Organizational Governance Related to Risk Management

These flashcards cover essential concepts regarding organizational governance and risk management, designed to aid in understanding and retention for exams.

What is the principal purpose of risk management?

To help an organization achieve its strategic objectives by identifying and assessing uncertainties and determining acceptable risk levels.

Define 'risk culture'.

Risk culture refers to the overall attitude an organization takes toward risk, influencing decision-making and planning.

What does risk appetite measure?

Risk appetite measures how much risk an organization is prepared to take in pursuit of potential benefits.

What are the three lines of defense in risk management?

1. Operational management, 2. Risk management oversight, 3. Internal auditing.

What does the term 'risk capacity' refer to?

Risk capacity refers to how much risk an organization can take regarding its resources and capabilities.

What is the purpose of documenting governance-related decision-making?

To ensure transparency, accountability, and provide an audit trail for decisions made by the organization.

How can organizational culture affect risk management processes?

Organizational culture can significantly influence risk culture, impacting how risks are identified and managed throughout the organization.

What is the importance of stakeholder analysis in risk management?

Stakeholder analysis helps identify and manage the interests and influences of parties involved, which can affect the success of initiatives.

What is inherent risk?

Inherent risk is the level of risk present in the absence of any responses or controls to mitigate that risk.

Explain the difference between risk appetite and risk tolerance.

Risk appetite is a broad statement indicating the level of risk an organization is willing to accept, while risk tolerance specifies acceptable variations from particular objectives.

What are PESTEL factors?

Political, Environmental, Social, Technological, Economic, and Legal factors that influence organizational objectives.

What is a 'risk management framework'?

The sum total of the arrangements by which risk management operates within an organization.

Why is soft controls important in risk management?

Soft controls, which depend on behavior and attitudes, are important for fostering a culture that promotes ethical behavior and integrity.

What is the 'tone at the top'?

The attitude and philosophy of senior management that reflects and shapes the organizational culture.

What should risk management processes consider when dealing with external stakeholders?

They should address the interests and expectations of stakeholders, including their influence on decisions and operations.

What are the key objectives of effective risk management processes?

To contribute to long-term organizational survival, maximize stakeholder value, and ensure compliance with laws and regulations.