risk management Flashcards
what is a business risk
a circumstance of factor that may have a significant negative impact on a business’s operations or profitability
what is a business crisis
a situation where unstable conditions exist, often unexpected, leading to operational or financial problems
what are the main types of risk in a business
- production risk e.g. machinery breakdowns
- human resources risk: e.g. employee strikes
- product risk e.g. faulty product
- environmental risk - pollution leading to backlash
what are quantifiable risks
risks that can be measured, often insurable e.g. operational risk (machinery breakdown)
what are unquantifiable risks
risks that be cannot be measured in financial terms e.g. damage to reputation from product failure, economic downturns affecting a business
what is risk management
the process of understanding and minimising risks that could negatively impact a business
what are some methods to minimise risks of a business
- finding alternate suppliers
- workforce training
- quality control
what are the key steps in the risk management process
- identifying and analysing the risk
- measure the likelihood
- assessing potential business impact
- deciding actions to eliminate or reduce the risks
what strategies can a business use for risk management
- insurance
- safety measures
- regular IT system backups
- hiring risk managers
examples of contingency planning
- fire drills
- backup supplier arrangements
- keeping backup data
what is contingency planning
a plan devised for unexpected situations to minimise negative impacts and resume normal operations
how does a business decide which events to plan for
- likelihood
- potential damage
what are examples of crises businesses might prepare for
- high staff turnover
- strikes
- product contamination leading to recalls
what are the negatives of contingency planning
- expensive and time consuming
benefits of contingency planning
- helps prepare business for risk
- ensures quicker recovery from crises
- reduces long term costs
