CHAPTER 11: RISK MANAGEMENT

1. What is risk management?

Risk Management is the process of measuring or assessing risk and developing
strategies to manage it. It is a systematic approach in identifying, analysing and controlling areas
or events with potential for causing unwanted change.

2. What is the basic approach in managing risks?

Manage individual risks recorded and assessed in a project risk register.

3. How does ISO 31000 define “Risk Management”?

ISO 31000 define risk management as the identification, assessment, and prioritization
of risks followed by coordinated and economical application of resources to minimize, monitor
and control the probability and/or impact of unfortunate events and to maximize the realization
of opportunities.

4. What are the basic principle of risk management?

- Create value
- Address uncertainty and assumptions
- Be an integral part of the organizational process and decision- making
- Be dynamic, iterative, transparent, tailorable, and responsive to change
- Create capability of continual improvement and enhancement considering the best
available information and human factors
- Be systematic, structured, and continually of periodically reassessed

5. Enumerate the steps in the ISO 31000 risk management process.

A. Establishing the context
B. Identification of potential risks
C. Risk Assessment

6. What are the elements of the risk management process?

A. Identification, characterization, and assessment of threats
B. Assessment of the vulnerability of critical assets to specific threats
C. Determination of the risk
D. Identification of ways to reduce those risks
E. Prioritize risk reduction measures based on a strategy

7. What are the key elements that the company-wide risk management system should possess?
A. Goals and objectives
B. Risk language identification
C. Organization structure
D. The risk management process documentation

Multiple Choice Questions

 1. B
2. C
3. A
4. A
5. D
6. A
7. D
8. D
9. D

CHAPTER 12:

Review Questions

1. Explain the difference in attitude to risk between European and US Companies.

Europe strategies focus on avoiding and hedging risk while Anglo-American companies
view risks as an opportunity and accept risk management as necessary to achieving their goals.

2. What is the advantage of defining the categories into which risks fall?
It allows a more structured analysis to develop and reduces the chances of a risk being
overlooked.

3. Explain the following types of risk catalyst might trigger risk.

A. Technology
New hardware, software or system configuration can trigger risks as can new demands
on existing information systems and technologies.

B. Organizational Charge
Risks are triggered by new management structures or reporting lines, new strategies,
and commercial agreements.

C. Processes
New products, markets, and acquisitions all cause change and can trigger risks.

D. People
Hiring new employees, losing key people, poor succession, planning, or weak people
management can all create dislocation as well as behaviour, everything from laziness to
fraud, exhaustion and simple human error can trigger risks.

E. External Factors
Changes to regulation and political, economic or social developments can all affect
strategic decisions by bringing to the surface risks that may have lain hidden.
4. The typical areas of financial risk includes the following except
A. Poor brand management

5. What are the stages in managing the enterprise wide risk?

A. Assess and analyse the risks resulting from a decision by systematically identifying
and quantifying them.
B. Consider how best to avoid or mitigate them.
C. In parallel with the second stage, take action to manage control and monitor risks.

6. What factors should be considered when setting and reviewing financial strategy?
A. Improve profitability
B. Avoid pitfalls in making financial decisions
C. Reduce financial risk

7. What are some of the financial tools that can be applied in making strategic financial decision
affecting profitability?
A. Variance analysis
B. Assessment of market entry and exit barriers
C. Break-even analysis
D. Controlling costs

8. Enumerate and explain at least (7) practical technique to improve profitability.

1. Focus decision-making on the most profitable area. - Concentrating on products and
services with the best margin will protect or enhance profitability.
2. Decide how to treat the least profitable products- The shelf-life and appeal of
product must be considered when deciding to continue or discontinue it.
3. Make sure new products enhances overall profitability- New product development
often focuses on market need or the production process with insufficient regard to
cost, price, sales volume and overall profitability.
4. Manage development and production decisions- Amounts spent on research as well
as the priorities and methods used affect profitability.
5. Set the buying policy- Strategize whether to focus on a small number of preferred
suppliers or a wider number of potential suppliers. In addition, consider techniques
on controlling various charges.
6. Consider how to create greater value from existing customers and products to
enhance profitability- Question company’s present strategies concerning products
or services and its customers and find ways how to improve them.
7. Consider how to increase profitability by managing people- Successful leadership is
prerequisite for profitability.