CHAPTER 2 RISK IDENTIFICATION Flashcards
What is risk identification?
Risk identification involves recognizing the risks that a company is facing. It is a crucial step in the risk management process, as only identified risks can be assessed and addressed.
What are the ideal requirements for risk identification according to Diederichs?
Ideal risk identification, according to Diederichs, should meet the following requirements:
- Complete and correct identification of risks.
- Early identification for timely responses.
- Substantial and efficient identification of relevant risks.
- Systematic and flexible identification as an ongoing process.
- Prudent identification without underestimating manageable risks.
- Minimization of opposition to the identification process.
Is it possible to identify all risks?
No, it is not possible to identify all risks. Some risks may remain unidentified despite efforts to identify them.
What should be done after identifying risks?
After identifying risks, they should be promptly documented, for example, through a risk inventory or risk register.
What is a prerequisite for successful risk identification?
A prerequisite for successful risk identification is a risk typology.
What are some types of risks?
-Enterprise risk (Financial risk Operational risk)
-Environmental risk (Economic risk, Industry risk, Political risk, Legal risk ,Social risk, and more.)
-Natural hazards (e.g., earthquake, flooding, fire)
What are some instruments suitable for risk identification?
Some instruments suitable for risk identification include:
Technical and organizational instruments:
Checklists and questionnaires
Statistics
Building/floor plans
Flow charts
On-site inspections
Employee trainings
Environmental analyses:
Product lifecycle/portfolio analysis
Industry analysis
Competition analysis
Business analyses:
Forecasting
Organizational analysis
SWOT analysis
Balanced Scorecard
Forecasting techniques:
Gap analysis
Scenarios
Delphi method
Historical analogy
Analytical models:
Fault tree analysis
Simulation models
Sensitivity and scenario analysis
Input-output analysis
Strategic foresight
What is an example of a risk identification instrument?
One example of a risk identification instrument is questionnaires.
Explanation:
Questionnaires are a versatile tool for risk identification, gathering information from many respondents. However, they may primarily identify apparent risks and sources of errors, rather than uncovering hidden or less obvious risks.
What is an example of a risk identification instrument?
An example of a risk identification instrument is industry/competition analysis.
Explanation:
Industry/competition analysis: Assess competitive landscape, use Porter’s five forces, monitor competitors for risks and opportunities.
What is an example of a risk identification instrument?
An example of a risk identification instrument is the Delphi method.
Explanation:
Delphi method: Structured survey with expert panel, anonymous participation, and feedback loop. Useful for complex risks, requires effort.
What is fault tree analysis and how does it work?
Fault tree analysis is a top-down analysis technique used for risk identification.
It starts by considering a potentially “faulty” system, such as the risk of lower-than-planned profits.
Through a recursive analysis, primary, secondary, tertiary, and other factors are identified that can lead to or contribute to the occurrence of the fault, in this case, smaller profits.
The analysis clarifies how various factors interact using Boolean operators (OR, XOR, AND), aiding in the aggregation of results, including quantified risks.
The results are visualized using a fault tree diagram, which provides a graphical representation of the causal relationships within the system.
However, there are some limitations to fault tree analysis:
There is a tendency to focus on obvious and closely associated causal chains, potentially overlooking less apparent risks.
