Risk management Flashcards
(12 cards)
What is meant by risk?
Business risk is a circumstance or factor that may have a significant negative impact on the operations or profitability of a given business.
Business risk can result from internal conditions or external factors that may be present in the wider business world. Risk can also be expressed as “uncertainty”. It means the possibility of incurring losses due to problems and circumstances, expected or unexpected.
What are quantifiable risk? (incl the types)
Some of the risks facing businesses are reasonably predictable and the likelihood of these risks occurring, along with the impact of these risks on the business, can be measured. This type of risk is known as a quantifiable risk and can take a number of forms:
-Financial
-Operational
-Strategic risk
-Compliance risk
These risks are often insurable
What are more difficult risks to manage?
-when do these arise?
More difficult types of risk to manage are uninsurable risks. These arise when the probability of the risk occurring is impossible to quantify – so insurance companies are unable to price the risk.
What are four types of internal risk?
- PR failures
- Product failure
- Failure of equipment
- Employee error
What are four types of External risk?
- Natural disasters
- Supply chain problems
- Economic factors
- Legal changes
What is risk management?
Risk management is the process of understanding and minimising what might go wrong in an organisation. It involves the activities undertaken by a business, which are designed to control and minimise threats to the continuing efficiency, profitability and success of its operations.
What does risk management involve?
- the identification and analysis of risks to which the organisation is exposed
- a measurement of the likelihood of the risks occurring
- an assessment of potential impacts on the business
- deciding what action can be taken to eliminate or reduce risk
What preventative actions can be taken against risks?
- Train staff appropriately
- Regular backup of IT systems
- Put robust quality control systems in place
- Installl a sprinkler system
What is a contingency plan?
A contingency plan is a plan of action to be followed in the event of an emergency or crisis occurring which threatens to destroy or significantly disrupt the continued operation of normal business activities. The plan should restore to normal, or as near to normal as possible, the business’s day-to-day functioning. All this needs to be done as fast as possible.
What is crisis management?
Crisis management is an unforeseen event that threatens the business. There are many recent examples of major events affecting businesses’ capability of operating normally. These have varied from terrorist atrocities, natural disasters or extreme climate events, to failures of operational control. A well-run business will have plans in place to deal with the unexpected, reduce its impact and get back to normal as soon as possible.
Explain ways in which a business can use a contingency plan to deal with risk
- Contingency funds
- Alternative production arrangements
- Allocating responsibilities to managers/employees
- Dealing with PR in the event of a crisis e.g. they could have pre-preparaed press release and social media announcements.
How could a business respond to risks?
- Insurance
- Contingency plans
- Loyalty cards, ad campaigns and promotions to deal with economic factors such as recession
- Multiple suppliers
- preventative measures such as sprinkler systems
