Chapter 13: Risk-management in practice

Question 1

What are some consequences of operational risks?

Answer 1

1. increased costs, e.g. repairing or replacing machinery
2. reduction in operational efficiency
3. increasing the unit cost of production
4. reducing productivity levels
5. business interruption, no delivery of goods and services
6. Customer dissatisfaction
7. compensation payments
8. reputational damage / media enquiries
9. a compliance breach, e.g. injury or death of an employee or third party

Question 2

Give examples of loss events

Answer 2

• Absence of loss of employees
• employee negligence
• fire
• human error
• IT systems failure
• machine breakdown
• power failure
• weather related damage

Question 3

What is cyber risk management?

Answer 3

Cyber risk-management is concerned with all forms of digital risk. Cyber risk-management traditionally falls within the field of information assurance (IA), the practice of assuring that an organisation’s information and technical resources are:

1. secure,
2. only accessible to authorised personnel
3. are used only for the purposes they are intended
4. are complete and intact.

Question 4

What is supply chain risk management?

Answer 4

A supply chain is a network of organisations and people that work together to produce a good or service, followed by distributing the good or service to the end client or consumer.

Most organisations will have, and are part of, a supply chain of some form. An upstream supply chain ensures that the inputs required for an organisation to function are available, such as electricity, equipment, software or product components. A downstream supply chain ensures that an organisation can supply its goods and services to clients and consumers further down the chain towards the end consumer.

Question 5

Give examples of supply chain loss events

Answer 5

• upstream suppliers are late delivering goods and services or are unable to deliver;
• upstream suppliers do not deliver goods and services of sufficient quality;
• reputation events, where a supplier is not conforming with the moral and legal conventions of an organisation, for
• example by using child labour;
• the cost of upstream supplies increases unexpectedly, perhaps as a result of exchange rate risk;
• payment and other legal disputes with upstream suppliers and downstream clients and consumers; and
• environmental risks due to pollution caused by upstream suppliers or distributors to downstream clients and customers.