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MANAGEMENT CONTROL AND RISK, Actual results will turn out differently from…
MANAGEMENT CONTROL AND RISK
Risk
Definitions
Upside risk
Downside risk
Categories
Particular risks
Speculative risks
Fundamental risks
Pure risks
Types
Business risk
Product risk
Commodity risk
Operational Risk
Strategic risk
Contractual Risk
Environmental and social risk
Economic risk
Inflation, unemployment rates, international trade relations or fiscal policy
Financial risk
Credit risk
Political risk
Currency risk
Interest rate risk
Gearing risk
Negative risk
Benefit of management of risk
Well-run systems
Limitation of the impact of potentially bankrupting events
Predictability of cash flows
Increased confidence of shareholders and other investors
Risk and Return
Reduce risk, max the returns- high risk, high return
Risk and Uncertainty
Risk assessment- can tell the possible outcomes
Uncertainty- do not know the possible outcomes
Managing risk using TARA
Accept
Abandon or avoid
Transfer
Reduce or control
Risk to data and system
Human error
Data transfer
Technical error
Malicious damage
Risk taking and Reduction
Limit uncertainty and manage speculative risks and opportunities to max positive outcomes
Risk attitude
Risk appetite
Risk attitude
Risk capacity
Limitation of SA
Assumption
Problem- focus on range
Impact on long term descion
Sensitivity analysis
Analyse Risk and uncertainty
Actual results will turn out differently from what is expected
The risk something could go wrong and the organization is damaged
Where things work out better than expected
Ex:air pollution
Ex:smoking
Ex:profit or loss
Ex:fires, flood
Dec18
Due to the nature of their operations and products
The risk that changes in the economy might affect the business
The risk of a change in a financial condition
Dec18 & June18
Amount of risk that prepared to accept
board is risk averse or risk seeking
The amount of risk that the organization can bear
Jan18
Involve minimizing the chances that the adverse events will happen