Risk Managment Flashcards
(12 cards)
What is business risk?
A circumstance or factor that may have a significant negative impact on the operations or profitability of a given business.
What are some common risks businesses encounter?
- Natural disasters
- Failure of equipment/technology
- Employee error
- Supply problems
- Economic factors
- Legal challenges
- Public relations issues
- Product failures
What is the importance of risk assessment?
It helps identify hazards that could negatively impact a business and provides measures to reduce the impact of these risks.
What is the difference between insurable and uninsurable risks?
Insurable risks are quantifiable and can be covered by insurance, while uninsurable risks are difficult to quantify and cannot be priced by insurance companies.
What are some examples of uninsurable risks?
- Reputational risk
- Regulatory risk
- Trade secret risk
- Political risk
- Pandemic risk
What is a contingency plan?
A course of action designed to help an organization respond effectively to significant future events or situations that may or may not happen.
What are key components of contingency planning?
- Identifying potential problems
- Understanding potential effects
- Devising plans for when things go wrong
- Implementing strategies for response
What is crisis management?
The process required when a significant unforeseen event threatens the business, involving plans to reduce impact and restore normalcy.
How can businesses use contingency planning to deal with risks?
- Having contingency funds
- Alternative production arrangements
- Allocating responsibilities to managers/employees
- Dealing with public relations in a crisis
What are some responses a business can take to risks?
- Insurance
- Contingency plans
- Buying currency in advance for exchange rate fluctuations
- Loyalty cards and promotions during economic downturns
- Multiple suppliers
- Preventative measures
Why is risk management important to businesses and stakeholders?
It minimizes risk and limits damage from crises, maintaining reputation and profits, and ensuring continuity of products or services.
What are some challenges associated with risk management?
- High costs involved in assessing risk
- Potential perception of waste if nothing goes wrong
- Need for constant testing and practice of recovery strategies
