Impact of risks on organisations Flashcards
Describe how RM helps to achieve core STOC processes
Better analysis of Strategic risks means improved strategic decisions
Improved visibility of risks associated with Tactics, consideration of alternative tactics
Events that disrupt Operations are identified and steps to reduce likelihood/impact taken
Risks associated with Compliance with statutory and customer obligations reduced
“Impact” is defined as the effect of events on FIRM. What does FIRM stand for?
Finances, infrastructure, reputation, marketplace
What type of risk is closely associated with insurance? Why?
Pure or Hazard. The outcome is always negative.
Attaching risks to objectives alone may not be adequate. Why?
Risks can also be attached to key dependencies, core processes and stakeholder expectations. Objectives driven approach can lead to viewing risks outside of the context that gave rise to them.
What is the benefit of an objectives-driven approach?
Allows consideration of opportunity and control risks. Dependency-focussed approach only accounts for hazard risks.
Why is attachment to dependencies and stakeholder expectations becoming more common?
Seen as straightforward - key components of the org and its external context are identified and then subject to SWOT analysis.
Explain what is meant by the appetite of an organisation.
The value of the resources it is willing to put at risk in the short term e.g. new product development or process.
Describe the risk vs reward maturity cycle
Start-up = high risk, low reward
Growth = high risk, high reward
Mature operation = high reward, low risk
Decline = Low risk, low reward
Why must organisations quantify the value of resources put at risk?
It must be within the appetite of the organisation. The organisation must ensure it has capacity to deal with adverse events that may arise.
Describe the rewards associated with Hazard, Controls and Opportunity risk management.
Hazard = fewer disruptions
Control = projects delivered on time, within budget and to specification
Opportunity = Fewer unsuccessful products, greater profit, reduced loss associated with new activities
What factors affect risk attitude?
The sector, the nature and maturity of the marketplace and the attitudes of individual board members.
What is meant by risk attitude?
Organisations long-term view of risk.
How might risk attitude vary at different stages of the maturity cycle?
Start-ups are likely to take an aggressive approach to risk, whereas an organisation in decline is likely to be more risk averse
