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Acca P1 Governance, Risk and Ethics
Acca P1 Governance, Risk and Ethics
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PRODUCT SUMMARY
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DETAILED NOTES:
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Please note:
This is just the sample study note extracted from the main study note in your tuition study
[This tuition study note is consistent in basic/super/gold package]. There would be more
chapters in the main study note covering the whole ACCA syllabus.
You can also take a look at the content within the main study note below:
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Product Summary
content
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Basic
Super
Gold
package
package
Package
Live revision note for June2014 P1 exam: [will be available since mid April 2014]:
Live revision1+2: [There would be a separate live revision note detailing all
past exam questions with answers to go through]
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Detailed notes:
Management of risks:
1. Identify risks:
How:
1. Models that may be used
SWOT
PESTEL
2. Other ways:
Interview
Questionnaires
Consultants
Brainstorming
Audit reports
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Category
Action
Financial
Environmental
Business/Operational Risk
Reputation Risk
International Risk:
Transaction risk
Economic risk
Diversification of business
Translation risk
Political risk
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Risk committee:
Risks can be identified and dealt with by risk committee.
In most organizations the risk committee and audit committee would be the same
but in large corporations there would be a separate risk committee dealing with
risks issues.
Risk correlation:
Positive relationship means as one risk arise or decrease then another risk would
arise or decrease.
Negative relationship means as one risk arise or decrease then another risk would
decrease or arise.
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2. Risk assessment:
This means the board is going to prioritize risks and focus on really problematic
ones.
Impact
Big
Small
Likelihood
Impossible
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Almost
certain
Objective assessment:
By reference to statistics or other forecasts by different experts.
Subjective assessment:
Would be based on 3AsRisk Authority: if its up to board of directors who are going to manage the risks
then they would have much auithority to deal with risks more properly.
Risk Appetite: this means whether company is risk aggressive or risk averse? And
risk appetite is the combination of risk attitude(willingness to accept risks) and risk
capacity(ability to accept risks, ie, do you have enough skills and resources).
Risk Awareness: this means when company is dealing with risks then it would affect
different stakeholders within the organization and hence company need to analyse
these potential negative impact on those stakeholders like customers, suppliers etc
before any prioritization of risks is taking place.
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3. Risk strategy:
Transfer
Using insurance; setting up a joint venture would be ways to transfer risks to 3rd
parties.
Avoidance
Totally reject a project.
Reduction
You can either use proactive approach or reactive approach to reduce risks.
Proactive approach means we can embed risks in culture:
1. It means ensuring that staff are thinking about risk issues as an integral part of
their work.
2. Staff should know that taking unnecessary risks will not only lead to disciplinary
action, but be regarded as unacceptable by their fellow employees.
3. So Risk management should be a part of everybodys job description, to ensure
that staffs responsibilities are clearly defined.
Reactive approach means we can embed risks in culture in internal control
systems:
Firstly, it suggests the need for proactive investment in systems so that their
technologies are reliable and fully functional so as to deliver required results
consistently into the future.
Secondly, such system must be monitored through the development of control
systems coupled with appropriate reporting on system operation and output.
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Acceptance
Accept the risk and not taking any measures to deal with it.
Principle: ALARP
Risk strategy is really something that occurs between avoidance and acceptance of
risk. The continuum that operates between these two points sees an interplay of
reduction and transference approaches.
Where, along the line between avoidance and acceptance, strategy plays out,
depends in part on risk attitude. Greater acceptance of risk often leads to greater
rewards. Greater avoidance of risk often leads to fewer rewards.
The concept of ALARP (As Low As is Reasonably Practicable) asks the board to
consider how many activities or risks it considers acceptable, how may it will avoid
and how high or low it is willing to push the remainder through investment in risk
management. ALARP could be viewed as a tool or technique to focus the mind, it
could also be simply a statement used to govern board deliberations, providing a
sense of prevailing risk attitude.
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If the companys environment is quite static like charities then it would need less
review.
If the companys environment is quite dynamic like financial services industry then
it would need more review.
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