BFF5902 Introduction to Risk Principles Lecture 12 – Review and Exam Preparation Semester 2, 2018
How to prepare for your final assessment 2 We have covered a large amount of material. This pack is a summary of weeks 1 to 10. To help guide your revision please refer to the separate document guide “Key Topics for Review” available on Moodle. Past exams will provide good practice and indicate the style of question expected. The discussion questions will also give good guidance and it is recommended that you practice these. In general, you will be well prepared if you can: – Explain key definitions. – Understand well the key risks mentioned in the Key Topics for Review. – Have business examples in mind that help illustrate key concepts.
Themes covered within BFF5902 Weeks 4 -7 Risk Management Process Weeks 8-10 The Management of Key Risks Weeks 1 -2 What is risk? Week 3 Risk Architecture 3
Topics by week 4 Week Number Title 1 Overview of risk, categories of risk and risk frameworks 2 Perceptions of risk, decision-making under conditions of risk, biases and heuristics 3 Risk management architecture 4 Risk context and identification 5 Risk assessment (introduction) 6 Risk assessment (continued) 7 Risk treatment and monitoring 8 Strategic risk and operational risk 9 Financial risk 10 Compliance risk including environmental risks and political risk 11 Case Study Analysis 12 Review and Exam Preparation
Weeks 1 & 2
6 AU/NZ ISO31000 definition of risk ISO31000 definition of risk: the effect of uncertainty on objectives The benefit of this definition is that it creates a workable business definition that involves measurable assessments of uncertainty and likelihood separate from how an individual may feel about the risk. Even if not perceived, the risk can be present. Perceptions influence the assessment but not the definition of a risk.
MONAS H BUSINE SS 7 Defining risk DEFINITION: ▪ Risk is "the effect of uncertainty on objectives“. ▪ This is a commonly accepted business definition. ▪ It is an objective and personal value neutral definition of risk, recognizing that risks involve both threats and opportunities ▪ A risk is the expression of the likelihood and impact of an event with the potential to affect the achievement of an organization's objectives ▪ Implies that, as a minimum, some form of quantitative and/or qualitative analysis is required for assessing risks.
Definition of uncertainty 8 ▪ Uncertainty is the deficiency of information related to understanding or knowledge of an event, its potential consequence on goals, and its likelihood of occurring. ▪ In order for risk to be present, two essential elements must be present: – Objectives (financial and non-financial) – Uncertainty (internal and external sources)
The relationship between risk and uncertainty Risk • Risk arises when there is the potential for unexpected outcomes, i.e., deviation from planned or expected.
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