302 risk management Flashcards
what is a risk
- anything that negatively impacts a business profits and operations
identity internal risks business are likely to encounter
- product failures
- failure of equipment
- employee error
- public relations failure
identity external risks business are likely to encounter
- supply chain problems
- economic factors
- legal challenges
- natural disaster
identify insurable risks
- financial risk
- operational risk eg.breakdoown of key machinery
- strategic risk eg. new competitor entering a market
- compliance risk eg. responding to the introduction of new health and safety legislation
identify uninsurable risks
- repetitional risk
- regularitory risk
- trade secret risk
- political risk
- pandemic
difference between insurance and unsureable risks
uninsurable risks risks that are impossible to quantify so cannot be covered by insurance
insurable risk risks that an insurance company can cover because they are measurable and sometimes predictable- quantifiable
what is a risk assessment
- the identification of hazards that could prevent a business from conducting business
importance of a risk assessment
- risk assessments are a legal requirement
- can be costly for a business if they fail to have necessary controls in place
- not only face financial loss- but loss in production time, damage to equipment, negative publicity etc
what is a contingency plan
- a contingency plan is a course of action to be followed in event of an emergency or crisis occurring which threatens to destroy or significantly disrupt the continued operation of normal business activities
- this plan a should restore, or as to normal as possible, the business day-to-day functions
what does a contingency plan include
- a risk registrar (list of potential risks with their levels if predictability/ severity)
- contingency funds
- alternative production arrangements
- allocating responsibilities to managers/employees
- dealing with public relations in the events of a crisis
what is criis management
- is a un-foreseen event that threatens the business
- a well run business will have a plan in place to deal with the unexpected, reduce the impact and get back to normal as soon as possible
how can business respond to a risk
- preventable measures eg.sprinkler system
- insurance
- multiple suppliers
- loyalty cards, advertising campaigns, and promotions to deal with economic factors like recession
what does responding to a risk depend on
- the size and likelihood of risk
- the capital available
important of risk management / contingency plan to business
- minimises risk/ damage caused by crisis- business doesn’t lose reputation- profits/dividends maintained
- helps maintain staff morale and provides the continuity of goods/services
- reduces impact on customers and protects against potential losses
drawbacks of risk management / contingency plan to business
- plan for recovery needs to be tested and practised> large business- several people co ordinating the plan- increased costs through training/time spent
- if they pay insurance and nothing goes wrong- could be seen as a waste of money
