Risk management Flashcards
What is risk
A factor that has a significant negative impact on operations or profitability of a business
Where can the risks come from
External or internal risk factors
What are quantifiable risks
1Risks that can be reasonably predicted and the impact on the business can be measured
2 the risks can be planned for to minimise effects
3 many can be incurable risks
Why is risk inevitable
Nothing in business is entirely predictable
List 4 types of quantifiable risks
1 financial - probability of a major customer goes bankrupt and doesn’t pay you
2 operational - breakdown of key equipment
3 strategic - a new competitor
4 compliance risk - responding to new legislation
What is business interruption insurance
Covers the risk o an incident that prevents a business operating eg a fire
What are uninsurable risks
When the risk of it occurring are impossible to quantify so insurance companies are unable to price the risk eg war, and managers who take extreme risks
List internal risks
1 public relations
2 product
3 failure of equipment
4 employee
List external risks
1 natural disaster
2 supply chain problems
3 economic
4 legal challenge
What is risk management
Process of understanding and minimising what may go wrong by controlling and minimising threats of efficiency, profitability and success of operations
What is the management risk process
Identify and analyse risk to business
2 measurements of
Likelihood of risks happening
3 assess potential impact on business
4 decide on action to eliminate or reduce risk
What is a risk register
Document produced at the end of the risk management process - it will be a list of risks to the business and the potential impact
What is the next step
Analyse and try to remove risk- in a large business this will be done by risk managers who put systems in place to reduce negative outcomes
Provide examples of prevention actions
1 train staff appropriately
2 regular back up of IT systems
3 put in robust quality control
4 install sprinkler system
5 take out insurance against financial loss
What is a contingency plan
Plan of action in the event of an emergency which could disrupt normal business. The plan should restore to normal or as near to normal as fast as possible
