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Questions and Answers
What type of risk is related to the production process and can result from inadequate internal processes?
What type of risk is related to the production process and can result from inadequate internal processes?
- Knowledge Risk
- Financial Risk
- Operational Risk (correct)
- Unforeseeable Risk
Which risk type cannot be accurately forecast prior to its occurrence?
Which risk type cannot be accurately forecast prior to its occurrence?
- Unforeseeable Risk (correct)
- Operational Risk
- Change Risk
- Knowledge Risk
Which type of risk includes market, credit, and capital structure risks?
Which type of risk includes market, credit, and capital structure risks?
- Financial Risk (correct)
- Internal Risk
- Speculative Risk
- Operational Risk
What type of risk arises from changes imposed by variations either within or outside the organization?
What type of risk arises from changes imposed by variations either within or outside the organization?
Knowledge risk primarily involves which aspect of an organization?
Knowledge risk primarily involves which aspect of an organization?
What defines knowledge risk in an organization?
What defines knowledge risk in an organization?
Which of the following is classified as an internal risk?
Which of the following is classified as an internal risk?
How can external risks be described in relation to an organization?
How can external risks be described in relation to an organization?
What type of risk can lead to both gain and loss?
What type of risk can lead to both gain and loss?
Which of the following best describes speculative business risk?
Which of the following best describes speculative business risk?
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Study Notes
Types of Risk in Tourism and Hospitality
- Change risk affects strategic, operational, and project levels; can be imposed or planned to meet objectives (e.g., installing a new production line due to increased demand).
Operational Risk
- Defined as the risk of loss from inadequate or failed processes, people, systems, or external events.
- Encompasses factors that impact organizational performance and value creation.
Unforeseeable Risk
- Cannot be accurately forecast; can arise suddenly (e.g., natural disasters).
- Can be mitigated by transferring risk through insurance contracts.
Financial Risk
- Includes market, credit, capital structure, and reporting risks.
- Examples include potential losses for shareholders due to company debt or defaults on bonds resulting in investor losses.
Knowledge Risk
- Relates to information management involving IT hardware, software, and planning.
- Organizations face threats such as hacking and espionage as IT use increases.
- Distinction between knowledge risk (disruption of information access) and IT risk (disruption to information technology).
Internal and External Risks
- Internal Risks: Originate within an organization, relatively controllable (e.g., employee fraud).
- External Risks: Arise from environmental factors, generally uncontrollable (e.g., new competitors like Microsoft entering markets).
Comparison of Internal and External Risks
- External risks include interest rate, volatility, competitor, political, and legislative risks.
- Internal risks encompass operational processes, legal, liquidity, competence, and technology risks.
Speculative and Static Risks
- Speculative risks may yield gains or losses, with outcomes being positive or negative (e.g., betting).
- Divided into speculative business risk (operational trading risk) and financial risk.
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