It comes from the Italian word "risicare" which mean to dare; a choice under uncertain conditions (rather than fate). It represent the barriers to successfully achieving those objectives as well as the opportunities that may help achieve those objectives.

An Italian word which means to dare; a choice under uncertain conditions.

According to them, risk is the possibility that an event will occur and adversely effect the achievement of enterprise objectives.

According to them, risk is now defines as the "effect of uncertainty on objectuves" which focuses on the effect of incomplete knowledge of events or circumtances on an organization decision making.

Which of the following are included in Internal events?

Which of the following are included in External events?

What are the 2 categories of risk?

The likelihood that the company might incur a financial loss, or suffer a decline in profit, capital, investment of cash flows, on account of the occurence of events or transactions.

It do not have an immediate direct financial impact to the business however, their consequences may be serious and can later affect the financial well-being of the business.

List the 4 examples of Financial risk.

The risk that a counter-party such as customer or borrower might fail to pay its account on due date. This risk is present in all activities where there is an expectation of returns or repayments.

The risk that the business will not be able to meet its financial obligations as they fall due to insufficient cash. This also includes the possibility that the business may not be able to convert non cash assets such as investments into cash on short notice

The risk of volatility in the market brought about by factors of interest rate, foreign currency and market pieces.

3 types of market risk

Potential decline in earnings and capital arising from changes in interest in the market.

Fluctuation in exchange rates could affect the profit of the business

Changes in specific prices (stock price, price of other investments) could affect the profit or cash flow of the business

The possibility that the business may not be able to generate sufficient revenue, or an increase in production and increased operating cost.

What are the example of non-financial risk?

The risk that business operations will be disrupted due to inadequate or failed systems, processes, people, breaches in internal controls or other unforseen catastrophes

The risk that the company might fail to comply with applicable laws regulations such as tax, labor laws, corporation laws, anti-money laundering laws and environmental laws. This type of risk may result to fines and penalties as well as possible criminal prosecution of erring company officers and employees

The risk that the unseen events could result to injuries, illnesses, or even loss of lives. This risk will increase medical costs that will be incurred by the company

The risk that the company may fail to control or minimize factory wastes, emissions, and other pollutants arising from its business activities.

The risk of selecting an inappropriate corporate strategy or the failure of implementing an appropriate one. This type of risk may result to failure to achieve long-term strategic goals, loss of market share and shrinkage in corporate value.

The risk that reputation or image of the company will be damaged due to reasons such as improper acts of corporate officers, poor financial performance and bad news about the company among others.

The possibility that the financial statements of the company will be incorrect due to errors, lapses or failure to apply accounting standards such as the international financial reporting standards

The risk arising from deceptive and intentional acts that result to loss company assets, resources and reputation.

What are the 3 categories of Risk attitudes?

It refers to an individual who is willing to accept greater economic uncertainty in exchange for the potential of higher returns.

It is the tendency to avoid risk and have a low risk tolerance. It prioritize the safety of principal over the possibility of higher return on their money

It describes a mindset where investors focus on potential gains when making investment decisions. Investors of this may understand that risk is involved, but they aren't considering it for the moment

It is a process effected by an entity's board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may effect the entity and manage risk to be within its risk appetite to provide reasonable assurance regarding the achievement of entity objectives.

What are the 4 business objectives?

High level goals aligned with and support the organization's mission and long term vision

Goal that are related to the effective and efficient use of corporate resources

Goals that are relating to the reliability and transparency of corporate reports such as financial and non-financial reports.

Goals that are related to compliance and comformity with applicable laws and regulatory requirements

Idetifying risk or threats that can prevent the company from achieving its business objectives

The list of all risks affecting the company is called what?

It pertains to the probability that the event will occur

It refer to the significance of magnitude of the negative effect of the risk to the company

Analyzing risk in terms of likelihood and impact

Tolerating the risk is permissible only if it is of minor effect of the business

Risk that are likely to happen or those that are expected to have a significant impact to the business.

Transfer the risk to some other entity such as insurance company

It may be right response when management thinks that mere reducing is not enough

A series of risk management standards formulated by the International Organization for Standardization. It provides a set of principles and guidelines for the design, implementation and evaluation of the risk amanagement process for companies across different industries

When was COSO enterprise risk management published?

It was tasked to make recommendations on how to prevent such improper accounting practices.