Risk Management & Strategic Risk Flashcards

What is the primary purpose of enterprise risk management (ERM) in strategic planning?

Answer: To align risk appetite with strategy and manage risks holistically across the organization

ERM aligns an organization's risk appetite with its strategy, enabling integrated, holistic risk management across all functions and levels.

Which framework is most widely recognized as the global standard for enterprise risk management?

Answer: COSO ERM Framework

The COSO ERM Framework (Committee of Sponsoring Organizations) is the globally recognized standard specifically designed for enterprise-wide risk management.

What does 'risk appetite' mean in the context of strategic planning?

Answer: The amount of risk an organization is willing to accept in pursuit of its strategic objectives

Risk appetite represents the level and type of risk an organization is willing to accept while pursuing its strategic objectives, guiding decision-making at all levels.

In a standard risk probability-impact matrix, which risk category demands immediate strategic attention?

Answer: High likelihood, high impact

Risks that are both highly likely and highly impactful represent the greatest threat to strategy and must be prioritized for immediate mitigation.

How is 'strategic risk' distinguished from operational risk?

Answer: Strategic risks threaten the organization's ability to achieve its long-term goals and execute its strategy

Strategic risks are those that threaten the organization's capacity to execute its strategy and achieve long-term objectives, operating at a higher level than operational risks.

Which risk response strategy involves accepting a risk without taking mitigation action because the cost of mitigation exceeds the potential loss?

Answer: Risk acceptance

Risk acceptance is selected when the cost of mitigating a risk outweighs its potential impact, making it more economical for the organization to absorb the risk.

What is the primary function of a risk register in strategic planning?

Answer: A centralized document that records identified risks, assessments, owners, and planned responses

A risk register is the central tracking document that captures identified risks, their probability and impact ratings, designated owners, and mitigation actions.