These notes are based of the Business Studies Grade 11 Learner’s Book written by Estie Meyer and Zain Strydom. They summarise risk management.
They include information on:
-What is risk.
-What is risk management.
-Risk and strategic management.
-Risk management in practice.
-Types of risk...
Analyzing the probability of an event taking place and then pro-active planning to minimize the
possible negative impact of the events on the business.
A business also wants to look at the events that might have a positive outcome and then plan to
capitalize on this possibility.
→ The world of business does not offer a lot of guarantees that specific outcomes will be
achieved because there is a high degree of uncertainty linked to:
o The economy of the country: will there be economic growth or will the economy
enter recession,
o The economy on a global level: Brexit or the election of Trump in the USA having the
impact of businesses in South Africa and elsewhere in the world. Biden vs. Trump in
2020 president elect.
o Political developments: corrupt government officials and the so-called state capture
o Technological advances: ongoing technology technological developments leading to
large scale automation in factories.
o Changes in legislation: impact that changes in legislation such as BBBEE and UIF have
on business.
o Changes in consumer demands: customers moving towards healthier food options
or demanding cleaner energy.
An entrepreneur should manage and actively plan for a variety of risks in the business.
Risk can be seen in a number of ways:
-Risk as a mere uncertainty
-Risk as a threat
-Risk as an opportunity
1. Risk and strategic management:
Risk management is to ensure a balance between business opportunities and threats. It should be
integrated into the strategic planning of a business.
o Strategic planning refers to formulating the business’ vision, mission and value statement,
organizational structure, and the goals and objectives of the business.
o The business operations include aspects such as implementing policies, managing processes,
monitoring, and controlling daily activities and satisfying the needs of customers to ensure
profitability.
o Risk management is implemented to ensure the strategic plan and business operations are
aligned.
, Chapter 12 – risk management
Interrelationship of business strategy, risk management and busines operations:
Strategy:
vision, mission,value statement,
organisational structure, goals and
objectives.
Risk managment:
allignment between business strategy
and business operations.
Business operations
Implementing policies, managing
processes, monitoring and controlling
daily activities.
Risk
managment:
Business
Strategy
operations
2. Risk management in practice:
Risk profile: Risk culture:
Definition: Definition:
Degree that a business is willing to accept risks Collective attitude in the business towards
in pursuit of creating value or to achieve the accepting risks.
businesses goals.
The result of the businesses practices such as
This is directly related to the strategy of the rewards for risk-taking or risk-avoiding
business. Any business should try to achieve a behavior.
balance between business growth, possible
returns, and risks.
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