rates - Answers :can update your
prices to react?
Strategic Risk - Answers :uncertainty regarding an organization's goals and objectives,
and the organization's strengths, weaknesses, opportunities, and threats (SWOT)
Examples of Strategic Risk - Answers :- product implementation
- company ethics
- location
Company ethics example - Answers :bank tries to get old people to take out more loans
just so they can make money even though the old people don't understand
Examples of using location in relation to strategic risk - Answers :- be strategic about
where to build a new Chick Fil A
- for amazon, they chose a populated area (GA), huge airport, savannah, cheaper cost
of land\
- target expanded into Canada, but didn't account for different consumer taste, or
difficulty getting inventory
- Atlanta Braves building new stadium in Cobb county because its closer to where fans
actually live, to build the battery, Cobb Co. basically paid for stadium, they wanted to
build smaller stadium so it looks fuller
Other ERM Program Risks - Answers :- regulatory/ compliance
- reputational
-terrorism
- climate change
Regulatory/Compliance RISK - Answers :Certain laws and regulations that businesses
have to deal with and comply with
Regulatory/ Compliance Risk Examples - Answers :- if minimum wage increases by $5,
company could increase prices, fire workers, etc. (company must comply with increase
in minimum wage)
- must be 21 to buy alcohol
- company must comply with taxes
