12.2 Reasons for risk control

Question 1

What are the two ways in which an organisation may control risk?

Answer 1

1 Loss prevention tools - Lowering probability of an event occurring

2 Loss reduction tools - Reducing probability of impact of an event that does occur

Question 2

Give two examples of loss prevention tools.

Answer 2

IT firewall
No smoking policy
Segregation of duties
Door locks
Driver safety training

Question 3

Give two examples of loss reduction tools.

Answer 3

Data backup arrangements
Fire extinguishers
Whistleblowing arrangements
Burglar alarm
Motor insurance

Question 4

What are the three stages of the life cycle of a loss event?

Answer 4

Cause –> Event –> Effect

Question 5

What are the three common causes of loss events?

Answer 5

1 People
2 System and process failures
3 External events

Question 6

What are the three common effects of a loss event?

Answer 6

1 Human - e.g. injury
2 Resources - e.g. financial, assets
3 Reputation

Question 7

How can risk control tools help an organisation to seize opportunities?

Answer 7

By protecting cash flow, which is needed for exploiting new opportunities.

Question 8

What two examples does Ashby give of risk control tools that are also mechanisms for exploiting new opportunities?

Answer 8

Market research (to identify opportunities)
Flexible manufacturing / IT systems