Risk Assessment Flashcards
def risk
possible future events and their probabilities
is risk always negative?
no, can be positive as well
def internal risks
= preventable, undesirable. they arise from the organisation itself.
give 3 examples of an internal risk
- breakdown in routine operations
- unethical behaviour (managers)
- counterproductive work behaviour (employees)
def strategy risk
voluntary risks that arise from organisation’s pursuit of strategic goals
state 3 sources of strategic risks
- entrepreneurial orientation
- R&D activities
- financing growth with debt
def external risks
arising from events outside the organisation
uncontrollable
negative
give 3 examples of an external risk
- natural disaster
- policy change
- macro-economic shift
what are the 3 sources of external risks?
- natural and economic disasters - immediate impact
- competitive risks - medium term impact
- geopolitical and environmental changes - long-term impact
what are the three steps to managing risks?
- identification
- id key environmental factors
- define possible future boundaries
- account for disruptive innovation - asses their impact (using stress tests, scenario planning, or war-gaming)
- mitigate the risks (reduce the impact cost-effectively)
def megatrends
Large-scale movements that are typically slow to form but have wide- and long-range impacts
def weak signals
Advanced signals of future trends (usually in a form of unstructured, fragmented and „unusual“ bits of information)
def inflexion points
Moments when trends shift in direction, for instance turning sharply upwards or downwards
state 6 possible megatrends in the future
- impactful tech
- demographic change
- rapid urbanisaiton
- amplified individuals
- economic power shifts
- climate and resource security
def disruptive innovation
technology advances that make a radical change in the way business is done
how does disruptive innovation change an industry? (3)
- creates lower entry barriers
- increases buyer power
- disintegrates boundaries
in what 3 ways does tech have a macro impact
- future of work
- new business models
- regulatory changes
in which 3 areas is extra technological innovation needed?
- resource scarcity
- global warming
- demographic changes
def black swan
unforseen events that are a surprise and have an extreme impact.
is the covid pandemic a black swan?
no, bc pandemic are actually expected, just the timing is unknown
what is a stress test used for?
used to identify vulnerabilities, set risk limits and develop contingency plans for major changes
define the stress testing model
input: macroeconomic variables and scenarios
calculation: correlation factors
output: losses and capital
define the reverse stress testing model
input: target capital or tail loss
caluclation: correlation factors
output: macroeconomic variables and scenarios
def war-gaming
assessment of a firm‘s vulnerability to disruptive technologies, competitive pressures, and stakeholder reactions
state and explain the three stages of war-gaming
- the battleground
- Collection of all the necessary data on competitors and markets
- Review of current strategic plan - war simulation
- Teams role-play key market players (action - reaction - counteraction)
- In the process they learn to identify key threats and opportunities - evaluation of the results
- Refinement of the current strategy
- Development of contingency plans against major threats
def scenarios
future possible (alternative) environments
what are scenarios used for? (4)
- make sense of a complex situation
- develop a strategy
- anticipate changes in the environment
- facilitate learning and adaptability in the organisation
state the 4 stages of scenario-making
- define scope (two dimensions - e.g. cooperation vs confict + weak state vs strong state)
- identify key drivers (define each part of the matrix)
- develop stories
- identify impacts of each story
state 4 possible scenarios for 2030.
- stalled engines (pandemic in Asia)
- Fusion (collaboration of China and US, restructuring of EU)
- Gini-out-of-the-bottle (bigger inequalities between countries, social tensions)
- nonstate world (new tech, non-state actors lead global issues)
def risk matrix
graphical representation of probability and severity of the risks in the environment
what are the possible decisions what to do with risks? (4)
- avoid (go into new markets)
- reduce (invest in R&D)
- accept
- transfer (insure against)
