Chapter 14 Flashcards
What are the two types of risk
Downside risk - outcome is worse than expected - what could go wrong?
Upside risk - something could go better than expected - best case scenario
What method can be used to assess the scale of risk
A risk map
assess the impact
Assess the probability
Which model is used to develop a response to risk
TARA
Transfer
Accept
Reduce
Avoid
What does a risk register record (7)
How is it ordered
Description of the risk
Nature of the risk
Parties affected by the risk
Quantification (likelihood and impact)
Appetite for risk
Risk treatment and control
Potential action to further reduce the risk
RAG - red amber and green
What are the 4 orientations towards risk
Defenders - low risk, tried and tested solutions
Prospectors - prefer results and being pro-active, happy to take risk risks
Analysers - enjoy core of stable products and markets as a source of change - likely to follow change but not initiate
Reactors - no consistently defined strategy but somehow muddle through, almost oblivious to risk
How can risks be categorized to be managed easier and out into a risk register
Strategic risk - long term strategic objectives and potential variability of returns
Operational risk - arising from day-to-day activities of the organization
Hazard risk- risk of natural event, actions of employees and disasterous events
Financial risk- gearing, FX risk, credit risk etc
Compliance risk - failing to comply with laws and regulations
What are the categories of risk map
Probability and impact
HP LI - loss of low level staff
HP HI - failure of key system or loss of key customers
LP LI - loss of small customers
LP HI - loss of senior or specialist staff
What types of controls can be used to reduce risk
Prevent - introduce fire safety procedures
Detect - fire detection system
Correct - install sprinkler system
Direct - instruct on use of fire extinguishers
