Introduction to risk management Flashcards
Business risks
Risks taken to earn more revenue
- Strategy risk (choosing and implementing the wrong strategy)
- Enterprise risk (success or failure of a business operation)
- Product risk (no demand for a product)
- Economic risk (unexpected changes in economic conditions)
- Property risk (losing property from accidents)
Financial risk (non-business risk)
Controllable financial risks (factors within businesses control):
- Gearing risk (increased interest charges on loans)
- Credit risk (economic loss suffered due to default of a customer)
- Liquidity risk (unexpected shortage of cash)
Uncontrollable financial risk:
- Market risk (changes in market prices e.g exchange rate)
Operational risks (non-business risks)
- Process risk (company’s processes are ineffective or inefficient)
- People risk (something goes wrong with the staff)
- Systems/ cyber risk
- Event risk
Cyber risk (operational risk –> non-business risk)
- Phishing (bogus emails)
- Webcam manager (webcam is taken over)
- File hijacker/ ransomware (where files are hijacked and held to ransom
- Keylogging (where criminals record what users type)
Event risk (operational risk –> non-business risk)
Risk of impact on companies financial position from a 1 off event
- Disaster risk (catastrophe occurs such as fire, flood ect)
- Regulatory risk (new laws or regulations)
- Reputation risk (risk of damage to the business’s reputation)
- Systemic risk (failure by a participant in the business’s supply chain)
Risk management process
- Risk awareness and identification
- Risk assessment and measurement
- Risk response and control
- Risk monitoring and reporting
Techniques to identify risk
- PEST/ SWOT analysis
- External advisors
- Interviews/ questionnaires
- Internal audit
- Brainstorming
Types of loss
- Property
- Liability
- Personnel
- Pecuniary
- Interruption
Gross risk equation
Gross risk = probability x impact
Attitudes to risk
- Risk averse attitude - safest possible option no matter the return
- Risk neutral attitude - highest investment no matter the risk
- Risk seeker attitude - willing to take risks in the hope of high return
Risk response (TARA)
Transfer (e.g insurance)
Avoidance
Reduction
Acceptance
What is a crisis?
An unexpected event that threatens the wellbeing of a business
What is a disaster?
When the business’s operations break down for some reason leading to a potential loss of equipment, data or funds
