ISO-31000-CLA ISO 31000 - Certified Lead Risk Manager Questions and Answers

According to , page 11, scenario based risk identification involves “creating different scenarios based on varying assumptions about how events might unfold”. This can help explore alternative ways to achieve an objective under different circumstances.

The ISO 31000:2018 standard provides a framework for risk management, with a focus on the strategic and integrated aspects of risk management. It outlines principles, a framework, and a process for managing risk in organizations of all kinds. The focus of the standard is on aligning risk management with the organization’s context, objectives, and strategy, and on integrating risk management into all aspects of an organization’s governance, culture, and performance. 

 Enhanced risk management ensures that uncertainty is managed so the organization can meet its objectives4. Enhanced risk management involves applying a systematic and logical process to identify, analyze, evaluate, treat, monitor, review, and communicate risks.

According to , page 16-17, insurance belongs to sharing technique which is “a way of transferring some or all financial consequences associated with a particular exposure”. It involves paying a premium in exchange for compensation in case of loss.

Enhanced risk management emphasizes the continual improvement of risk management capabilities1. This means that risk management is regularly reviewed and updated to ensure its relevance, adequacy, and effectiveness.

Understanding the potential causes of risk events will primarily help an organisation to reduce the frequency of loss. This is because identifying and analysing the sources and drivers of risks can enable an organisation to implement preventive or mitigating measures.

According to 3, a captive insurance company is “a wholly owned subsidiary insurer that provides risk mitigation services for its parent company or related entities”. It can act as a reinsurer by accepting risks from other insurers or captives 1. It can also access reinsurance markets to transfer some of its own risks 1. It can sometimes offer greater cover than is available in the insurance market by tailoring its policies to suit its parent’s needs 3. It does not have to be located in the same country as its parent company; in fact, many captives are domiciled offshore for tax or regulatory reasons 4.

According to ISO 31000:2018, a risk management framework consists of four critical elements: design (B), implement (D), evaluate (E) and improve (F)5. These elements guide an organization in integrating risk management into all functions and processes.

A pure risk only leads to the possibility of a loss, whereas a speculative risk may lead to a gain12. For example, entering into a contract to purchase a new factory is a speculative risk, as it could result in either profit or loss depending on market conditions.

according to page 15 of source 3, the development of a risk management strategy takes into account the organization's resources and internal support. These resources include factors such as human, capital, and technological resources; organizational structure, culture, and governance; communication and consultation mechanisms; and support from senior management and leadership. These inputs have an impact on the feasibility and effectiveness of the risk management strategy.

Integrated and customized are two of the nine risk management principles in ISO 31000:20181. Integrated means that risk management is an integral part of all organizational activities. Customized means that risk management is aligned with the organization’s external and internal context and risk profile.

Records and reports provide a continuing account of the risk management system2. They help to monitor and review the performance and effectiveness of risk management.