Risk Management

Question 1

Risk

Answer 1

Business risk is a circumstance or factor that may have a significant negative impact on the operations or profitability of a given business.​

Question 2

Crisis and crisis management

Answer 2

businesses may face crises; these are situations where unstable conditions exist. As a result, problems can occur. Crises are usually unexpected. ​

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Effective planning should reduce the impact of a crisis on a business. ​

Question 3

Identifying the risks that businesses are likely to encounter​

Internal Risks

Answer 3

Risks include:​

Natural disasters​

Events caused by environmental factors e.g. earthquake, flooding, landslides​

Failure of technology​

IT can be mission critical i.e. without it a business can no longer operate​

Ability to make transactions, contact customers, control operations​

Threat of cyber attacks​

Loss of customer trust​

Failure of equipment​

Inability to match supply to demand​

Faulty goods

Question 4

Identifying the risks that businesses are likely to encounter​ part 2

Answer 4

Risks include:​

Employee error​

Damage to the business’ reputation​

Risk of criminal charges​

Supply problems​

Shortages of raw materials​

Damaged by actions of a link in the supply chain​

Product recalls​

Economic factors​

Consumer confidence and the impact on demand​

Changing interest rates and exchange rates​

Legal challenges​

Legal action by stakeholders e.g. employees, community and customers​

Associated cost and damage to reputation​

Intellectual property infringements​

Question 5

Risk assessment

Answer 5

Risk assessment involves:​

Identifying any potential scenarios​

Categorising them by severity​

Assigning a probability​

Planning response​

Question 6

Risk mitigation

Answer 6

Risk mitigation is the actions taken by business to minimise or eliminate risk through a process of:​

Identifying​

Assessing​

Prioritising​

This helps minimise disruption allowing the business to enjoy business continuity i.e. to continue to operate ​

This can be achieved through succession planning …​

Question 7

Insurable and uninsurable Risk

Answer 7

Risk can be insurable or uninsurable:​

Insurable​

A risk that an individual or organisation is able to take insurance against so that if the risk occurs they can be financially compensated​

Criteria for a insurable risk include that it is the result of chance, the loss can be backed by evidence making it definite and measurable and the risk is non predictable​

Uninsurable​

A risk that an individual or organisation is not able to take insurance against so that if the risk occurs they are not protected​

Criteria for uninsurable risk include the outcome is inevitable or the damage takes place over time​

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Question 8

Contingency planning and Crisis management

Answer 8

Contingency planning is the process by which organisations try to prepare for unexpected and potentially disastrous events​

Businesses have to be able to respond to change and change can be unpredictable​

Crisis management is the manner in which an organisation responds to an unexpected and potentially disastrous event​

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Question 9

Benefits of Contingency planning

Answer 9

Sense of security​

Limits damage​

Speeds up recovery process​

Informs staff training​

Preventative measures can be part of CSR​

Question 10

drawbacks of continguency plan

Answer 10

Costly and time consuming​

Including opportunity cost​

Needs reviewing​

Lack of predictability​