3.6.3 Scenario planning Flashcards
How do businesses deal with risk?
- contingency plans
- risk assessments
- staff consultation
- diversify product portfolio
- adaptive culture
- decision trees
- Ignore it
- market research
- financial calculations
- scenario plans
- deflect risk ie. insurance
How would the marketing function deal with risk?
- avoid over-reliance
- test marketing (sales forecasting)
How would the operations function deal with risk?
- JIC (hold extra stock)
- quality control and assurance (TQM)
How would the finance function deal with risk?
- insurance premiums
- investment appraisal and comparison
- tests
How would the HR function deal with risk?
- insurance
- recruitment plans
- succession planning
- training
- progression
- flexible working
- motivate staff
What are the methods of risk management?
1) Risk management (identifying and dealing with the risk)
2) Scenario planning (planning for unforeseen events)
3) Crisis management (handling of potentially dangerous events)
4) Do nothing
What are the steps in risk assessment?
- identify possible risk
- quantify possible costs
- attempt to quantify the probability that each risk might occur.
What are the key risks in any organisation?
- natural disasters
- IT systems failure
- loss of key staff
How would a business plan to mitigate risks?
- business continuity
- succession planning
What is business continuity?
Resilience to change after a disastrous event
In order for business continuity what must be in place?
- strong financial position to deal with short term implications
- clear lines of authority
- middle managers
- possibly a crisis team.
What is succession planning?
Planning ahead for when a leader leaves and must be replaced.
Is succession planning long or short term?
long term
What type of business is succession planning often found in?
Large MNCs
Why is succession planning important?
- ensures the new leader understands the culture and importance of the leadership role
What are some positives of succession planning?
- minimises risk
- saves costs
- plan for future
- reassures staff and customers
What are some negatives of succession planning?
- hard to implement
- doesn’t encourage entrepreneurship
- costly
How would a firm mitigate against natural disasters?
multiple suppliers
How would a firm mitigate against IT systems failure?
cybersecurity, back-up systems and have open communication with customers.
How would a firm mitigate against the loss of key staff?
- succession planning
- active internal and external recruitment
What is contingency planning?
An ongoing plan devised for an outcome other than the usually expected plan.
Why do business use contingency planning?
- minimise impacts of foreseeable events
- to plan how the business will operate after the events
What is crisis management?
The way in which management plan for and cope with unexpected crisis that poses a significant threat to the business.
What is a crisis?
1) An event that is unexpected
2) Threatens the wellbeing of a business
How do businesses handle a crisis?
- appoint a crisis manager
- recognise the authoritarian style
- determine whether the impacts will be long term or short term
- focus on activities that will mitigate or eliminate the problem
- look for opportunities
How do businesses assess a crisis?
using:
- contingency plan
- risk assessment
- PESTLE
- SWOT
- PORTERS
List the methods of reducing risk and their ‘magnitude’:
- scenario planning
- contingency planning
- risk assessment
- review PESTLE/SWOT
