risk management

Question 1

what is risk management?

Answer 1

practice of identifying potential risks in advance, analysing them and taking precautionary steps to minimise a firm’s exposure to the risk

Question 2

what is an opportunity cost?

Answer 2

value of the next best alternative whena decision is made

Question 3

what are the types of risk facing a business?

Answer 3

• natural disasters
• employee error
• equipment failure
• product failure
• economic factor
• legal challenges
• public relations failure
• supply problems

Question 4

how do you calculate risk score from a risk assessment matrix?

Answer 4

impact x probability

Question 5

what is a quantifiable risk?

Answer 5

a risk that can be planned for i.e., financial risk, operational risk, strategic risk, compliance risk

Question 6

what is the ISO 31000?

Answer 6

company that helps firms to improve the identification of risks, helping effectively allocate resources so businesses achieve their objectives

Question 7

what aspects of risk does the ISO 31000 consider?

Answer 7

how to minimise risk
eliminating sources of risk
acceptable levels of risk when pursuing opportunities
sharing risk with other parties

Question 8

what is a risk register?

Answer 8

record of each risk, the probability of their occurrence, which helps minimise businesses’ exposure to risk

Question 9

how does a business use a vulnerability map of risk?

Answer 9

look at the level of disruption probability (low-high) and the level of consequences (light-severe).

Question 10

what are the key roles of a risk manager?

Answer 10

implementing preventative policies that minimise a firm’s exposure to risk, but doesn’t guarantee removal of risk
-easier to apply to internal risks.

Question 11

what are insurable risks?

Answer 11

-due to chance
-definite and measurable
-predictable
-not catastrophic
(businesses pay insurance premiums to cover themselves from risks)

Question 12

what are uninsurable risks?

Answer 12

type of risks insurer is not ready to insure against as future losses can not be estimated/calculated
i.e., consumer demand, floods, technological change

Question 13

what is contingency planning?

Answer 13

agreed course of actions a business and its employees will adopt should things go wrong

Question 14

what are the main aims of a contingency plans?

Answer 14

contain/minimise damage to persons or property

allow main operational functions of the business to continue

Question 15

what are examples of contingency planning?

Answer 15

flood
fire
death of key employee
cyber attack
terror attack
pressure group activity
supplier failure

Question 16

what are the benefits of contingency planning?

Answer 16

reassures stakeholders
managers spend less time ‘fire fighting’ should a crisis occur
public relations better managed

Question 17

what are the disadvantages of contingency planning?

Answer 17

takes up valuable management time
no guarantee plans effectiveness
can encourage inflexibility
plan needs constant updating

Question 18

what are other contingency strategies?

Answer 18

insurance (regularly checked)
contingency cash fund (for sudden emergency)
alternative production facilities

Question 19

what is crisis management?

Answer 19

the process where business deals with an unexpected event that threatens to harm business and stakeholders.

Question 20

what are the three common features of a business crisis?

Answer 20

an immediate threat to the firm’s survival
unexpected
decisions have to be made quickly

Question 21

how do senior management operate in a crisis management situation?

Answer 21

lead the process and coordinate a firm’s response

plan must be communicated to everyone

Question 22

what are some evaluation points of risk management?

Answer 22

impossible to identify all threats
cost of prevention needs to be assessed against cost of event
reliable basis for effective decision making
increased stakeholder trust and confidence