Risk and uncertainty

Pure risk

eg. factory fire

Only results in a loss of some kind

Event that is beyond control of people

Dealt with trying to minimise effect

Speculative risk

Carries possibility of gain or loss

Uncertainty

Higher uncertainty = higher risk

Higher uncertainty and risk = higher level of planning needed to make decision

Current state of knowledge of business manager is imperfect

External uncertainty

Political- new government =new policy?

Competitive- What are competitors doing? Going to do?

Economic- consumer and business confidence, government policy and interest rates

Internal uncertainty

Stakeholders- shareholders, employees and customers

Technological-what we have to cope? Stick with old or buy new?

Organisational and HR- structure, culture and staff ability

Managing risk

Political- being and staying aware of policy intentions

Competitive- SWOT analysis, ongoing market research and use of tools like boston matrix

Economic- analyse economic indicators and use of time series to predict trends.

Organisational- how depts impact each other, foster 'change' culture and incentives to staff

Stakeholder- consult as appropriate

Technological- lease, second hand or most up to date

Risk

Quantifiable risk is likelihood of a predictable risk occuring

Unquantifiable risk is risk of event that's unexpected