DQM Core Units
Organizational Risks and Opportunities cheat sheet
Every chapter's key points, formulas and definitions on one page, for the last week before the exam. Each heading links to the chapter that explains it.
The risk management framework
- Risk is the effect of uncertainty on objectives, and it can be negative (a threat) or positive (an opportunity).
- Risks are classified as strategic, operational, financial, compliance (legal) and reputational.
- The five risk strategies are avoid, reduce, transfer, accept and exploit; exploit is the one that applies only to an opportunity.
- The process runs from establishing the context through risk identification, analysis and evaluation to treatment, with monitoring and review, and communication and consultation, running throughout.
- Risk criteria, usually likelihood and impact scales, are agreed before risks are assessed so that every risk is judged on a consistent basis.
Key terms
- Risk
- The effect of uncertainty on objectives, which can be negative (a threat) or positive (an opportunity).
- Risk management
- Coordinated activities to direct and control an organisation with regard to risk.
- Risk appetite
- The amount and type of risk an organisation is willing to pursue or retain.
- Strategic risk
- Threatens the achievement of high-level organisational objectives.
- Operational risk
- Arises from day-to-day processes, people or systems failing.
- Financial risk
- Relates to cash flow, credit, market or investment exposure.
- Compliance (legal) risk
- Arises from failing to meet legal or regulatory requirements.
- Reputational risk
- Damage to how the organisation is perceived by its stakeholders.
- Avoid
- Decide not to proceed with the activity that carries the risk.
- Reduce (mitigate)
- Take action to lower the likelihood or impact of the risk.
- Transfer (share)
- Shift some or all of the risk to another party, e.g. through insurance or a contract.
- Accept (retain)
- Knowingly accept the risk, typically where it falls within risk appetite (see Defining risk).
- Exploit
- Take deliberate action to increase exposure to a risk that represents an opportunity.
The rest of the sheet covers
- Assessing risks and opportunities
- Treating risks
- Monitoring and review
- Worked examples
- Exam technique and revision
- Glossary