Chapter 10: Risk Management

Question 1

define risk

Answer 1

risk is the possible variation in outcome to what was expected to happen

Question 2

define uncertainty

Answer 2

the inability to predict an outcome due to a lack of information

Question 3

define downside / pure risk

Answer 3

the likelihood that the outcome will turn out worse than expected

Question 4

define upside / opportunity risk

Answer 4

the possibility that the outcome will be worse than expected

Question 5

how is risk measured

Answer 5

risk = likelihood x impact

Question 6

what is risk management

Answer 6

the process of identifying and assesing risks and the development, implementation and monitoring of strategy to combat those risks

Question 7

define risk appetite and its influences

Answer 7

risk appetite is the extent to which a company is prepared to take risks to achieve its objectives
things that may influence risk appetite are
expectation of shareholders
national culture
regulatory framework
nature of ownerships
personal views of managers

Question 8

define Miles and Snow four management attitudes

Answer 8

Reactors - fail to plan and strategise against risk, avoid risk and change only if they have to
defenders -