302 Risk Management Flashcards
What is business risk?
Circumstance or factor that may have negative impact on profitability or operations of a business.
Can also be expressed as uncertainty - possibility of losses due to unexpected or expected problems and circumstances.
What types of internal risks may a business face?
Employee errors
PR failure
Product failure
Equipment failure
What types of external risks may a business face?
Natural disasters
Supply chain problem
Economic factors
Legal challenges
What can risk lead to?
Reduced profits and Competitive disadvantage
What can avoiding or trying to foresee risks lead to?
Employee satisfaction
Shareholder confidence
Business keep running
Safeguarding long term investment
What is a quantifiable risk?
Predictable and measurable risks that are easy to manage as insurance can be taken out.
Such as - financial risk, operational risk, strategic risk(competitors), compliance risk(health and safety).
What are uninsurable risks?
Unpredictable and unmeasurable risks.
Such as reputation all, regulatory, trade secret, political, pandemic
What are preventative risks?
Train staff appropriately, regular backup of IT system, robust quality control systems, sprinkler system.
What is contingency planning?
Plan of action to be followed in event of emergency or crisis which threatens to disrupt continued operation of normal business activities.
Should restore normal or near to normal business’s day to day functions.
What 5 things are in a contingency plan?
Risk register with severity/predictability
Contingency funds
Alternative production arrangements
Allocation of responsibilities to managers/employees
Dealing with PR
How to deal with PR in event of crisis?
Communicate and reassure stakeholders
Find and end issue (recall) - will be expensive
Adapt, supply, produce
Relaunch and regain losses
What is the inportance of risk management?
They are a legal requirement
If business fails to have necessary controls in place then it can be costly
Losses may happen in production time, damaged equipment and negative publicity
What is a risk assessment?
Identification of hazards which could negatively impact an organisation’s ability to conduct business
How could a business deal with risks using a contingency plan?
Contingency funds
Alternative production arrangements
Allocating responsibilities to managers/employees
Being able to deal with PR
Insurance
Importance of risk management and contingency planning?
Minimises risk
Limits damage caused
Reputation can be saved
Maintains staff morale
Continuity of services
