Risks - P2 Flashcards
Define Business Risk.
Business risk refers to the potential for a business to face challenges that could affect its overall strategic objectives and profitability.
Examples in TrimAyr.
Expanding into new markets (e.g., online delivery to younger audiences).
Changes in customer preferences.
Economic downturns affecting consumer spending.
Risk Identification.
Financial Risk: Loss of income or revenue due to changes in the market or competition.
Strategic Risk: Long-term risks associated with a business’s direction (e.g., shift from premium to budget brand).
Market Risk: Risks associated with market conditions, customer preferences, or competitor actions.
Mitigation Strategies.
Diversify revenue streams (e.g., create new services or products).
Use scenario planning to anticipate changes in the market.
Conduct regular competitor analysis to adjust strategy.
Define Product Risk.
Product risk is the potential for harm or failure associated with the products a company offers, including safety, quality, and functionality concerns.
Examples in TrimAyr.
A new hair dye causing allergic reactions.
The introduction of a new service (e.g., express styling) that fails to meet customer expectations.
Risk Identification.
Safety Risks: Products or services that could harm customers (e.g., chemical burns from hair treatments).
Quality Control Risks: Failure to meet consistent product quality standards.
Legal Risks: Non-compliance with industry regulations (e.g., hair product ingredients).
Mitigation Strategies.
Implement stringent quality control procedures.
Conduct product testing and safety assessments before launch.
Ensure all products meet relevant safety and legal standards (e.g., certifications).
Define Reputation Risk.
Reputation risk refers to the potential loss of a company’s good name and public trust due to negative publicity, poor customer experiences, or unethical behaviour.
Examples in TrimAyr.
A viral social media post highlighting a customer’s negative experience.
Poor performance of a salon or service affecting the overall brand perception.
A controversial partnership (e.g., with a low-cost airline) damaging brand perception.
Risk Identification.
Customer Perception: How customers view the brand based on their experiences.
Public Relations Issues: Media or social media affecting the brand’s image.
Brand Alignment: Any mismatch between the brand and its actions, partners, or products.
Mitigation Strategies.
Maintain transparent communication with customers.
Regularly monitor and address social media feedback.
Align brand values with business practices, partnerships, and products.
Define Operational Risk.
Operational risk refers to the potential for loss resulting from inadequate internal processes, systems, or people, or from external events.
Examples in TrimAyr.
System failures (e.g., booking system crashes).
Poor performance by part-time trainers or stylists.
Supply chain disruptions affecting product availability.
Risk Identification.
Internal Process Risks: Inadequate systems or processes for booking appointments or managing services.
Employee Risk: Employee turnover or poor performance, particularly among freelance trainers.
System Risk: Technological failures affecting service delivery or client satisfaction.
Mitigation Strategies.
Implement robust internal controls and processes.
Provide training and development programs to staff to reduce human error.
Have backup systems in place to manage technological failures.
Define Contractual Inadequacy Risk.
This risk refers to the potential for loss or dispute due to poorly drafted contracts or inadequate terms in agreements.
Examples in TrimAyr.
Contracts with suppliers not meeting the required service levels, leading to product shortages.
Franchise agreements with clauses that are not favourable or clear regarding performance expectations.
Risk Identification.
Ambiguous Terms: Contracts that are unclear or poorly worded, leading to misinterpretation.
Non-Performance Clauses: Lack of enforceable terms to ensure that parties meet their obligations.
Legal Compliance: Risk of contracts not aligning with applicable laws or regulations.
Mitigation Strategies.
Use clear and precise language in contracts.
Regularly review contracts with legal professionals to ensure they remain compliant and enforceable.
Include clear performance and penalty clauses for non-compliance.
Define Technology Risk.
Technology risk refers to the potential failure or disruption caused by technological systems or tools.
Examples in TrimAyr.
AI booking system crashes, leading to missed appointments and dissatisfied customers.
Inability to protect customer data from cyber-attacks.
Risk Identification.
System Downtime: Failure of key systems (e.g., website, booking system).
Cybersecurity Risks: Data breaches or cyber-attacks on customer information.
Integration Risks: New technology not integrating properly with existing systems.
Mitigation Strategies.
Implement reliable backup systems to reduce system downtime.
Invest in cybersecurity measures such as encryption and firewalls.
Conduct regular system testing and updates to ensure smooth integration.
