Business Risks
Business risks refer to potential threats that can negatively impact a company's operations, financial performance, or reputation. These risks can arise from various sources such as economic downturns, competition, regulatory changes, or natural disasters. Managing business risks involves identifying, assessing, and implementing strategies to mitigate or minimize their impact on the organization.
7 Key excerpts on "Business Risks"
eBook - ePubManaging Country Risk in an Age of Globalization
A Practical Guide to Overcoming Challenges in a Complex World
- Michel Henry Bouchet, Charles A. Fishkin, Amaury Goguel(Authors)
- 2018(Publication Date)
- Palgrave Macmillan(Publisher)
...Some organizations are willing to assume a relatively high level of exposure to new ventures but a low level of exposure in existing mature businesses. In certain cases, risk appetite can be expressed as an amount or an estimate. In other cases, risk appetite is a qualitative assessment. 6 Risk appetite may be based on the inherent risk or residual risk. Box 1.3 Breaking Down Financial Risk Below are examples of common categories of uncertainty that are especially relevant in financial services. These categories are usually referred to as risks. Strategic Risk Also referred to as business risk, strategic risk is the risk associated with pursuing a specific strategy or plan. It involves numerous choices that organizations must make: to specialize in a few activities or to diversify more broadly; to focus on certain market segments to the exclusion of others; to conduct operations in international markets or to concentrate or to limit activity to their domestic market. Market Risk Market risk is the risk associated with fluctuations in financial or commodity markets. It can involve increases or decreases in, for example, interest rates or equity prices. It can, moreover, involve the price of jet fuel, electricity, copper, or soybeans. Credit Risk Credit risk is the risk associated with the creditworthiness of a specific individual, company, industry sector, or region. Banks are obvious examples of organizations that incur credit risk, but other organizations do so as well, including corporations that buy commodities from other suppliers. Credit risk can include relationships with customers, suppliers, venture partners, or other parties. Operational Risk Operational risk is a broad term that includes inadequate or failed internal processes, people, systems, and exposure to external events. This includes such diverse issues as cyber attacks, labor strikes, compensation, incentives, governance, and internal controls...
eBook - ePubThe Essential Management Toolbox
Tools, Models and Notes for Managers and Consultants
- Simon Burtonshaw-Gunn(Author)
- 2009(Publication Date)
- Wiley(Publisher)
...CHAPTER 14 RISK MANAGEMENT In life there are risks: driving a car, crossing the road or playing various sports. So too in business although in many cases such risk uncertainties are naturally associated with a financial risk compared to the market volatility and hence the ability to realistically provide expectations based upon a risk versus reward trade-off. While the management of corporate financial risk is undertaken through a very specialist risk discipline this chapter looks at the subject of risk management from a project, business or operational viewpoint where such risks can be internally or externally driven and may impact on the project’s stated scope, schedule and cost objectives. Risk management has evolved into a formal systematic process of identifying potential risk or uncertainties and developing, selecting and managing options for addressing the risks through the life of the project. While risk management may be a proactive approach it cannot control future events but allows decisions to be made and actions to be taken if such identified risks become reality. An understanding of risk comes from a realistic understanding of what can go wrong, the likelihood of the event occurring and the consequences of such an event, seen in Professor Clare Brindley’s triple definition. On the basis of a good understanding of what can go wrong a number of actions are open to companies to manage the risk and to a large extent such management response will be a function of the probability and quantified consequences of the risk occurring. A matrix of probability and risk is provided in this chapter together with practical definitions of risk impact on scope, cost, quality and time. Although the way risk management is operationalized varies from one company to another, one common approach is a staged approval of risk identification followed by employment of a number of strategies for its management...
eBook - ePub- Chris March(Author)
- 2009(Publication Date)
- Routledge(Publisher)
...CHAPTER 10 Risk analysis and management 10.1 Introduction Risk has been alluded to and discussed elsewhere in this book and its two companion volumes, but the subject is of such importance it is identified here as a subject in its own right. Risk is associated with everything we do, as individuals, where even the air we breathe can potentially harm us because of pollutants and allergens, and in the workplace. In construction it is usually considered in terms of financial risk and the risks associated with safety. The latter is developed further in Operations Management for Construction, Chapter 4, but many of the principles outlined here are relevant. Risk is defined by HM Treasury as ‘uncertainty of outcome, whether positive opportunity or negative outcome’. However, others believe risk should not be confused with uncertainty, arguing the former is known about and an assessment of its probable impact made, whereas uncertainty is not known about and can have either a negative or positive effect. Clearly there is a conflict of views on this matter and the reader is well advised to seek clarification when reading others’ discourses. There is a strong correlation between risk management and value engineering. The two subjects are linked as any value management judgement can alter the risk. Risk management is concerned with identifying relevant risks, assessing their likelihood and impact, and deciding how best to manage them. It is not about avoiding risk, for to do so would remove any entrepreneurial spirit in a team and life would be come boring. Risk taking is part of normal business practice; what needs to be done is to take calculated risks. There is a difference between accepting risk and ignoring it...
eBook - ePub- Tony Merna, Faisal F. Al-Thani(Authors)
- 2011(Publication Date)
- Wiley(Publisher)
...When it is strategically important, organisations will want to incorporate explicit risk management objectives into their financial perspective. Metro Bank, for example, chose a financial objective to increase the share of income arising from fee-based services not only for its fee-based potential but also to reduce its reliance on income from core deposit and transaction-based products. Such income varied widely with variations in interest rates. As the share of fee-based income increased, the bank believed that the year-to-year variability of its income stream would decrease. Therefore the objective to broaden revenue sources serves as both a growth and risk management objective (Kaplan and Norton 1996). 8.7 RECOGNISING RISKS Bower and Merna (2002) describe how a business which is part of an American corporation, operating in the UK, optimises the contract strategies for a number of its projects. The risks identified by the authors led them to suggest that alliance contracts should be developed by the business and used on future projects as a means of transferring the risks identified. In this case the projects carried out by the business were similar and risks associated with each project were those relating to time, cost, quality and safety. 8.7.1 Specific Risks at Business Level Many SBUs need to borrow money to finance projects. Lenders often require parent company guarantees from the corporation in case of default by the SBU. SBUs will, in some cases, use the corporation’s profit and loss accounts as a means of illustrating their financial stability to clients rather than their own accounts, which are often not as financially sound. 8.7.2 Typical SBU Organisation Figure 8.2 illustrates the relationship between the SBUs and the corporate and project levels...
eBook - ePubInformation System Audit
How to Control the Digital Disruption
- Philippe Peret(Author)
- 2022(Publication Date)
- CRC Press(Publisher)
...Chapter 10 Risks management DOI: 10.1201/9781003230137-10 Risk: A dollar amount which tells how bad it could be if everything fails. Paul A. Strassmann, The Politics of Information Management The company defines the perimeter of activities for which the employer pools profits and risks and for which it is responsible in this respect. The unity and continuity of this perimeter were first seen in accounting, but the standardization of accounts, from the second half of the 20th century onward, has changed this. Accounting now favors the splitting up of the company, the uncoupling of profits and risks. The first form of this fragmentation is spatial. The perimeter of the firm is disappearing as a place of mutualization, to make way for a collection of units placed in competition with one another in a growing permeability between the inside and the outside. The second form of this fragmentation, perhaps even more serious in its consequences, is played out in time. Until then, accounting aimed to inscribe the disposition of goods in a genealogical order, because through the way in which each generation works, it is society as a whole that plays out its existence and the conditions of its possible recommencement. Accounting thus inscribed the activity of the company in time, or more precisely in a plurality of interlocking and interrelated times. This function is undermined by the adoption of the principle of independence of accounting periods when this independence is considered as a reality and no longer as a fiction. This slicing up of the life of the company into units of equal and autonomous duration now leads to the disassociation of short and long time periods. Risks do not follow any dedicated calendar. Risks comes in and out of scope depending on the environment and the different decisions, choices made by the top management to the employees throughout time. Risks must be managed on a regularly basis...
eBook - ePubThe Handbook of Risk Management
Implementing a Post-Crisis Corporate Culture
- Philippe Carrel(Author)
- 2010(Publication Date)
- Wiley(Publisher)
...Seldom a smooth transition, the history of corporations is fraught with crises, failures and restarts. More often than not, change is a painful implementation. It is the evolution of risks, the unexpected ones in particular, that seems to be pushing the boundaries of innovation by changing the conditions for survival. Corporations and governments are forced to adapt as they face unstable and unsustainable situations - namely crises. Therefore they are periodically compelled to find new balances between risk and value generation, going from crisis to crisis. In other words, no approach to risk management, despite a brilliantly designed one, can be set in stone and dogmatically dictated to future generations of managers. Risk management is a continuous search of equilibrium, just as the balancing pole of a tightrope walker is always in movement. Managing risks requires bringing into question the very hypothesis it relies on, time and again. In the finance industry, risk management is of even greater importance since the core business is about managing others’ money - others being the depositors of a bank, the investors of a fund or clients of an asset management service. It is also about managing others’ risks - corporates, retail customers or funds that operate on margin. So there is a double balance between value and risk generation to be maintained when operating in the finance industry - the balance of any corporation between risks and the value extracted from growth and operations and the balance between customers’ risks and customers’ support. As the link that holds all business sectors, households, corporations, governments and institutions together, the finance sector plays a central role in every economy. Since the late 1960s, no business, administration or institution would run any operation by funding any part of its activities in cash. Hence the finance industry plays a far more critical role, akin to a heart pumping blood throughout an economy...
eBook - ePub- Joseph E. Kasser(Author)
- 2020(Publication Date)
- CRC Press(Publisher)
...In this context, a risk is anything that can negatively impact the cost of the process and the schedule. Product being produced by that process. In this context, a risk is anything that can cause a failure in operation or increase the cost of the product. Potential risks can be identified based on the literature and experience which results in a long list of risks. Effective planners with expertise in the solution and implementation domains can think about situations and conceptualize factors that could cause cost and schedule escalations as well as system and subsystem failures using the five questions from reliability-centered maintenance (Moubray 1997) (Section 3.8.2.1) instead of copying lists of risks; mediocre planners can check boxes on lists. Risk analysis : consists of the following two parts: Risk effect analysis : performed from two perspectives: the cause and the effect of failures: Cause : starting with a proposed failure, inferring the symptoms that could arise from that failure to identify that cause. Effect : starting with a symptom, deducing what failure could have caused it (root cause). Risk impact analysis : analysing each risk to determine the probability of occurrence and consequences/impacts, along with any interdependencies. Risk mitigation and prevention planning : planning mitigation actions and prevention. Translating risk information into decisions and actions (both present and future). This is done in the planning process as part of creating the process steps by inserting the prevention and mitigating activities into the appropriate processes * For a project, LEP, policy or any other purpose. Risk tracking : monitoring the risks and actions taken against risks. Risk controlling : taking the planned corrective action in the appropriate process steps. Should an unforeseen event occur that will negatively impact the cost and schedule, the occurrence of the event identified the risk post facto...
