Summary
Summary Risk management
- Institution
- WJEC
Summary notes for risk management.
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Risk managementRisk – possibility of incurring loss or misfortune.
All businesses will incur some kind of risk.
What risk might a business face?
Natural disasters.
Equipment failure.
Employee error.
Supply problems.
Financial problems.
Legal challenges.
Product issues.
Insurable risks
Business interruption insurance – used to cover the risk of an incident that prevents a
business operating.
Therefore, in the case of a large fire, business interruption insurance will pay for new stock,
premises, vehicles, etc.
Uninsurable risk
These are risks that arise when the probability of the risk occurring is impossible to quantify
– so insurance companies are unable to price the risk.
Occurrences such as those which take place during civil unrest, war, are too widespread to
even consider insuring.
Types of risk
Risks can be systematic (associated with the environment) or specific (associated with particular
products).
Systematic risks could be:
An unfavourable change in the economy affecting the business i.e., Brexit.
Specific risks could be:
A product having a defect.
Risk assessment
Risk management is the process of understanding and minimising what might go wrong in an
organisation. The process includes:
Identifying the risk.
Measuring the likelihood of risk occurring.
Assessing the impact, the risk has on the business.
Deciding the action to be taken to eliminate/ reduce risk.
Preventative actions:
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