Business component 3- Risk

Definition of a Risk in a business
Business risks are circumstances or factors that may have a significant impact on the operations or profitability of a given business.
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Internal risks faced by businesses
Public relations failure
Product failure
Failure of equipment
Employee error
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External risks faced by businesses
Natural risks
Supply chain problems
Economic factors
Legal challenges
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What type of risks are insurable?
Quantifiable risks (can be planned for and measures can be taken to minimise its risk on the business)
(Financial risk, Operational risk, Strategic risk and Compliance risk)
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What is a risk assessment matrix?
determines the probability and impact of the risk using the formula
risk = hazard x exposure
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What type of risks are hard to plan for?
Non-insurable risks
Arise when the probability of the risk occurring is impossible to quantify and therefore insurance companies cannot price the risk.
These include- War, Civil Unrest, floods
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Risk management process
1) the identification and analysis of risks to which the organisation is exposed
2) a measurement of the likelihood of the risks occurring
3) an assessment of potential impacts on the business
4) deciding what action can be taken to eliminate or reduce ri
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Risk management methods
introducing safety or security methods
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ISO 31000
Provides businesses with generic guidance on how to manage risks.
Can help firms to improve the identification of risks and effectively and efficiently allocate resources for their management, so helping them to achieve their objectives.
Not com
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What is meant by a risk assessment?
A structured way of thinking about how a potential situation in the future may cause harm to people, property, or the environment.
It is needed due to the law requiring a suitable assessment of risks in order to identify the measures needed to comply wit
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When should a risk assessment be completed?
When the activities or situations proposed present a significant risk of injury or ill-health
When you don’t have one already in place
When the review date for the one in place currently has passed.
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Difference between risk assessment and risk management
Risk assessment is the identification of a potential risk, whereas risk management is the plan on how to deal with he risk
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Risk Assessment methods
Risk Register (records each risk, the probability of their occurring, and their likely impact)
Vulnerability mapping of the risk
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What is a contingency plan?
A contingency plan is a plan of action to be followed in the event of an emergency or crisis occurring which threatens to destroy or significantly disrupt the continued operation of normal business activities.
The plan should restore to normal, or as nea
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What are the key steps to contingency planning/ what it should contain?
Identify potential disasters.
Assess the likelihood of them occurring.
Minimise potential impact by protecting fixed assets, people, reputation, public goodwill
Plan for continued operations so the business can begin trading again as soon as possible
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Pros of contingency planning
An effective contingency plan will minimise the risk to the business.
Limits the damage caused by a crisis.
Limits the damage to a business's reputation.
It will help maintain staff morale in case of an emergency.
reduces the impact on customers ad protec
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Cons of contingency planning
The potential of it being a waste of money
Takes up time that could have been spent elsewhere
May encourage inflexibility
The plan will need constant updating due to the changes in the business environment
Events are highly variable therefore no gu
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What is crisis management?
Crisis management refers to the actions taken by an organisation to maintain its credibility and good reputation after a situation has occurred, which may affect it in a negative manner and therefore reduce sales of its products or services.
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How is contingency planning different from crisis management?
Contingency planning is planning for an unforeseen event.
Crisis management is how the business will manage the impact this even will have on the business.
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What are the 3 approaches a business can take to manage a risk
Risk management: identifying and dealing with the risks threatening a business
Contingency planning: planning for unforeseen events in the future
Crisis management: handling events that have impacted the businesses reputation negatively
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Other cards in this set

Card 2


Internal risks faced by businesses


Public relations failure
Product failure
Failure of equipment
Employee error

Card 3


External risks faced by businesses


Preview of the front of card 3

Card 4


What type of risks are insurable?


Preview of the front of card 4

Card 5


What is a risk assessment matrix?


Preview of the front of card 5
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