The document outlines the concept of risk in business, defining it as the probability of an event and its consequences, with categories including strategic, financial, and operational risks. It discusses risk management processes, which involve identifying, assessing, and responding to risks, as well as the benefits of effective risk management, such as improved decision-making and resource allocation. The evaluation of risks is emphasized as essential for ranking their significance and determining appropriate actions to minimize potential negative impacts.

1. Understanding
& Managing Risk

2. What is a Risk?
“Risk is defined as the
probability of an event
and its consequences.”

3. What risks does
a business face?
The main categories of risk to a business are:
• Strategic
• Compliance
• Financial
• Operational
• Environmental risks
• Employee risk management
• Political and Economic instability
• Health and Safety risks
• Commercial risks

4. Risks - Task 1
Describe what constitutes risk for
businesses giving 3 examples

5. Dealing with Risk
and Risk Management
There are four ways of dealing with,
or managing, risk that are identified.
A business can:
• Accept it
• Transfer it
• Reduce it
• Eliminate it

6. Risk Management
• Is the practice of using processes, methods and tools for
managing risks
• Focuses on identifying what could go wrong, evaluating
which risks should be dealt with and implementing
strategies to deal with those risks
• Businesses that have identified the risks will be better
prepared and have a more cost-effective way of dealing with
them
• Businesses face many risks, therefore risk management is a
central part of a businesses strategic management

7. Risk Management
• It helps to identify and address the risks facing a business and
in doing so increases the likelihood of successfully achieving
businesses objectives
• Involves putting processes, methods and tools in place to deal
with the consequences of events that have been identified as
significant threats to a business.

8. What does the Risk Management
Process involve?
A risk management process involves:
• Methodically identifying the risks surrounding business
activities
• Assessing the likelihood of an event occurring
• Understanding how to respond to these events
• Putting systems in place to deal with the consequences
• Monitoring the effectiveness of your risk management
approaches and controls

9. What are the benefits of a
Risk Management Process?
The benefits of the process of risk management:
• Improves decision-making, planning and prioritisation
• Helps allocate capital and resources more efficiently
• Allows businesses to anticipate what may go wrong,
minimising the amount of fire-fighting, in a worst-case
scenario, preventing a disaster or serious financial loss
• Significantly improves the probability that the business
will deliver their business plan on time and to budget

10. Evaluating Risks
“Risk evaluation allows a business to
determine the significance of risks to their
business and decide to accept the specific risk
or take action to prevent or minimise it.”

11. Evaluating Risks
• Businesses evaluate risks and rank these risks once they have
identified them. This is usually done by considering the
consequence and probability of each risk
• Many businesses find that assessing consequence and
probability as high, medium or low is adequate for their needs
• These are then compared with their business plan - to
determine which risks may affect their objectives - and
evaluated in the light of legal requirements, costs and investor
concerns
• In some cases, the cost of mitigating a potential risk may be so
high that doing nothing makes more business sense

12. Evaluating Risks
• You can plot on a risk map the significance and likelihood of
the risk occurring
• Each risk is rated on a scale of one to ten; one is the least
significant
• If a risk is rated ten this means it is of major importance to
the company
• The map allows you to visualise risks in relation to each
other, gauge their extent and plan what type of controls
should be implemented to mitigate the risks

13. For More Information
For more information about our leadership, management and Risk
Assessment courses or any other information, advice and guidance please:
Call: 0121 707 0550
E-mail: info@pathwaygroup.co.uk
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