Risk Management Flashcards
Risk
- Definition
- Possibility of loss or injury to an individual
- Can also be a hazard
- Does not necessarily have to be related to primary service
Types of Risk
- Business Risk
- FInancial Risk
- Personal Risk
Types of Business Risk
Revenue Risk
Operational Risk
Non-Operational Risk
Revenue RIsk
- What is it? What kinds?
(Business Risk)
Related to commercial and professional aspects of pharmacy practice
- Impacts the profitability of the pharmacy
Two kinds
- External (Little to no control)
- Internal (Controllable)
Revenue RIsk
- Internal
Controllable
- Did not buy enough product = lost sale
- Failed to renew license = closure
- No contingency plan for when licensee develops long term illness = temporary closure
Revenue RIsk
- External
Limited to no control
- Business Model Changes
- New Pharmacy Opens up Next Door
- Medical Clinic next door closes
- Drug shortages
Operational Risk
- What is it? What kinds?
(Business Risk)
If you were not running this business then the risk would not occur
Internal Fraud
External Fraud
Internal
External
Operational Risk
- Internal
Staff leaves
Computers crash
Patient safety event
Harm to staff
Defamation
Operational Risk
- External
Robbery
Break and Enter
Cyber Crime
Operational Risk
- Internal Fraud
Deception for personal gain done by employees
- Human resources (false credentials, abusing breaks)
- Payments (false claims, stealing payments)
- Theft (cash, supply)
Operational Fraud
- External Fraud
Deception for personal gain NOT done by employees
- Shoplifting
- Credit card fraud
- Supplier / Shipping fraud
- Health and safety
Non-Operational Risk
- What is it? What kinds?
Risks that would occur even if the business was not running or did not exist
Non-Operational Risks
Non-Operational Risk
Availability of capital (Loans, investors)
- Is the business can not be funded properly there is lost revenue
Economics of the community
Changes in demographics
Pollical policy
Financial Risk - Debt Capital
- What is it?
Money used to start a business or keep the business running
- If the money did not exist the business would not exist
Financial Risk - Debt Capital
- Personal Guarantee
If the business ever defaults on the loan then the individual names as the guarantee is responsible for it
Financial Risk - Debt Capital
- Shares
Shares (ownership) for private corporations have restrictions regarding sales
- If shares are lost then the business does not profit
Financial Risk - Debt Capital
- Shareholder Loan
Can ask the shareholders for a loan
- A more flexible repayment schedule than a bank loan
- Shareholders become at risk of losing money
Financial Risk - Debt Capital
- Financial Leveraging
Risks involved in other investments from the business / shareholder
- If the business invests in a second business then there is risk associated if that second business fails
Personal Risk
- What is it? What kinds?
Risks that the individual carrys
Personal Risk
- Invested funds
- Borrowing personally
- Guaranteeing loans personally
- Issues with partners (Death, divorce, health)
- Reputation
Risk Management
- Steps
- Identifying / Exploring / Understanding risks
- What causes risks
- What are the consequences of that risk - Risk Mitigation
- Eliminating or decreasing the likelihood of the risk occuring / the outcome of the risk - Risk Transfer or Risk Sharing
- Transferring risk to third party like insurance
Managing Risk
- Identifying Risks
Create a risk register or dashboard
- Systematic approach to list potential risks
Determine potential causes
- Why / how would they occur
- How likely is it to occur
What are the consequences
- Who is affected
- Type of damage
Managing Risk
- Understanding Risk
First look at historical information
- Look at sales in the last 5 years, how has it deviated from the average
Use a risk tool to calculate a criticality score
Can use more complex calculations / resources
- Insurance providers have claims and incidence data
- Bankers
- Research location specific data
Criticality Score
- Formula
Likelihood x Impact
Risk Mitigation
- Steps
Avoid - Do not get involved
Keep - Assume the risk (Show awareness)
Mitigate - Reduce likelihood or impact
Transfer - Make someone else responsible for failures
Risk Mitigation
- Where to start
Use risk matrix to determine priority areas
Risk Mitigation
- Medication Errors
- Continuous quality improvement
initiatives - Root Causes
Risk Mitigation
- Shoplifting
- Cameras
- Security
- Locked displays
- Security tags
Risk Mitigation
- New competition
- Enhanced marketing plans
- Focus on niche opportunities
Risk Mitigation
- Disaster
- Business continuity plans
Risk Transfer
- Insurance Covers
Commercial Property
- Fires, Business interruption
General Liability
- Accidents, Negligence
Professional Liability
- Malpractice
Life / Disability of a key person
Automotive
Cybercrime
Directions and Officers Liability
Umbrealla
- Broad coverage that applies when other insurance limits are met
General Liability
- Examples
- Accidents
- Injuries
- Negligence
- Defamation
Risk Transfer
- Policy Coverage
- What is covered and how much is covered
- Exclusions and limits
Risk Transfer
- Premium
- How much the insured pays for the coverage
Risk Transfer
- Deductible
- How much the insured pays before insurance coverage is applied
