Lesson 10 Flashcards
(24 cards)
What is risk management in business?
A strategic process to identify, assess, and control financial, legal, and strategic risks to minimize threats, maximize opportunities, and protect the business.
Why is risk management important?
Reduces costs
Increases continuity
Boosts chances of success
Protects from uncertainty
What are the main types of business risk?
Financial
Reputational
Compliance
Operational
Economic
Security
Fraud
Are business risks internal or external?
They can be either, and are often higher during times of economic instability.
What are the 5 key steps in the risk management process?
Risk Identification
Risk Analysis
Risk Assessment
Risk Mitigation
Risk Monitoring
What is the goal of risk identification?
To find all relevant potential risks to support informed decision-making.
Name 5 strategies to identify risk.
SWOT analysis
Flowcharts of systems
Root-cause analysis
Risk checklists
Team-storming or expert interviews
What is risk analysis?
Evaluating the likelihood and severity of a risk event affecting the business.
What tool is commonly used in risk analysis?
A risk matrix (plots likelihood vs. impact).
What is a risk assessment (RA)?
A formal process carried out by a competent person to identify and evaluate hazards
What are the key steps in a risk assessment?
Identify hazards
Identify who might be harmed
Evaluate the risks
Decide precautions
Record and review
What tool should support a risk assessment?
A risk matrix
What is risk mitigation?
Choosing how to respond to and manage identified risks.
What are the 5 types of risk mitigation strategies?
Acceptance: Manage internally
Avoidance: Don’t do the activity
Control: Reduce or remove risk
Monitor: Observe and update
Transference: Shift risk to a third party (e.g., insurance)
What is the purpose of risk monitoring?
To continually track and manage risks, making sure nothing is overlooked.
What is included in risk monitoring?
Risk register
Metrics and KPIs
Regular reviews
Stakeholder feedback
Budget checks
External audits
What is a risk register?
A document that captures all identified risks and plans to manage them.
What should be included in a risk register?
Risk identification and description
Categories
Response plan
Priorities
Ownership
Updates and notes
How does insurance help with risk management?
It transfers financial risk to a third party (the insurer).
What are examples of business insurance?
Crop/machinery cover
Life insurance
Public liability insurance
When is public liability insurance required?
When customers, suppliers, or visitors may enter the business.
What is business diversification?
Reducing reliance on one industry, sector, or product.
What are types of diversification strategies?
Mergers/acquisitions
- Forward integration (retailers)
- Backward integration (suppliers)
- Horizontal integration (competitors)
Geographical diversification
Product/service development
What types of external support can help manage risk?
Risk management software
Risk assessors
Asset management tools
Consultants for productivity and operational efficiency
