Introduction to ERM

Exposure is the maximum loss that could be suffered; downside risk refers to an assessment of risk that looks only at adverse events, whilst severity looks at how bad an adverse event would be.

Both quantifiable and unquantifiable risks should be allowed for in an ERM framework.

Risk can be quantifiable or unquantifiable, but there is always an element of uncertainty.

It is important that if abbreviations are used, they are employed in such a way that external parties can still understand risk definitions. This makes external verification of ERM frameworks easier.

Correct!