,Enterprise risk management (ERM) is characterised by a
1. Narrow focus of hazard risks
2. Comprehensive, inclusive and proactive approach to risk management
3. Functional approach to risk management responsibilities
4. Lack of consistency in terms of level of detail and reporting formats
The purpose of an ERM policy is to
1. Assist an organisation integrating risk management into its management processes
2. Communicate externally that risk management is being practiced
3. Satisfy internal and external audit requirements
4. Set out how the risks will be managed and controlled
A risk management policy sets out how the risk, which have been identified by the risk assessment
procedure, will be managed and controlled.The risk management policy assigns responsibility for
performing key tasks, establishes accountability with the appropriate managers, defines boundaries
and limits and formalises reporting structures. The policy should address specific responsibilities of
the board, internal audit, external audit, the risk committee, the corporate governance committee,
the central risk function, employees and third party contractors in implementing risk management. A
policy statement defines a general commitment, direction or intention. A policy on risk management
expresses an organisation’s commitment to risk management and clarifies its general direction or
intention.
What do boards fundamentally seeks from an ERM system?
1. The avoidance of unpleasant surprises and losses
2. Integration of risk management, audit and governance
3. Robust procedures
4. Competent risk management teams
Pg 9 textbook
Which of the following are benefits of ERM?
, a. Build confidence with stakeholders and the investment community
b. Align risk appetite and strategy
c. Link risk with audit requirements
d. Seize opportunities
Choose the correct combination:
1. A, c
2. B, c
3. A, b, d
4. All of the above
The benefits of ERM include the following:
♦ Increase in the likelihood of a business realising its objectives
♦ Build confidence in stakeholders and the investment community
♦ Comply with relevant legal and regulatory requirements
♦ Align risk appetite and strategy
♦ Improve organisational resilience
♦ Enhance corporate governance
♦ Embed the risk process through the organisation
♦ Minimise operational surprises and losses
♦ Optimise allocation of resources
♦ Identify and manage cross enterprise risks
♦ Link growth, risk and return
♦ Rationalise capital
♦ Seize opportunities
♦ Improve organisational learning
Which of the following is typical to the traditional approach to risk management?
1. Risk management carried out in silos and extensive use of insurance
2. A comprehensive approach to managing risks
3. Integrating efforts of operations and risk managers
4. Viewing risk management as part of everyone’s daily routine
Traditionally, risk management has been segmented and carried out in “silos”. However, with the
dynamic environment and the evolving nature of risk, businesses encounter new types of risk while
pursuing new business objectives. There is therefore a need for an integrated framework for a
holistic approach to risk management.
, King III applies to
a. Banks
b. Insurance institutions
c. Public sector agencies
d. All listed companies on the JSE
Choose the correct combination:
1. A, b
2. A, b, d
3. A, b, c
4. All of the above
King III applies to all listed companies on the JSE, banks, financial and insurance institutions and
some public sector agencies.
The King III Report on Corporate Governance introduced which of the following new concepts?
a. Shareholder approval of remuneration policies
b. Alternative dispute resolution (ADR)
c. Directors’ performance evaluation
d. Business rescue
Choose the correct combination:
1. A, c
2. A, b, c
3. B, c, d
4. All of the above
The risk management policy forms part of the ERM
1. Scenario
2. Taxonomy
3. Framework
4. Structure
ERM is composed of seven elements namely: corporate governance, internal control,
implementation, risk management framework, risk management policy, risk management process
and sources of risk.
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