Risk And Uncertainty Flashcards
What are the 3 main rements of management accounting?
Is risk avoidable?
Planning, controlling and decision making
No
What are the 7 stages of dealing with risk?
Identify Assess Map Record Evaluate Treat Report
Identify What must you first do? Examples of these sources(4) What methods do we use to identify the risks? Who do they consult with?
Collect information
Individuals, observations, reports and environmental assessment
Workshops, scenarios, brainstorming, surveys
Stakeholders, environmental analyses and strategic plans
Assess
What are you assessing?
In what ways can you quantify this?(3)
Or you can apply?(3)
The impact and likelihood of the risk occurring
Market surveys, cost-benefit analyses and the Delphi technique
Probabilities, statistical tests or sensitivity analysis
Map
Why do we map?
What two types of scales can we use?
Which risks do we manage?
To prioritise critical risk
High-medium-low or more complex
Most significant
Record What do we record the risks in? What do we list them by?(3) What must we ensure risks are? Why are risks often grouped?
A register
Risk, likelihood and consequence
Constantly evaluated
To make them more manageable
Evaluate
What is it that we’re evaluating?
Who’s call is it ultimately?
What can we do with risk?(3)
Risk against the organisations apetite for taking them
The boards
Accept, reject or manage
Treat What are the four ways we can deal with risk? If we avoid what do we do? If we reduce what do we do? If we transfer what do we do? If we accept what do we do?
Avoid, reduce, transfer, accept Withdraw from high risk activity Mitigate likelihood or impact of risk by introducing internal control mechanisms Outsource, get insurance or hedging No action necessary
Report
Who do we inform about the risk?
The whole organisation
Who’s responsibility is it?
What do departments do?
What do management deal with?
The whole organisation
Identify risks on a local level
Strategic risks
What is the best practice for company’s to adopt?
What do they do?
Who do they report to? Through who?
If combined with what will it provide a high level assurance?
Risk management group
Manage seven step process
Board, audit committee or separate risk committee
Internal and external audit
What varies in different departments?
Risk/return pay off and so the decision as to whether to take the risk
Mapping What is medium risk? (2options) What do we do for each? High risk and how to deal? Low risk and how to deal?
High impact low probability
Transfer/share
Low impact high probability
Control
High impact high probability
Mitigate and control
Low impact low probability
Accept
Attitude to risk
Why is managing risk hard for organisations?
Why are organisational objectives more complex?
What does risk also relate to?
Because people have different opportunities to risk
Because they have to please stakeholders
Missed opportunities
