Podcast
Questions and Answers
What is the primary consequence of business risk?
What is the primary consequence of business risk?
- Increased market share
- Failure to achieve targets, plans, or objectives (correct)
- Enhanced brand reputation
- Improved employee morale
Business risks are solely internal to an organization and cannot be influenced by external factors.
Business risks are solely internal to an organization and cannot be influenced by external factors.
False (B)
What is the purpose of developing a risk management strategy?
What is the purpose of developing a risk management strategy?
To eradicate or reduce the degree of risk
__________ risk relates to an entity's failure to carry out its business in line with its strategic plan.
__________ risk relates to an entity's failure to carry out its business in line with its strategic plan.
Which of the following is an example of a strategic risk?
Which of the following is an example of a strategic risk?
A strategic plan does not need to include strategic objectives, intended results, strategy, activities, activity output, output indicator, target, costings, and year of implementation.
A strategic plan does not need to include strategic objectives, intended results, strategy, activities, activity output, output indicator, target, costings, and year of implementation.
What can be the consequence of conducting business without complying with the required laws and rules?
What can be the consequence of conducting business without complying with the required laws and rules?
__________ risk emanates from industry and sector regulations and can impact the distribution of certain drugs and medicines.
__________ risk emanates from industry and sector regulations and can impact the distribution of certain drugs and medicines.
What is an example of compliance risk in the pharmaceutical industry?
What is an example of compliance risk in the pharmaceutical industry?
Operational risk primarily arises from external factors such as market volatility.
Operational risk primarily arises from external factors such as market volatility.
What might be the cause of operational risks?
What might be the cause of operational risks?
Failure to follow policies, procedures, rules, and regulations may cause an entity to incur huge losses through fraud, ghost workers, and loss of __________.
Failure to follow policies, procedures, rules, and regulations may cause an entity to incur huge losses through fraud, ghost workers, and loss of __________.
Which of the following factors contributes to operational risk?
Which of the following factors contributes to operational risk?
Financial risk arises from non-financial operations of an entity.
Financial risk arises from non-financial operations of an entity.
Name two forms that financial risk can take.
Name two forms that financial risk can take.
__________ risk arises from the financial operations of an entity, including currency risks, interest rate risks, and credit risks.
__________ risk arises from the financial operations of an entity, including currency risks, interest rate risks, and credit risks.
Match each risk type with its broad classification.
Match each risk type with its broad classification.
Which broad classification of risk includes fraud and employee malfeasance risk?
Which broad classification of risk includes fraud and employee malfeasance risk?
The degree of exposure to financial risks is uniform across all organizations, regardless of size or international involvement.
The degree of exposure to financial risks is uniform across all organizations, regardless of size or international involvement.
Besides operational, strategic, compliance and financial risks, what is another type of business risk?
Besides operational, strategic, compliance and financial risks, what is another type of business risk?
Flashcards
What is Business Risk?
What is Business Risk?
The chance that a company will be unable to achieve its financial goals due to elements or hazards.
What is Strategic Risk?
What is Strategic Risk?
The possibility that a company will not be able to execute its business strategy.
What is Compliance Risk?
What is Compliance Risk?
The potential for a business to face legal or regulatory penalties due to non-compliance.
What is Operational Risk?
What is Operational Risk?
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What is Financial Risk?
What is Financial Risk?
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What is Reputational Risk?
What is Reputational Risk?
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Study Notes
- Business risk refers to the potential for an organization to fail to meet its objectives, whether those are related to plans, targets, or profitability.
- Business risk encompasses any aspect that could hinder a company's ability to reach its financial goals.
- Business risks come from both internal and external sources, such as employee actions, management decisions, market conditions, government regulations, competition, and supply chain factors.
- Risk management strategies can help reduce or eliminate the degree of any risk factor.
Types of Business Risk
- Strategic risk stems from a company's failure to align its business activities with its strategic plan.
- For best operations, every entity needs a strategic plan, ideally spanning 3 to 5 years, which guides the development of Annual Work Plans and Budgets (AWPB).
- Strategic Plan (SP) components include strategic objectives, intended results, strategy, activities, activity output, output indicators, targets, costings, and implementation year.
- Chaos and poor performance are expected when companies operate without a strategic plan.
- Compliance risk arises from adhering to industry and sector regulations.
- Selling and distributing medicines necessitates obtaining the required registration, ZAMRA permits, licenses and qualified staff, ZRA, NAPSA, Workers compensation Control Board etc.
- Businesses must respect the required laws and rules. Failure to comply risks business closure.
- Operational risk is an internal risk which comes from within the business itself.
- An entity's failure to adhere to internal controls and procedures can cause operational risk.
- Disciplinary codes, grievance procedures, recruitment guidelines, and other internal guidance are examples of the processes and regulations an entity must adhere to.
- Failure to follow policies, procedures, rules, and regulations may cause huge loses through fraud, ghost workers, and loss of productivity.
- Financial risk originates from the financial activities of an entity, including currency, interest rate, credit, liquidity, cash flow, and financing risks.
- Exposure varies among organizations based on size and whether they operate domestically or internationally.
Broad Classifications of Risks
- Political, legal, and regulatory risk
- Economic risk
- Business risk
- Financial risk
- Fraud and employee malfeasance risk
- Corporate reputation risk
- Technology risk
- Environmental risk
- International risk
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