Theme 3 - Decisions and Strategy Flashcards
(195 cards)
1
Q
Objectives
A
Statements of specific outcomes that are to be achieved
2
Q
Hierarchy of business objectives
A
- Individual
- Team
- Functional
- Corporate
- Mission
3
Q
Corporate objectives
A
Objectives that relate to the business as a whole
4
Q
Purpose of corporate objectives
A
- Provide strategic focus
- Measure performance of the firm as a whole
- Inform decision making
5
Q
Functional objectives
A
Objectives set for each key business function and are designed to ensure corporate objectives are achieved
6
Q
External influences on corporate objectives and decisions
A
- Short termism
- Economic environment
- Competitors
- Social and technological change
- Political and legal environment
7
Q
Ansoff’s matrix
A
Marketing planning model that helps a business determine its product and market strategy
8
Q
Features of Ansoff’s matrix
A
- Market penetration
- Product development
- Market development
- Diversification
9
Q
Market penetration
A
When a business aims to sell existing products into existing markets
10
Q
Advantages of market penetration
A
- Uses existing products and services, so the risk is relatively lower compared to new product development
- Increased market share can result in economies of scale
- Penetrating the market can improve a company’s competitive advantage
11
Q
Disadvantages of market penetration
A
- Aggressive pricing strategies can lead to price wars, damaging long-term profitability
- Market may become saturated, making further growth more difficult
- More businesses may enter the market, intensifying competition
12
Q
Product development
A
When a business aims to sell new products into existing markets
13
Q
Advantages of product development
A
- Developing new or improved products can help a business gain a competitive advantage
- Offering innovative products can help retain existing customers and attract new ones
- Unique products can help the business differentiate themselves in a crowded market.
14
Q
Disadvantages of product development
A
- Product development can be expensive, requiring significant investment in research, design and marketing
- No guarantee that a new product will be successful and the business may face financial losses
- Developing a new product often takes time, delaying potential revenue generation
15
Q
Market development
A
When a business aims to sell existing products into new markets
16
Q
Advantages of market development
A
- Allows businesses to expand their customer base and increase sales without creating new products
- Reduces reliance on a single market, spreading the business risk across multiple markets
- Brand can become more widely known in different markets, improving overall brand equity
17
Q
Disadvantages of market development
A
- Expanding into new markets often requires substantial investment in marketing, distribution and logistics
- When entering international markets, businesses may face cultural differences, legal regulations and political challenges
- New market might already be saturated, making it difficult to gain traction or achieve a competitive advantage
18
Q
Diversification
A
When a business aims to sell new products into new markets
19
Q
Advantages of diversification
A
- Operating in different industries or markets, a company can reduce its dependence on a single market or product, spreading its risk
- Allows businesses to exploit new opportunities and respond to market changes
- Entering new markets or product areas provides additional revenue streams
20
Q
Disadvantages of diversification
A
- Entering a new market or creating a new product involves significant costs for research, development, marketing and production
- Diversification into unfamiliar markets can create operational hurdles and risk failure due to cultural differences, market dynamics and a lack of experience
- Expanding into new areas may divert attention from the company’s core operations and could lead to inefficiency
21
Q
Features of Porter’s strategy matrix
A
- Low cost
- Differentiation
22
Q
Competitive advantage
A
An advantage over competitors gained by offering consumers greater value, either through lower prices or providing greater benefits and service that justifies a higher price
23
Q
Low cost strategy
A
Objective of becoming the lowest cost operator, this typically involves production on a large scale enabling the business to exploit economies of scale
24
Q
Features of a low cost operator
A
- High levels of productivity and efficiency
- High capacity utilisation
- Use of bargaining power to negotiate lower prices from suppliers
- Lean production methods and culture
25
Differentiation strategy
Aims to offer a product that is distinctively different from the competition, with the customer valuing that differentiation
26
Ways for a business to achieve differentiation
1. Superior product quality
2. Branding
3. Wide distribution
4. Sustained promotion
27
Boston matrix
Tool used by business to analyse their product portfolio and make strategic decisions based on market growth and market share
28
Features of the Boston matrix
1. Dog (low market share and low market growth)
2. Question mark (low market share and high market growth
3. Cash cow (high market share and low market growth)
4. Star (high market share and high market growth)
29
Kay's distinctive capabilities
The strengths that give a business a sustainable competitive advantage over rivals
30
Features of Kay's distinctive capabilities
1. Architecture (strong relationships with employers, suppliers and customers)
2. Innovation (ability to develop new products, services or processes ahead of competitors)
3. Reputation (business' brand image and customer perception)
31
SWOT analysis
Helps a business assess its competitive strength and the nature of its external environment
32
Features of SWOT analysis
1. Strengths
2. Weaknesses
3. Opportunities
4. Threats
33
Porter's five forces model
Framework used to analyse the level of competition within an industry, helping businesses assess their competitive position and develop strategies to improve profitability
34
Features of Porter's five forces model
1. Threat of new entrants
2. Threat of substitute products
3. Bargaining power of suppliers
4. Bargaining power of customers
5. Intensity of rivalry within the industry
35
Factors determining the intensity of rivalry within the industry
1. Number of competitors in the market
2. Market size and growth prospects
3. Product differentiation and brand loyalty
4. Barriers to entry and exit
36
Reasons to grow
1. Increase profits
2. Achieve economies of scale
3. Increase market power
4. Increase market share and brand recognition
5. Grow shareholder value
37
Economies of scale
When unit costs decrease as output increases
38
Formula for unit costs
Total production costs / Total output
39
Types of internal economies of scale
1. Purchasing
2. Technical
3. Managerial
4. Marketing
5. Network
6. Financial
7. Risk bearing
40
Examples of external economies of scale
1. Many specialist suppliers close by
2. Access to research and development facilities
3. Pool of skilled labour to choose from
41
Diseconomies of scale
When unit costs increase as output increases
42
Reasons for diseconomies of scale
1. Lack of motivation and co-operation
2. Lack of co-ordination and control
3. Negative effects of internal politics
43
Overtrading
When a business expands too quickly without having the financial resources to support such a quick expansion
44
Ways to manage the risk of overtrading
1. Reduce inventory levels
2. Leasing rather than buying capital equipment
3. Improving payment terms with customers and suppliers
45
Factors causing overtrading
1. Rapid business growth
2. Insufficient working capital
3. Excessive credit sales
4. Overinvestment in fixed assets
46
Reasons to stay small
1. Product differentiation and unique selling point
2. Flexibility in meeting customer needs
3. Deliver high standards of customer service
4. Exploit opportunities from e-commerce
47
Takeover
When one business acquires control of another business
48
Reasons for takeovers
1. Increase market share
2. Acquire new skills
3. Spread risks by diversifying
4. Secure better distribution
5. Acquire intangible assets (brands, patents and trade marks)
49
Benefits of a takeover
1. Fast growth
2. Access to new skills and technology
3. Economies of scale
50
Drawbacks of a takeover
1. High cost
2. Cultural clashes
3. Job losses
51
Forward vertical integration
When a business acquires or merges with another company further along the supply chain, typically closer to the final consumer. This usually means a manufacturer taking control of a distributor or retailer
52
Advantages of forward vertical integration
1. Stronger market presence
2. Cost savings
3. More stable supply chain
53
Disadvantages of forward vertical integration
1. High initial costs
2. Less flexibility
3. Management challenges
54
Backward vertical integration
When a business acquires or merges with another company earlier in the supply chain, typically a supplier. This means a company takes control of the production of its raw materials or components
55
Advantages of backward vertical integration
1. Lower production costs
2. Improved product quality
3. Better negotiation power
56
Disadvantages of backward vertical integration
1. Risk of inefficiency
2. High initial costs
3. Less flexibility
57
Horizontal integration
When a business merges with or acquires another company at the same stage of the supply chain within the same industry
58
Advantages of horizontal integration
1. Stronger competitive position
2. Cost savings
3. Greater bargaining power
59
Disadvantages of horizontal integration
1. Reduced innovation
2. Culture clashes
3. High costs
60
Conglomerate integration
When a business merges with or acquires another company in a completely different industry
61
Advantages of conglomerate integration
1. Reduced industry-specific risk
2. Stronger brand presence
3. More opportunities for growth
62
Disadvantages of conglomerate integration
1. Lack of industry expertise
2. Potential for brand dilution
3. Management complexity
63
Merger
When two companies agree to combine into a single entity
64
Benefits of a merger
1. Stronger financial position
2. Operational efficiency
3. Boosts innovation
65
Drawbacks of a merger
1. Job losses
2. Regulatory issues
3. Cultural challenges
66
Organic growth
Expansion of a business using its own resources, rather than through mergers, acquisitions, or takeovers. This growth is achieved by increasing sales, launching new products, or expanding into new markets
67
Advantages of organic growth
1. Lower risk
2. Maintains business control
3. Sustainable growth
68
Disadvantages of organic growth
1. Slower expansion
2. Limited resources
3. Missed opportunities
69
Inorganic growth
When a business expands through mergers, acquisitions or takeovers, rather than growing internally
70
Advantages of inorganic growth
1. Rapid expansion
2. Access to new skills and technology
3. Increased market share
71
Disadvantages of inorganic growth
1. Financial risk
2. Regulatory hurdles
3. Job losses
72
Extrapolation
Using trends established from historical data to forecast the future
73
Benefits of using extrapolation
1. Simple method of forecasting
2. Not much data required
3. Quick and cheap
74
Drawbacks of using extrapolation
1. Unreliable if there are significant fluctuations in historical data
2. Assumes past trend will continue into the future
3. Ignores qualitative factors, like changes in tastes and fashion
75
Correlation
Looks at the strength of a relationship between two variables
76
Investment appraisal
Process of analysing the attractiveness of possible future investments
77
Types of investment appraisal
1. Payback period
2. Average Rate of Return
3. Net Present Value
78
Average Rate of Return
Assesses the worth of an investment by calculating the average annual profit it generates as a percentage of the initial investment
79
Formula for Average Rate of Return
(Average annual profit / Initial investment) * 100
80
Advantages of Average Rate of Return
1. Simple to calculate and understand
2. Focusses on profitability
3. Provides a percentage return which can be compared with a target return or other investments
81
Disadvantages of Average Rate of Return
1. Ignores time value of money
2. May encourage short-term thinking
3. Ignores risk and external factors
82
Payback period
Length of time it takes for a firm to get back the initial cost of the investment
83
Advantages of payback period
1. Simple to use and understand
2. Emphasises speed of return
3. Straightforward to compare projects
84
Disadvantages of payback period
1. Doesn't consider cash received after the payback period
2. Doesn't consider time value of money
3. Ignores long term profitability
85
Net Present Value
Calculates the monetary value now of a project's future cash flows using a discount factor
86
Advantages of Net Present Value
1. Takes account time value of money
2. Looks at all cash flows involved through the life of the project
3. Has a decision making mechanism
87
Disadvantages of Net Present Value
1. Difficult to select the most appropriate discount rate
2. Some users may find it difficult to understand
3. Sensitive to the initial investment cost
88
Decision trees
Graphical tool used in business decision-making to assess possible outcomes, probabilities, and financial returns of different choices. It helps businesses evaluate risks and make data-driven decisions
89
Benefits of decision trees
1. Choices are set out in a logical way
2. Potential options and choices are considered at the same time
3. Use of probabilities enables the risk of options to be assessed
90
Drawbacks of decision trees
1. Probabilities are just estimates
2. Uses quantitative data only
3. Assignment of probabilities and expected values are prone to bias
91
Critical path analysis
Project management technique used to plan and schedule tasks in complex projects. It helps businesses identify the longest sequence of dependent tasks (the critical path) and the shortest time needed to complete a project
92
Critical path
The longest sequence of dependent tasks with zero float, meaning any delay in these tasks will delay the entire project
93
Float time
The amount of time a task can be delayed without affecting the overall project completion time
94
Benefits of critical path analysis
1. Identifies the exact activities involved
2. Identifies activities that can be done simultaneously
3. Speeds up processes and allows for Just In Time
4. Identifies float time and activities that are critical for success
95
Drawbacks of critical path analysis
1. Projects and strategies often involve multiple factors making calculating the time taken to complete an activity very difficult
2. Doesn't take into account qualitative issues
3. Relies on estimations
4. Doesn't take into account unexpected events
96
Short termism
Business strategy that prioritises immediate financial gains, quick returns, and short-term performance over long-term growth and sustainability
97
Advantages of short termism
1. Quick returns
2. Easier to secure funding
3. Flexibility
98
Disadvantages of short termism
1. Employee and customer dissatisfaction
2. Can neglect innovation and sustainability
3. Reputation damage
99
Long termism
Business strategy that prioritises sustained growth, innovation, and stakeholder value over immediate short-term gains. Companies that adopt long-termism focus on future success rather than quarterly profits
100
Advantages of long termism
1. Better employee retention
2. Stronger competitive advantage
3. Financial stability
101
Disadvantages of long termism
1. Slower profits
2. Investor pressure
3. Long-term plans can be disrupted by unforeseen economic changes
102
Evidence based decision making
When business decisions are based on data, research and factual evidence
103
Advantages of evidence based decision making
1. Minimises uncertainty by using proven facts
2. Decisions are based on actual customer needs improving customer satisfaction
3. Managers can justify their choices with evidence
104
Disadvantages of evidence based decision making
1. Can be time consuming
2. Too much information can complicate decision making
3. Some decisions must be made quickly without sufficient evidence
105
Subjective based decision making
When business decisions are based on personal opinions, experiences and intuition
106
Advantages of subjective based decision making
1. Faster decision making
2. Useful for experienced managers who rely on past knowledge
3. Useful in unpredictable situations
107
Disadvantages of subjective based decision making
1. Higher risk of bias
2. Less reliable as lacks factual backing
3. Difficult to justify to stakeholders
108
Big data
Process of collecting and analysing large data sets from traditional and digital sources to identify trends and patterns that could be used in decision making
109
Data mining
Process of analysing data from different perspectives and summarising it into useful information, including discovery of previously unknown interesting patterns, unusual records or dependencies
110
Features of a strong culture
1. Clear mission and values
2. Strong communication and engaged employees
3. Recruitment and training aims to find individuals who best fit the culture of the business
111
Features of a weak culture
1. Inconsistent customer service
2. Demotivated workforce
3. Poor leadership and management
112
Handy's four classes of culture
1. Power
2. Role
3. Task
4. Person
113
Power culture
When power is concentrated amongst a few individuals, usually at the top of the organistion. These key decision makers control the business and employees follow their direction
114
Advantages of power culture
1. Fast decision making
2. Clear direction
3. Strong leadership
115
Disadvantages of power culture
1. Demotivating for employees as may feel powerless and disengaged
2. Lack of stability as if the leader leaves business can struggle
3. Can be autocratic
116
Role culture
Structured and hierarchical business culture where power and responsibilities are defined by formal job roles and procedures. Relies on rules, job descriptions and clear chain of command
117
Advantages of role culture
1. Defined roles ensure consistency in operations
2. Fair treatment as promotions and rewards are based on qualifications not favouritism
3. Works well in businesses that need strict organisation, such as banks and government offices
118
Disadvantages of role culture
1. Lack of flexibility as employees may struggle to adapt to changes
2. Bureaucracy can delay important business decisions
3. Employees may feel restricted by rules reducing creativity and innovation
119
Task culture
When teams are formed to complete specific tasks or projects. Power is distributed based on expertise rather than hierarchy and success is measured by results rather than job titles
120
Advantages of task culture
1. Encourages innovation
2. Workers feel valued because their skills directly impact outcomes
3. Brings together experts from different areas to tackle issues efficiently
121
Disadvantages of task culture
1. Teams form and disband frequently leading to uncertainty
2. Disagreements may arise between team members
3. Requires strong project management and skilled employees
122
Person culture
When focus is on individuals rather than organisations as a whole. Employees have high autonomy and the organisation exists primarily to support them rather than having strict structures or hierarchies
123
Advantages of person culture
1. High employee satisfaction as employees have control over their work and careers
2. Encourages creativity and expertise as individuals have freedom to innovate
3. Attracts skilled professionals due to the autonomy and freedom
124
Disadvantages of person culture
1. Lack of direction meaning strategic goals may be unclear
2. Employees may prioritise their own goals over the company's
3. Person cultures don't work well in large organisations
125
Reasons to change culture
1. Improve business performance
2. Respond to significant change
126
Signs organisational culture may need changing
1. Internal fighting
2. Greater absenteeism
3. High levels of staff turnover
127
Stakeholder
Any individual, group or organisation that has an interest in or is affected by a business' activities and decisions
128
Potential conflicts between stakeholders
1. Cutting jobs to reduce costs, may be supported by shareholders but likely to be opposed by employees
2. Introduce new machinery to replace manual work, could be supported by customers and shareholders but likely to be opposed by employees
3. Increase selling price to improve profit margins, likely supported by shareholders but opposed by customers
129
Ethics
Moral guidelines which govern acceptable behaviour
130
Benefits of behaving ethically
1. Higher revenues from positive consumer support increasing demand
2. Improved brand awareness and recognition
3. Better employee motivation and recruitment
131
Drawbacks of behaving ethically
1. Higher costs, such as sourcing from Fairtrade suppliers rather than lowest price
2. Higher overheads, such as training and communication of ethical policy
3. Danger of building up false expectations
132
Amoral business
Seeks to win at all costs and anything is acceptable
133
Legalistic business
Will obey the law but no more than that
134
Responsive business
Accepts that being ethical can pay off
135
Ethical business
Ethical practice is at the core of the business
136
Pressure group
An organisation that seeks to influence business or government decisions without seeking political power. They campaign on specific issues such as the environment, worker's rights, or ethical business practices
137
Corporate Social Responsibility
The extent to which a business addresses the concerns and obligations of its wider stakeholders
138
Benefits of Corporate Social Responsibility
1. Improves brand image and customer loyalty
2. Attracts investors who support ethical businesses
3. Motivates employees and enhances workplace culture
139
Drawbacks of Corporate Social Responsibility
1. Can be costly and reduce short-term profits
2. Some companies may use it for marketing without real action (greenwashing)
3. Difficult to measure the direct impact
140
Return On Capital Employed
Financial ratio that measures a company’s profitability and efficiency in using its capital to generate profit. It shows how well a business is utilising its resources to produce returns
141
Formula for Return On Capital Employed
(Operating Profit / Total equity + Non current liabilities) * 100
142
Advantages of Return On Capital Employed
1. Measures efficiency
2. Useful for comparisons
3. Indicates how sustainable a business' profitability is
143
Disadvantages of Return On Capital Employed
1. Ignores external factors
2. May not suit all industries as capital-intensive industries (e.g., manufacturing) may naturally have lower ROCE
3. Companies can alter figures by delaying investments or selling assets
144
Gearing ratio
Financial metric that measures the proportion of a company's capital that is financed by debt compared to equity. It indicates the level of financial risk a business carries, higher gearing means more reliance on borrowed funds
145
Formula for gearing ratio
(Non current liabilities / Total equity + Non current liabilities) * 100
146
Advantages of gearing ratio
1. Shows financial stability
2. Businesses can decide whether to take on more debt helping decision making
3. Useful for lenders
147
Disadvantages of gearing ratio
1. Ignores profitability
2. Does not consider industry norms, with some industries naturally having higher gearing
3. Can be misleading as seasonal debt fluctuations may distort results
148
Benefits of high gearing
1. Less capital required to be invested by the shareholders
2. Debt can be a relatively cheap source of finance compared with dividends
3. Easy to pay interest if profits and cash flows are strong
149
Benefits of low gearing
1. Less risk of defaulting on debts
2. Shareholders call the shots rather than debt providers
3. Business has the capacity to add debt if required
150
Ratio analysis
The comparison of financial data to gain insights into business performance
151
Main groups of ratios
1. Profitability
2. Liquidity
3. Financial efficiency
152
Benefits of ratio analysis
1. Helps in performance evaluation
2. Assists in decision-making
3. Useful for budgeting and forecasting
153
Drawbacks of ratio analysis
1. Does not consider qualitative factors
2. Can be manipulated
3. Ignores external factors
154
Liquidity ratio
Assesses whether a business has sufficient cash or equivalent current assets to be able to pay its debts as they fall due
155
Formula for current ratio
Current assets / Current liabilities
156
Evaluating current ratio values
1. A ratio of 1.5-2.5 would suggest acceptable liquidity and efficient management of working capital
2. A low ratio well below 1 indicates possible liquidity problems
157
Formula for acid test ratio
Current assets - Stock / Current liabilities
158
Evaluating acid test ratio values
1. 1 or higher, indicates that the company has enough liquid assets to cover its current liabilities without needing to sell inventory or obtain additional financing
2. Less than 1, may suggest that the company doesn't have sufficient liquid assets to meet its short-term obligations. This could indicate a potential liquidity issue, but it's not always a cause for concern, especially for companies heavily reliant on inventory, like retailers.
159
Income statement
Measures the business' performance (income and costs) over a given period of time
160
Balance sheet
A snapshot of the business' assets and liabilities on a particular day
161
Cash flow statement
Shows how the business has generated and disposed of cash and liquid funds during a specific period
162
Human Resources
The department responsible for managing employees within an organisation. It plays a key role in hiring, training, motivating, and retaining staff to ensure business success
163
Key measures of Human Resources performance
1. Labour turnover and staff retention
2. Labour productivity
3. Absenteeism
164
Employee retention
A business' ability to keep its employees over time rather than losing them to competitors
165
Labour turnover
Percentage of the workforce that leave a business within a given period
166
Formula for labour turnover
(Number of employees leaving during period / Average number employed during period) * 100
167
Benefits of high staff turnover
1. Fresh ideas and innovation
2. Removal of poor performers
3. Opportunities for promotion
168
Drawbacks of high staff turnover
1. Increased recruitment and training costs
2. Increased pressure on remaining staff
3. Disruption to production
169
Factors affecting staff turnover
1. Type of business
2. Pay and other rewards
3. Working conditions
4. Opportunities for promotion
5. Economic conditions
170
Ways to improve staff turnover
1. Effective recruitment and training
2. Provide competitive pay and other incentives
3. Job enrichment
4. Reward staff loyalty
171
Labour productivity
Measures output per worker (or per hour worked) over a given period. It shows how efficiently labour is used in producing goods and services
172
Formula for labour productivity
(Output per period / Number of employees at work) * 100
173
Factors affecting labour productivity
1. Skills, ability and motivation of the workforce
2. External factors, such as reliability of suppliers
3. Extent and quality of fixed assets, like IT systems
174
Ways to improve labour productivity
1. Measure performance and set targets
2. Invest in capital equipment
3. Invest in employee training
4. Improve working conditions
175
Staff absenteeism
An employee's intentional or habitual absence from work
176
Formula for staff absenteeism
1. (Number of staff absent during period / Number employed during period) * 100
2. (Number of days taken off for unauthorised absence during period / Total days worked by workforce over period) * 100
177
Ways to reduce staff absenteeism
1. Set targets and monitor trends
2. Have a clear sickness and absence policy
3. Provide rewards for good attendance
178
Employee empowerment
Giving employees the power to do their job
179
Change management
The process that ensures a business responds to the environment in which it operates
180
Step change
Dramatic change in one fell swoop. Often required when a business has suffered from strategic drift
181
Incremental change
Many small changes which take place as a business develops and responds to subtle changes in the external environment
182
Examples of internal causes of change
1. New leadership
2. New ownership
3. Adjusting the organisational structure
183
Main reasons why change is resisted
1. Self interest
2. Different assessment of the situation
3. Low tolerance for change and inertia
4. Misinformation and misunderstanding
184
Examples of external causes of change
1. Significant competitor actions
2. Political and legal changes
3. Technological change
185
Ways to overcome resistance to change
1. Communication
2. Support
3. Negotiation
4. Involvement
186
Risk management
Process of identifying, assessing, and prioritising risks followed by coordinated efforts to minimise, monitor, and control the likelihood or impact of unfortunate events
187
Scenario planning
Strategic planning method used by businesses and organizations to create long-term plans based on different possible future scenarios. Instead of relying on predictions, it involves exploring a range of possible futures and preparing responses to various uncertainties and challenges
188
Crisis management
Process by which an organisation handles a disruptive event or situation that has the potential to damage its reputation, finances, operations, or overall stability
189
Succession planning
Process of identifying and developing internal talent to fill key leadership roles within an organisation. It ensures that the business can maintain continuity and stability when current leaders retire, leave, or are unable to perform their duties
190
Risk mitigation
Process of identifying, assessing, and taking steps to reduce or manage the potential impact of risks on a business or project. The goal is to prevent or minimise the negative consequences that could arise from uncertain events or situations, thereby protecting the organisation’s assets, reputation, and long-term success
191
Risk acceptance
Strategy in risk management where an organisation acknowledges the presence of a risk but decides not to take action to mitigate or avoid it. Instead, the organization accepts the potential consequences if the risk materializes. This approach is often used when the cost of mitigating the risk is too high, or the risk is perceived to have a low likelihood or impact
192
Risk avoidance
Strategy in risk management where an organisation takes steps to completely eliminate a potential risk by either not engaging in certain activities or changing their processes to avoid exposure to the risk. This approach aims to eliminate the possibility of a risk occurring altogether
193
Risk limitation
Strategy in risk management aimed at reducing the severity or impact of risks that cannot be entirely avoided. Instead of completely eliminating a risk, businesses focus on minimising its potential negative effects through mitigation strategies, such as preventive measures or setting limits on the scale of exposure
194
Risk transference
A risk management strategy where a business shifts the responsibility for a particular risk to a third party. This typically involves passing the financial or operational burden of a risk to another entity, such as an insurer, contractor, or supplier. The goal is to reduce the impact of the risk on the business by having another party assume responsibility for it
195
Business continuity
The ability of an organisation to maintain essential functions during and after a disaster or disruption. This involves planning and preparation to ensure that a company can continue delivering products or services to customers even in the face of unexpected events, such as natural disasters, cyberattacks, or other crises
