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