CFAI Topic Tests Says: 1) Set Policies & Procedures 2) Define Risk Tolerance 3) Identify & Measure Risk Exposures 4) Review & Make Necessary Adjustments Schweser (Video) says: 1) Identify & Measure 2) Set Risk Tolerance Levels 3) Report Risk Exposures to Stakeholders 4) Review (Monitor) & Make Necessary Adjustments Maybe some of you think not a big deal, but I came across exam questions which asked which order should be done first ie define RT before Identify & measure risks and other similar questions. I referenced the Reading (25) to find that the Topic Test has it exactly as in the reading, not surprisingly. Having referred to the Schweser On Demand videos for some revision this evening, I’m more than a bit disappointed to discover such a large discrepancy given how much the package costs and how well qualified this man is supposed to be… I hope the other guys haven’t got things so badly wrong in other topics as I have relied on Schweser quite a lot over the last 5 months or so, and have found most of the guys presenting the videos to be excellent. I think I’ll stop watching this guy though and refer to the curriculum for revision instead!
There are always a few mistakes. Even in CFA curriculum/mocks/topic test.
you go formal first before your specifc situation. so
set policies and procedures
define risk tolerance
identify and measure risks
review and adjust
You forgot "Measure’ between Identify and Adjust - I remember it using PRIMA
Policies and Procedures
Risk Tolerance (define)
Identify
Measure
Adjust
From my point of view, the CFAI is confusing :
Page 140 (end of chapter 3 of reading 25) states:
_ An effective ERM system typically incorporates the following steps _:
- Identify each risk factor
2)Quantify each exposure
3)Map the inputs into a risk estimation calculation
4)Identifty the overall risk exposure
-
Set up a process to report on these risks periodically to senior management who will set up a committee of division heads and executives to determine capital allocations, risk limits and risk management policies
-
Monitor compliance with poliicies and risk limits
Does the Schewer video talks about ERM ( based on the steps above) or Risk management as a process (steps described in exhibit 1 page 135 ,PRIMA as stated above)?