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Risk management (How can a business plan for problems (Financial (Bank…
Risk management
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insurable risks
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complex insurance - BUSINESS INTERRUPTION INSURANCE covers the risk of an incident that prevents the business operating
- e.g. fire - insurance would pay for new stock, premises etc...
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Risk management = the process of understanding what might go wrong in an organisation, trying to continue efficiency, profitability and success
Risk management process
1) identification and analysis of risk
2) Measurement of risk occurring
3) Assessing risk impact
4) Deciding how to eliminate or reduce risk
Strategies/preventive
- Insurance
- train staff well
- regularly back up ICT systems
- put robust quality control systems in place
- install a sprinkler system incase of fire
Contingency plan = plan of action to be followed in the event of an emergency which may affect the day to day business. The plan should restore the business to normal as fast as possible.
- need to firstly identify threats and estimate impact
DISADVANTAGES
- takes management time and could be expensive - i.e. backing up equipment
- ineffective if not kept up to date - needs to be changed for changing circumstances (internal/external)
ADVANTAGES
- identifies the weak points that can be improved and made more resiliant
- minimises the risk and limits the damage caused by a crisis - maintaining business reputation
- helps maintain staff morale and protects against potential losses
Internal business risks
- PR - e.g. hacked accounts
- Production - e.g. tesco horse meat
- employees - illness
- failure of equipment - e.g. alton towers
External business risks
- Natural disaster - e.g. hurricanes - small scale sole trader may have to shut down as no customers and damage
- legal challenge - e.g. copyrights laws and tighter restriction
- supply chain problems e.g. farmers may not be able to sell to wholesalers
- economic - recession or inflation
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