ARM 401 - HOLISTICALLY ASSESSING RISK
1. Basis of holistic risk management- Answers - all business decisions and operations carry risk,
and risk is essential for growth
2. Four Quadrants of Risk- Answers - Hazard, Operational, Financial, Strategic
3. hazard risks- Answers - pure risks arising from property, liability, or personnel loss exposures
4. Operational risks- Answers - Pure risks associated with an organization's processes, systems, and/or
controls
5. Financial risks- Answers - speculative risks associated with the firm's financial activities
6. Strategic risks- Answers - speculative risks arising from the firm's long-term goals and management decisions
7. Covarience- Answers - measures the tendency of two variables to move relative to each other
8. Correlation measures- Answers - the degree of relationship of change between two variables
9. Monte Carlo Simulation- Answers - A computerized statistical model that simulates the ettects of various
types of uncertainty
10. Delphi technique- Answers - has a group of experts make independent projections through anonymous
question- naires
11. Delphi technique advantages- Answers - - avoids cost of assembling facilitated workshop
- anonymous responses avoid group bias and encourage honest answers
12. Disadvantages of Delphi technique- Answers - expert's opinions limited to current thinking and
may not produce forward-thinking results
13. Scenario analysis- Answers - identifies risks and projects their potential consequences
14. Disadvantages of scenario analysis- Answers - - analysis could miss key risks
- risks are limited by members' imaginations
15. HAZOP (Hazard and Operability) Study- Answers - comprehensive review of a system or
process
,- used mainly to design complicated, scientific systems
16. Steps in HAZOP Process- Answers - 1. Subdivide the project or system into small components
2. Review each component to identify risks
3. Identify the cause and potential outcome of each risk
4. Develop a solution for each risk
5. Ensure that solutions work and reevaluate if necessary
17. Risk Threshold- Answers - the range or amount of risk that is acceptable
18. Sensor- Answers - a device that detects and measures stimuli in its environment
19. Radio frequency identification (RFID)- Answers - a technology that uses radio frequency to identify
objects
20. Artificial Intelligence- Answers - Computer processing or output that simulates human reasoning or
knowledge
,21. Computer vision- Answers - a technology that simulates human vision
22. What is a risk register?- Answers - a ledger of identified risks, which are recorded in a table
23. What is a risk map?- Answers - a diagram showing the components of the risk register
24. Process flow analysis- Answers - analyzes processes within the firm from input to output
- reviews activities, their relationships, and relative metrics in order to make decisions that will help the process run
more eflciently, flexibly, quickly, or cost-ettectively
25. Cause and effect analysis- Answers - uses backward-looking, step-by-step evaluation to identify the
underlying cause of an unwanted outcome
26. Fault Tree Analysis- Answers - starts with a given event or failure and traces the underlying causes back
in time to determine how to prevent similar failures in the future
27. Failure Mode and Effects Analysis (FMEA)- Answers - uses a team that identifies potential
failures at each step in a process and charts the consequences of those failures
28. Risk Register- Answers - a tool developed at the risk owner level that links specific activities, processes, projects,
or plans to a list of identified risks and results of risk analysis and evaluation and that is ultimately consolidated at the
enterprise level
29. Three things a risk register does- Answers - 1. describes and prioritizes organizational risks
2. outlines the activities undertaken to manage those risks
3. sets the frequency with which each activity or risk will be checked
30. Scenario Models- Answers - evaluate the risks associated with events to create realistic descriptions of
outcomes under various circumstances
31. An effective organizational risk register does the following- Answers -- Answers -
1. identifies the firm's risks adequately
2. prioritizes risks according to their potential ettects on the firm
3. allows interactive risk use by owners
, 4. tracks improvement actions and schedules follow-up or reviews of those actions
32. Risk Map- Answers - a template depicting the likelihood and potential impact/consequences of risks
33. Risk appetite- Answers - amount of risk an organization is willing to take on in order to achieve an anticipated
result or return
34. Inherent Risk- Answers - the level of risk that would be faced if it were to remain untreated or no action were
to be taken to alter the level of risk
35. Residual Risk- Answers - the level of risk remaining after actions are taken to alter the level of risk
1. Basis of holistic risk management- Answers - all business decisions and operations carry risk,
and risk is essential for growth
2. Four Quadrants of Risk- Answers - Hazard, Operational, Financial, Strategic
3. hazard risks- Answers - pure risks arising from property, liability, or personnel loss exposures
4. Operational risks- Answers - Pure risks associated with an organization's processes, systems, and/or
controls
5. Financial risks- Answers - speculative risks associated with the firm's financial activities
6. Strategic risks- Answers - speculative risks arising from the firm's long-term goals and management decisions
7. Covarience- Answers - measures the tendency of two variables to move relative to each other
8. Correlation measures- Answers - the degree of relationship of change between two variables
9. Monte Carlo Simulation- Answers - A computerized statistical model that simulates the ettects of various
types of uncertainty
10. Delphi technique- Answers - has a group of experts make independent projections through anonymous
question- naires
11. Delphi technique advantages- Answers - - avoids cost of assembling facilitated workshop
- anonymous responses avoid group bias and encourage honest answers
12. Disadvantages of Delphi technique- Answers - expert's opinions limited to current thinking and
may not produce forward-thinking results
13. Scenario analysis- Answers - identifies risks and projects their potential consequences
14. Disadvantages of scenario analysis- Answers - - analysis could miss key risks
- risks are limited by members' imaginations
15. HAZOP (Hazard and Operability) Study- Answers - comprehensive review of a system or
process
,- used mainly to design complicated, scientific systems
16. Steps in HAZOP Process- Answers - 1. Subdivide the project or system into small components
2. Review each component to identify risks
3. Identify the cause and potential outcome of each risk
4. Develop a solution for each risk
5. Ensure that solutions work and reevaluate if necessary
17. Risk Threshold- Answers - the range or amount of risk that is acceptable
18. Sensor- Answers - a device that detects and measures stimuli in its environment
19. Radio frequency identification (RFID)- Answers - a technology that uses radio frequency to identify
objects
20. Artificial Intelligence- Answers - Computer processing or output that simulates human reasoning or
knowledge
,21. Computer vision- Answers - a technology that simulates human vision
22. What is a risk register?- Answers - a ledger of identified risks, which are recorded in a table
23. What is a risk map?- Answers - a diagram showing the components of the risk register
24. Process flow analysis- Answers - analyzes processes within the firm from input to output
- reviews activities, their relationships, and relative metrics in order to make decisions that will help the process run
more eflciently, flexibly, quickly, or cost-ettectively
25. Cause and effect analysis- Answers - uses backward-looking, step-by-step evaluation to identify the
underlying cause of an unwanted outcome
26. Fault Tree Analysis- Answers - starts with a given event or failure and traces the underlying causes back
in time to determine how to prevent similar failures in the future
27. Failure Mode and Effects Analysis (FMEA)- Answers - uses a team that identifies potential
failures at each step in a process and charts the consequences of those failures
28. Risk Register- Answers - a tool developed at the risk owner level that links specific activities, processes, projects,
or plans to a list of identified risks and results of risk analysis and evaluation and that is ultimately consolidated at the
enterprise level
29. Three things a risk register does- Answers - 1. describes and prioritizes organizational risks
2. outlines the activities undertaken to manage those risks
3. sets the frequency with which each activity or risk will be checked
30. Scenario Models- Answers - evaluate the risks associated with events to create realistic descriptions of
outcomes under various circumstances
31. An effective organizational risk register does the following- Answers -- Answers -
1. identifies the firm's risks adequately
2. prioritizes risks according to their potential ettects on the firm
3. allows interactive risk use by owners
, 4. tracks improvement actions and schedules follow-up or reviews of those actions
32. Risk Map- Answers - a template depicting the likelihood and potential impact/consequences of risks
33. Risk appetite- Answers - amount of risk an organization is willing to take on in order to achieve an anticipated
result or return
34. Inherent Risk- Answers - the level of risk that would be faced if it were to remain untreated or no action were
to be taken to alter the level of risk
35. Residual Risk- Answers - the level of risk remaining after actions are taken to alter the level of risk
