Risk Management Flashcards
1
Q
Risk management
A
- Analysing the probability of an event taking place then proactively taking initiative to minismise the damage or take advantage of the opportunity
- Risk can be an uncertainty, threat, or opportunity
- Ensuring a balance between business opportunity and threat
- Must be included in the businesses strategic planning(vission, mission, values, organisational structure, goals, objectives)
- Ensures the business strategy and operations are aligned
2
Q
Business operations
A
- Implementing policies
- Managing processes
- Monitoring and controling daily activities
- Satisfying the needs of customers for profitability
3
Q
Risk profile
A
- The length in which the business is willing to go to achieve business goals or in creating value
- Directly related to the strategy of the business
4
Q
Risk culture
A
- The shared attitude toward taking/accepting risks
- Is the result of the business’s practices(reward for taking risks or risk-avoiding behaviour)
5
Q
Types of risks
A
- Operational risk
- Financial risk
- Country risk
- Reputational risk
- Strategic risk
- Environmental risk
6
Q
Operational risk
A
- Risk involved in the internal operations of the business
- Employees/management
- Processes/systems
- Organisational structure
- Product development
- Data storage and security
7
Q
Country risk
A
- Risk associated with running the business in a certain country
- Political events
- Economic conditions
- Stability/instability within country
8
Q
Environmental risk
A
- Can be business envirnment risk or physical environmental risk
- Physical environmental: floods, droughts, traffic, crime rate in certain areas
- Business environmental: Socio-economic factors like unemployment, competition, technological advancements
9
Q
Financial risk
A
- Credit risk: debtors not paying
- Fluctuating exchange rates affecting imports/exports
- Sovency
- Increased interest rates
- Bad debt
10
Q
Strategic risk
A
- Risk directly associated with the business strategy
- A poorly communicated vission/mission/value statement
- Unrealistic standards/goals
- Poor organisational structure
11
Q
Reputational risk
A
- Damage to business’s reputation due to business practices
- Complaints on social media
- Associating with unethical businesses
- Causing damage to the environment
12
Q
Managing risk
A
- Business must analyse the kind of risk and its potential impact it must develop strategies to deal with the risk
- Addressing the business’s weaknesses
- Capitalising on business’s strengths
- Exploiting competition’s weaknesses
13
Q
Four steps of managing risk
A
- Risk assessment
- Risk management policy
- Risk response
- Risk reporting
14
Q
Risk assessment
Identifying risk
A
- Identifying risk: looking at areas of uncertainty in business, implement a methodical approach to identify all significant activities n any risks that flow from them
- Stakeholder consultaion: is a third party is identified as a risk, a consultation must be held
- Auditor: internal and external auditor must identify any risks, could also check if business dealt w risk properly
- Scenario planning: Simulations to assess all “what ifs” n plan accordingly to all of them
- Survey: A survye could identify risks by asking questions to all relevant parties
15
Q
Risk assessment
Description of risk
A
- Once risk has been identified it must be described in detail to ensure all parties understand
