Risk management

Purpose
This unit is about the application of key risk management principles and practices to a variety of practical
situations. This unit would be of benefit to underwriters and intermediaries who wish to gain a greater
understanding of risk management processes.

Assumed knowledge
It is assumed that the candidate already has the knowledge gained from a study of the relevant sections of
IF1 Insurance, legal and regulatory or equivalent examinations.

Summary of learning outcomes

1. Understand the context of risk management.
2. Understand and apply risk identification and prioritisation processes.
3. Understand and apply methods of risk assessment and analysis.
4. Understand and apply risk controlling techniques.
5. Understand and apply risk transfer and financing options.
6. Understand and apply the methods of risk monitoring and review

Important notes
• Method of assessment: Part I 1 compulsory question (case study) (80 marks). Part II 2 questions
selected from 3 (scenarios) (80 marks). Total of 160 marks. Three hours are allowed for this exam.
• The syllabus is examined on the basis of English law and practice unless otherwise stated.
• The general rule is that the exams are based on the English legislative position six months before the
date of the exams.
• Candidates should refer to the CII website for the latest information on changes to law and practice and
when they will be examined:
1) Visit www.cii.co.uk/qualifications
2) Select the appropriate qualification
3) Select your unit on the right hand side of the page

Knowledge ratings
General background awareness necessary. 1
Requires a knowledge of the major elements of procedures or concepts and their uses. 2
Requires the ability to evaluate concepts, issues, policies and procedures, together with an 3
understanding of associated aspects of these items and their application to various situations.

2014 655
© The Chartered Insurance Institute 2014
 1. Understand the context of risk 4. Understand and apply risk
management controlling techniques
1.1 The principles and properties of risk. 1 4.1 Risk control plans and techniques. 3
1.2 The definition of risk management. 1 4.2 Financial risks. 3
1.3 The need for and value of risk management. 3 4.2.1 Internal concerns, including financial control 3
1.3.1 Risk maturity, development and identification and liquidity, including Solvency II.
of. 4.2.2 External concerns, including investment market 2
1.3.2 Risk aware culture. movement and credit risk.
1.4 The relationship between risk and ownership 3 4.3 Risks within the service chain. 3
of risk within the organisation. 4.4 Risk and corporate governance, including 3
1.5 The risk management process. 1 Sarbanes Oxley.
1.5.1 Risk management responsibilities: 4.5 Technology and e-commerce risks/digital risk. 3
• Allocation of responsibilities. 4.6 Physical damage risk control. 2
• Risk architecture and reporting. 4.7 Intellectual asset exposure and controls. 2
• Risk committees. 4.7.1 The value and importance of brand values and 2
other reputational issues.
• Role of the risk manager.
4.7.2 Damage prevention strategies. 2
1.6 The significance of managing global risk. 2
4.8 Liability controls, including: 2
4.8.1 Public. 2
2. Understand and apply risk 4.8.2 Employees. 2
identification and prioritisation 4.8.3 Workplace legislation. 2
processes 4.8.4 Professional indemnity. 2
2.1 Sources and uses of information for the risk 2 4.8.5 Directors and Officers/Trustees. 2
identification process.
4.9 Product risk controls, including: 2
2.2 Techniques used to identify risks, including: 2
4.9.1 Quality control. 2
2.2.1 Checklists. 2
4.9.2 Brand/reputational risk. 2
2.2.2 Risk mapping. 2
4.9.3 Research and development exposures. 2
2.2.3 Risk matrices. 2
4.9.4 Product recall. 2
2.2.4 Physical inspections. 2
4.10 Other risk control, including: 2
2.2.5 Organisational charts. 2
4.10.1 Political risks. 2
2.2.6 Control self assessments. 2
4.10.2 Environmental and pollution risks. 2
2.2.7 Business impact analysis. 2
4.10.3 Contractual risks. 2
2.2.8 Flow charts. 2
4.10.4 Outsourcing. 2
2.2.9 Fault trees. 2
4.11 Evaluation of risk control options, including 3
2.2.10 HAZOPs. 2 cost-benefit analysis.
2.2.11 Brainstorming/workshops. 2 4.12 Business continuity planning and 2
2.3 Appetite for and tolerance of risk. 3 management.
2.4 Ranking risk. 3
5. Understand and apply risk transfer
3. Understand and apply methods of and financing options
risk assessment and analysis 5.1 The purpose of and process for determining 2
3.1 Subjective and objective assessment and 2 retained risk including:
analysis of identified risks. 5.1.1 Self-insurance/funding. 2
3.2 Modelling and measuring risk, including: 2 5.1.2 Captives. 2
3.2.1 Hazard indices. 2 5.2 The options available for transferring risk, 1
3.2.2 Risk modelling and forecasting. 2 including:
3.2.3 Use of statistical techniques and probability 2 5.2.1 Contractual transfer. 1
theory. 5.2.2 Insurance. 1
3.2.4 Dependency modelling. 2 5.2.3 Alternative risk transfer including securitisation 1
3.3 Internal and external comparisons/ 3 and use of derivatives.
benchmarking. 5.3 Evaluating risk financing options, including 2
cost-benefit analysis.
5.4 Preparation and implementation of risk 2
financing plans.
5.5 The balance between insurance and the 2
management of risk programmes.

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 6. Understand and apply the methods
of risk monitoring and review
6.1 Integrating risk management across an
organisation.
6.2 Methods of monitoring and reviewing
management of risk across the organisation.
6.3 Communicating and reporting on the
management of risk both internally and
externally.
2014
© The Chartered Insurance Institute 2014
Reading list
The following list provides details of various publications
2 which may assist with your studies.
2 These will help candidates keep up-to-date with
developments and will provide a wider coverage of
syllabus topics.
2
Note: The examination will test the syllabus alone.
However, it is important to read additional sources
as 10% of the exam mark is allocated for evidence of
further reading and the use of relevant examples.
The reading list is provided for guidance only and is not
in itself the subject of the examination.
CII/Personal Finance Society members can borrow most
of the additional study materials below from Knowledge
Services.
CII study texts can be consulted from within the library.
For further information on the lending service, please go
to www.cii.co.uk/knowledge.
CII study texts
Risk management. London: CII. Study text 655
Insurance, legal and regulatory. London: CII. Study text IF1.
Additional reading
Additional reading materials are available through the
library or on the Knowledge Services website.
New materials are added frequently – for information about
new books and articles in your area of interest, please visit
www.cii.co.uk/knowledge or email knowledge@cii.co.uk.
Books (and ebooks)
Managing risk in projects. David Hillson. Farnham, Gower,
2009.
International risk management. Margaret Woods, Peter
Kajuter and Philip Linsley (eds). Oxford: Elsevier, 2008.
Strategic project risk appraisal and management. Elaine
Harris. Farnham, Gower, 2009.
Understanding and managing risk attitude. David Hillson,
Ruth Murray-Webster. Farnham, Gower, 2007.
Tolley’s practical risk assessment handbook. Mike
Bateman. Oxford: Newnes, 2006.
Risk analysis: assessing uncertainties beyond expected
values and probabilities. Terje Aven. Hoboken: Wiley, 2009.
Managing risk and resilience in the supply chain. David
Kaye. London: BSI Business Information, 2008.
A short guide to facilitating risk management. Penny
Pullan, Ruth Murray-Webster. Farnham, Gower, 2011.
Risk management: organisational and context. Steven
Ward. London: Witherby, 2005.
‘Risk management in banking’. Chapter – the Oxford
handbook of banking, pp 90-111. Linda Allen and Anthony
Saunders. Oxford: Oxford University Press, 2010.
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 ‘Risk-based regulatory capital and Basel II’. Chapter – the
Oxford handbook of banking, pp 357-376. Michael Gordy.
Oxford: Oxford University Press, 2010.
Exploiting future uncertainty: creating value from risk.
David Hillson. Farnham, Gower, 2010.
Rethinking risk measurement and reporting. 2v. Klaus
Bocker (ed). London: Incisive, 2010.
Risk control. Shaun Wilkinson. London: Witherby, 2003.
Risk financing. Alan Gordon. London, Witherby, 2003.
Risk management and insurance: perspectives in a global
economy. Harold Skipper and W Jean Kwon. Oxford:
Blackwell, 2007.
Risk: an introduction. Bernardus Ale. Routledge, 2010. Also
available as an ebook via www.cii.co.uk/knowledge (CII/
Personal Finance society members only).
Risk analysis in finance and insurance. Alexander Melnikov.
Chapman and Hall/CRC, 2004. Also available as an ebook
via www.cii.co.uk/knowledge (CII/Personal Finance society
members only).
Risk and the law. Edited by Gordon Woodman, Diethelm
Klippel. Routledge-Cavendish, 2008. Also available as an
ebook via www.cii.co.uk/knowledge (CII/Personal Finance
society members only).
A short guide to reputation risk. Garry Honey. Farnham,
Surrey : Gower, 2009. Also available as an ebook via
www.cii.co.uk/knowledge (CII/Personal Finance society
members only).
A short guide to fraud risk. By Martin Samociuk and
Nigel Iyer. Edited by Helenne Doody. Aldershot: Gower
Publishing, 2010. Also available as an ebook via
www.cii.co.uk/knowledge (CII/Personal Finance society
members only).
A short guide to political risk. By Robert McKellar.
Aldershot: Gower Publishing, 2010. Also available as an
ebook via www.cii.co.uk/knowledge (CII/Personal Finance
society members only).
A short guide to procurement risk. Richard Russill.
Farnham, Gower, 2010. Also available as an ebook via
www.cii.co.uk/knowledge (CII/Personal Finance society
members only).
Corporate risk management: an organisational perspective.
Tony Merna, Faisal F Al-Thani. 2nd ed. Chichester, West
Sussex: John Wiley, 2008.
Corporate risk management and value creation: a guide
to real-life applications. Thomas-Olivier Leautier. London:
Risk Books, 2007.
A risk management approach to business continuity:
aligning business continuity with corporate governance.
Julia Graham, David Kaye. Brookfield, Connecticut:
Rothstein Associates, 2006.
Tame, messy and wicked risk leadership. David Hancock.
Farnham, Gower, 2010.
Approaches to enterprise risk management. London:
Bloomsbury, 2010.
Risk management for insurers: risk control, economic
capital, and Solvency II. Rene Doff. 2nd ed. London: Risk
Books, 2011.
2014
© The Chartered Insurance Institute 2014
Bank and insurance capital management. Frans De Weert.
Chichester: Wiley, 2011.
Liquidity risk measurement and management: a
practitioner’s guide to global best practices. Leonard Matz
and Peter Neu. Singapore: Wiley, 2007.
Probability and statistical models: foundations for
problems in reliability and financial mathematics. Arjun
Gupta, Wei-Bin Zeng, Yanhong Wu. New York: Springer,
2010.
The econometrics of individual risk: credit, insurance and
marketing. Christian Gourieroux & Joann Jasiak. Princeton:
Princeton University Press, 2007.
Introduction to insurance mathematics: technical and
financial features of risk transfers. Annamaria Olivieri,
Ermanno Pitacco. Berlin: Springer, 2011.
Systemic risk assessment and oversight. J A Chan-Lau.
London: Risk Books, 2013.
Quantitative operational risk models. Catalina Bolance et
al. London: Chapman & Hall, 2012.
Innovative thinking in risk, crisis and disaster management.
Simon Bennet. Farnham: Gower, 2012.
The handbook of integrated risk management in global
supply chains. Panos Kouvelis. Wiley, 2012.
Factfiles and other online resources
CII factfiles are written by subject matter experts within
the insurance and financial services industry. They are
updated annually, and interim update bulletins are
included where necessary to take into account any major
changes during the year. All are available online via
www.cii.co.uk/knowledge (CII/Personal Finance society
members only).
• Alternative risk transfer. David Kaye; updated by Ian
Searle.
• Risk control. Ian Searle.
• Risk identification. Ian Searle.
• Enterprise risk management. Ian Searle.
• Recent developments to Solvency II. Brad Baker.
EBSCO Risk Management Reference Centre: an online
collection of thousands of articles, reports, books etc
that pertain to all types of risk. Available online via
www.cii.co.uk/knowledge (CII/Personal Finance society
members only).
Association of Insurance and Risk Managers
www.airmic.com
Institute of Risk Management www.theirm.org
Further articles and technical bulletins are available at
www.cii.co.uk/knowledge (CII and Personal Finance
Society members only).
Journals and magazines
The Journal. London: CII. Six issues a year. Also available
via www.cii.co.uk/knowledge (CII/Personal Finance society
members only).
Post magazine. London: Incisive Financial Publishing. Weekly.
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 Continuity insurance & risk. London: Perspective. Six
issues a year.
Risk management professional: the official magazine of
the Institute of Risk Management. London: Institute of Risk
Management. Quarterly.
Strategic risk. London: Newsquest Specialist Media. Eight
issues a year.

Reference materials
Dictionary of insurance. C Bennett. 2nd ed. London:
Pearson Education, 2004. Also available as an ebook via
www.cii.co.uk/knowledge (CII/Personal Finance society
members only).

Examination guides
Guides are produced for each sitting of written answer
examinations. These include the exam questions,
examiners’ comments on candidates’ performance and key
points for inclusion in answers.
You are strongly advised to study guides for the last two
sittings. Please visit www.cii.co.uk to buy online or contact
CII Customer Service for further information on +44 (0)20
8989 8464.
Older examination guides are available (for members only)
via www.cii.co.uk/knowledge. Alternatively, if you have a
current study text enrolment, the latest exam guides are
available via www.revisionmate.com.

Exam technique/study skills

There are many modestly priced guides available in
bookshops. You should choose one which suits your
requirements.
The Insurance Institute of London holds a lecture on
revision techniques for CII exams approximately three
times a year. The slides from their most recent lectures
can be found at www.cii.co.uk/knowledge/iilrevision (CII/
Personal Finance Society members only).

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© The Chartered Insurance Institute 2014