Risk Management Function

Question 1

What must business pay attention to for a competitive advantage?

Answer 1

Risk business may face

Question 2

What does risk management do?

Answer 2

Identifies, assesses, controls threats as well as developing strategies on how to deal with different risks

Question 3

List possible risks

Answer 3

• Loss/damage - fire,floods,theft
• Loss of customers - changing trends, decline income, more competition
• Unforeseen circumstances
- Covid19

Question 4

Why must business identify different risks?

Answer 4

Well prepared to confront and manage - cost effective

Question 5

What must the owner do in order to identify risks?

Answer 5

Visualise what the future holds

Question 6

How must the potential future outcomes be brainstormed?

Answer 6

Decision tree technique

Question 7

What are the three types of risks?

Answer 7

1. Preventable risks
2. Strategy risks
3. External risks

Question 8

Define preventable risks

Answer 8

Controllable + avoided/managed by changing certain structures

Question 9

What are strategy risks?

Answer 9

Take risks by implementing a specific strategy - hope increase market share

Question 10

What are external risks?

Answer 10

Events businesses have no control.

Question 11

What are external risks caused by?

Answer 11

Political decisions, economic downturns, change jn trend, pqndemics

Question 12

What must be put in place for an external risk?

Answer 12

Preventative measures

Question 13

Define risk estimation

Answer 13

Management of business looks at the probability of certain risks occurring and the impact

Question 14

What is a risk profile?

Answer 14

Summary which lists all the estimates of what can go wrong, with a strategy, new product or program to mitigate it

Question 15

Who is a risk profile drawn up by?

Answer 15

Management

Question 16

How is the risk profile summary visualised?

Answer 16

Using probability studies to show impact if unsuccessful

Question 17

What is risk culture?

Answer 17

The culture of the business which cannot be controlled

Question 18

What will the employees have in risk culture based on experience?

Answer 18

Shared behaviours, values and goals

Question 19

What does risk culture lead to?

Answer 19

Type of decision made in business
Assessment on how much of the Rick can be afforded

Question 20

Name the five types of risks

Answer 20

1. Strategic risk
2. Compliance risk
3. Operational risk
4. Financial risk
5. Repetitional risk

Question 21

What is a strategic risk?

Answer 21

Business strategy becomes less effective and struggles to reach its goal

Question 22

What is a strategic risk caused by?

Answer 22

Technological changes, new competitor, shift in demand, spikes cost of raw materials

Question 23

What is compliance risk?

Answer 23

Failing to comply with existing regulations and new laws - expands

Question 24

What is operational risk?

Answer 24

Unexpected failure in a businesses day-to-day operations

Question 25

What does operational risk include?

Answer 25

Technical failure, people or processes

Question 26

What is financial risk?

Answer 26

Money is always flowing in and out of the business which increases the possibility of financial loss.

Question 27

What increases financial risk?

Answer 27

Short term debt

Question 28

What is a reputational risk?

Answer 28

Businesses reputation is damaged gas immediate loss of revenue – customers become wary

Question 29

What happens to the employees in terms of a reputational risk?

Answer 29

They may become demoralised and decide to leave. Finding good replacements will be difficult as no one will want to join the firm

Question 30

What will happen to suppliers and advertises in terms of a reputational risk?

Answer 30

Suppliers will get off at least favourable terms. Advertises, sponsors and other partners might decide they don’t want to be associated

Question 31

Name the five steps of the risk management process

Answer 31

1. Risk identification 2: risk analysis 3. Risk assessment and evaluation 4. Risk mitigation 5. Risk monitoring

Question 32

What is risk identification?

Answer 32

Identify and define potential risk that may negatively impact the business

Question 33

What is risk analysis?

Answer 33

Gain insight into the possibility of the risk occurring as well as the impact

Question 34

What is risk assessment and evaluation?

Answer 34

Further evaluation to determine if the risk is likely and acceptable to the company – return potential reward

Question 35

What is risk monitoring?

Answer 35

Follow up and review the risk process. Track and existing risks