Identify the risks. contingencies, and risk management options which commonly relate to financial and business performace.
The main categories of risk or contingencies for a business to consider are:
1. Strategic, for example a competitor coming on to the market
2. Compliance, for example the introduction of new health and safety legislation
3. Financial, for example non-payment by a customer or increased interest charges on a business loan
4. Operational, for example the breakdown or theft of key equipment
5. Environmental risks, including natural disasters
6. Employee risk management, such as maintaining sufficient staff numbers and cover, employee safety and up-to-date skills
7. Industry changes
8. Health and safety risks
9. Merger and acquisition activity
10 Changes among customers or in demand
Some major Risk Management steps which a business can take upon are:
1. Avoidance: Use an alternate approach that does not have the risk. This is the most effective risk management technique if it can be applied.
2. Control: Controlling risks involves the development of a risk reduction plan and then tracking to the plan. The key aspect is the planning by experienced persons.
3. Assumption: Simply accepting the risk and proceeding. However, there can be a tendency within organisations to gradually let the assumption of a risk take on the aura of a controlled risk.
4. Risk Transfer: Means causing another party to accept the risk, typically through insurance cover.
Risk management is an on-going process, and is a combination of proactive management directed activities within a programme that are intended to accommodate the possibility of failures.
Identify the risks. contingencies, and risk management options which commonly relate to financial and business performace.
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