1) Why might it be in a firm’s best interest to centralize the management of some risks

but not others?

It depends extraordinarily on the kind of risks that a firm is hoping to centralize. By

centralizing the administration of core risk and offering duties to the CEO, a firm can
"increment straightforwardness and consistency of the risk exposures got by contributing".
Following a concentrated arrangement brings down the risk of recognition for more
significant level financial specialists. A case of a progression to risks can be seen with
Statoil as their center risks are overseen midway and their business risks are taken care of
by their business office. Ordinarily alluded to as the "Risk mapping process". This includes
taking care of risks at the lower levels and getting increasingly critical, making upper
administration be informed. Quarterly the organization surveys the risks, and this goes
about as a balanced governance process. By investigating its development, it enables the
organization to survey execution. The most significant thing with regards to succeeding is
to have support from the officials of the firm. This guarantees the staff will be
appropriately prepared as the officials will comprehend what is normal.

The risk the executives sometimes ought to be brought together in light of the fact that as
associations move towards concentrated tasks to diminish expenses and better
administration control, different offices and spaces engage in various however
incorporated activities at the same time. This makes it basic for the administration to
oversee risks including numerous areas in a brought together way. This mitigates risks
compromising numerous areas to be overseen by concentrated risk the board framework.
Be that as it may, with the exception of some center risk, the board more likely than not
scattered some risk to line the executives on the grounds that,

1. Quick Response – Some risks are required very speedy reaction as opposed to trusting
that the top the executives will respond, which will be time taking, and this may cause in
some potential misfortune.

2. Understanding the criticality – Some risks cannot be effectively imparted on account of

their multifaceted nature in understanding the circumstance. These risks can be better
comprehended by business unit heads and low line managers.

3. Low effect risk – Those risks which do have very low likelihood and low effect risk can
be moved to business unit levels, at the end of the day these risks can be decentralized.

2) Describe why the organizational status quo might lead to resistance to ERM
implementation. How can this potential resistance be overcome?

Following are the reasons why the organizational status quo lead to resistance to ERM
implementation:

1. Change not appropriately conveyed inside the association - Lack of legitimate

correspondence of the looming change, the requirement for it and the advantage to be
gotten from it, breeds disarray and vulnerability. At the point when individuals are not
clear about the requirement for a specific change, they will undoubtedly oppose it or,
best case scenario, won't bolster it.

2. Fear of losing Influence - Some representatives over the association and over all
levels have built up themselves as perspective in current set up. They might be planners
of the present procedures or frameworks being used and along these lines dread that
their impact will vanish with the new change.

3. Uncertainty about the Future - Lack of adequate data about the future bearing of the
association as it influences individual staff might be a wellspring of protection from the
change procedure. Individuals regularly dread that under the new regulation they
might be more terrible off than they were as of now.

4. Feeling of prohibition from the change procedure - Some individuals oppose change
since they have not been a piece of the individuals entrusted with affecting the
adjustment in the association. They along these lines feel rejected in the change
procedure and henceforth the opposition. Such staff have assessment of themselves as
individuals to counsel and tune in to in the association.

5. Lack of required ability fundamental for the change - For the representatives of the
association, executing an ERP arrangement means gaining new aptitudes to have the
option to utilize the new frameworks. The dread or fear that one doesn't have the stuff
to become familiar with these new aptitudes may convert into obstruction.

Strategies to manage these potential resistances are:-

1. Getting the help and responsibility of the senior the board of the association
2. Getting the help of supposition pioneers in the association
3. Provide Training to every single influenced worker
4. Develop a legitimate correspondence technique
5. Developing a strong case for the change, and selling it
6. Identifying hierarchical, procedure, and job changes and conveying it inside the
association
7. Make a reasonable explanation, which ought to be reflected in activities, that the
choice to change has been taken and won't be turned around
8. The Change Management Team should work intimately with the usage groups
9. The Change Management Team should work intimately with the business
10.Involve the business procedure proprietors all through the execution
11.Engage the individuals that dread the loss of impact if the status quo changes
12.Involve Highly Opinionated Employees in the execution
13.Make utilization of Change Agents

3) How do you succeed in making sure that the risk committee really turns into an
ERM champion, as opposed to continuing in a silo mentality?
Risk committees of trustees have demonstrated to be a compelling apparatus for chance
experts to connect the operational gap, see all the more profoundly the risks taken and
instruct stakeholders all through the association about the entities' Risk strategy,
tolerance and craving.
As discussed for the situation itself underneath two examples are clear as crystal to the
inquiry,

A) Earlier Statoil's FX approach was set up by the Finance division alone, however once
ERM was planned, this readiness required help of Risk Committee.

B) Risk Committee likewise removed some from the case sort of measure to determine
the issue of risk advancement and those are finished by presenting KPI and Balance
Scorecard things.

C) Untiring exertion from people and colleagues of ERM Risk Committee are likewise
certain.

D) Risk Committee's prior and beginning gathering plan was utilized to be topped off
with training content which helped individuals to turn out to be increasingly inquisitive
and information searcher in regards to the ERM.

Below are some of the few things that should be done to make ERM even better:-
1. By teaming up with the Expert consultancy in the field of ERM like the risk
committees of trustees of the Statoil joint effort with consultancy firm HIS Global Insight
through which Statoil risk advisory group created mastery in assessing in nation chance.
This helped Statoil for investing in many risky countries.

2. Creating Awareness on the modern approach of ERM among the risk committees of
trustees and uncovering the risk committees to new inclines through preparing and
workshops. This workshop should be organize in regular basis.

3. Risk committees should comprise of top individuals from every office and every
specialty unit like strategy, finance, marketing etc. This will let every part to convey his
insight to others also. Along these lines every individual from risk panel will know about
every division.

4. Support by top the executives for staff to view chance from the positive viewpoint
likewise rather than the traditional approach that used to view chance as from negative
angle as it were. This will help chance board to pick up involvement with discovering
which risk to moderate and which to acknowledge.

5. Risk Committee ought to remain pro discussion and ought not be incorporated with
top the board. So the choice made by Risk Committee comes with no weight yet on the
genuine outcomes.

6. Risk Committee ought to be kept as warning body as opposed to official body, with
the goal that they can investigate the risk superior to compelling that choice because of
their official control.

7. Exposing staff to the new patterns through trainings and workshops may likewise
help in coming to central of the greatness of ERM.

8. Advocating for staff to view risk structure the positive point of view rather than the
traditional apporach.

4) What are the costs and benefits of integrating the ERM risk register in the firm’s
financial model to obtain “risk-adjusted” financial forecasts?
Some benefits of the risk register’s integration with financial model are,

1.Real time appraisal – Integration of risk register with financial related model aides in
rapidly evaluating the potential effect of each eisk to ultimate result. For the situation
too, statoil is fit in distinguishing and measuring the risk and the equivalent is used in
assessing the most ideal undertaking risk planning.

2.More command over forms – Upper the board and CFO can undoubtedly make sense
of the issue or risk which has sway in the outcome and can without much of a stretch
beat those risk just by expelling it or keeping it low.

3.Better representation – Risk registers are presently a days outfitted with each angle
and skylines of business and related risks. This consideration causes firm to effectively
and successfully make sense of ruling risks.

4.Corrective activity usage with no deferral – Once the risk, antagonistically influencing
the outcome, is distinguished, at that point a restorative activity could quickly be
actualized to defeat it.

5.Periodical audit – After the combination of risk register with financial model one can
survey the register alongside financial results and can cross-check those figures every
once in a while.

5) What are the key financial risk factors that a company could encounter?

Financial risk is a risk related with any sort of money related exchange. It is
profoundly organized by each business as it legitimately influences the assets of the
association. Financial risk is an aftereffect of developments in the market that can be
brought about by different factors. In view of these elements, money related risk can
be arranged into various sorts, for example, showcase chance, credit chance,
operational risk, legitimate risk, getting risk, remote venture chance, liquidity chance,
and so forth.

The key financial risk factors that an organization could experience are:
 1. Market risk: This risk is an aftereffect of vacillations in costs of money related
instrument. Market risk can be of two sorts:

(i) Directional Risk: It emerges because of development in interest rates, stock prices,
and so on.

(ii) Non-Directional: This is a sort of unpredictability risk.

2.Credit risk: This risk emerges when one gathering doesn't play out their
commitments towards their counterparties. Credit risk can be of two sorts: Sovereign
Risk and Settlement Risk. Sovereign risk is a consequence of troublesome outside
trade strategies. Then again, Settlement risk emerges when one gathering makes the
installment while the other party neglects to play out its commitments.

3.Liquidity risk: This risk is a consequence of powerlessness to execute exchanges.

Liquidity risk can be of two sorts: Asset Liquidity Risk and Funding Liquidity Risk.
Resource Liquidity risk happens either because of inadequate merchants or lacking
purchasers against purchase requests and sell arranges individually.

4.Operational risk: This outcomes out of operational disappointments like blunder or

specialized disappointments. Operational risk can be of two kinds: Fraud Risk and
Model Risk. Misrepresentation risk is an aftereffect of absence of controls and Model
risk is a consequence of erroneous model application.

5.Legal chance: This is a financial risk that emerges out of lawful imperatives like
claims. At whatever point an association needs to confront any money related loses
because of legitimate procedures, it is said to be a lawful risk

6) What should limit Statoil’s capacity to invest in profitable new oil projects, that is,
take on new risks?
When taking on new risks, a company must know that the current risks they are currently
taking, are manageable and can be handled correctly before taking on new risks. As seen in
the case of Statoil, all of the company’s risks have been accounted for by mapping out a
quarterly rhythm. This includes meetings with top management. There shouldn’t be a limit
as to Statoil investing in new profitable oil projects. Monte Carlo simulation performs risk
analysis by building models of possible results by substituting a range of values- a
probability distribution- for any factor that has inherent uncertainty. It will then calculate
results over and over, each time using a different set of random values from the probability
functions. When it comes to Statoil, it would be wise to use the monte carlo simulation to
manage all of their risk factors. Investing in new oil projects is a huge risk within itself, so
being able to see all possible results, it would help dissect the risks and what projects
would be worth the risks.

7) For which risk factors would it be advisable to use Monte Carlo simulation to
quantify the distribution of outcome?
Monte Carlo reenactment is a technique used to comprehend the effect of risk and
uncertainty in financial, cost, project management and other forecasting models. It imagines
practically all the potential results to comprehend risk of a choice. It very well may be
utilized to manage different issues in for all intents and purposes each field, for example,
finance, supply chain, engineering, science, etc. it is also referred as multiple probability simulation.

Monte Carlo reproduction is basically used to gauge Value in risk. To figure VaR there
are two strategies for Monte Carlo reenactment:

Analytic method: This technique is utilized when appropriation of profits is ordinary, and
the parameters of the model can be evaluated with typical exactness.

Historical method: This technique is utilized when authentic return dispersion can be
sensibly expected to reflect future return recorded appropriation whether the
dissemination is ordinary or not. There are some risk variables or conditions under
which it is fitting to utilize Monte Carlo Simulation to measure the circulation of result.
These conditions are expressed beneath:

There are lacking verifiable return information to build an exact image of its arrival
dispersion (model: recently gave protections or new financial instruments)

Future return conveyance will be not quite the same as the past return dissemination.

Parameters that characterize the arrival conveyance are not known however they can
display.

In Monte Carlo VaR, the investigator indicates a model comprising of in any event one
arbitrary variable that is utilized to decide the arrival on the benefit or
portfolio/circulation of the potential estimations of each irregular variable in the model.
In light of these information sources, the PC produces the arrival circulation for this
thing and its VaR.

8) In what cases would it be relevant for an oil company to consider effects of

correlation between risk factors in quantifying risk?
1. Oil Prices and Exchange Rate – Given the oil reliance of the Norwegian economy, this
swapping scale will in general be delicate to the cost of oil, which is cited in USD.
Throughout the decades this has furnished Norwegian oil organizations with a
characteristic support: A lower oil value will in general debilitate the Norwegian Krone,
as less oil income should be changed over into NOK.

2. Risk Appetite and Upside Potential – Risk appetite is generally interpreted as the
measure of risk exposure an organization is happy to hold so as to seek after upside
potential it comprises suitable and alluring. Consistent with its convention of evaluating
risk, Statoil edges chance risk as far as a few chance quantitative measures.

RAUNIKA
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