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Risk Management Slides - Part 2
Risk Management Slides - Part 2
LU2: Study Guide, Page 10 Copy Right Reserved © University of the Free State 2024 8
RISK MANAGEMENT PROCESS:
• Risks faced by any business or organisation should be managed.
• Minimising the possibility that adverse events would occur, minimising
the adverse effects should the risk occur.
• Risk Management Process:
LU2: Study Guide, Page 11 Copy Right Reserved © University of the Free State 2024 10
RISK MANAGEMENT PROCESS
• Steps in a detailed risk management framework:
LU2: Study Guide, Page 12 Copy Right Reserved © University of the Free State 2024 11
S T E P 1 : R I S K I D E N T I F I C AT I O N
• Process of finding, recognising, describing, and documenting the various business risks
that the entity is exposed to.
• Different strategies and sources that can be used:
• SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats)
• Porter’s Five Forces Model (Competition, new entrants, customers, suppliers,
substitute)
• Stakeholder Engagement
• King IV: Six Capitals
• Financial, Intellectual, Manufactured, Natural, Human, and Social and Relational
Capital
• Why is this important?
LU2: Study Guide, Page 14 - 15 Copy Right Reserved © University of the Free State 2024 12
ST E P 1 :RIS K ID EN T IF I CAT IO N E XAM P LE :
By using Porter’s Five Forces module,
identify possible business risks for a
local barbershop.
Business risks:
Existing competitor barbershop
offering cheaper haircuts
New barbershops
Cheaper products offered by retailers
or competitors
Any other business risks?
LU2: Study Guide, Page 14 Copy Right Reserved © University of the Free State 2023 14
R I S K M AT R I X | R I S K M A P
LU2: Study Guide, Page 14 - 15 Copy Right Reserved © University of the Free State 2024 15
RANKING AND PRIORITISING OF RISKS
1 - Risk of theft
(physical or digital)
2 - Risk of broken
windows
3 - Risk of strong
winds / tornado
LIMITED RESOURCES
LU2: Study Guide, Page 17 Copy Right Reserved © University of the Free State 2024 17
LEVELS OF RISK TOLERANCE
• Levels of risk tolerance: Specific limit of risk that an entity will
tolerate to achieve its objectives.
• Based on the Risk Appetite of the business
• Above the limit – Not Accept (Do something to reduce the risk)
• Below the limit - Accept
LU2: Study Guide, Page 17 Copy Right Reserved © University of the Free State 2024 19
RISK RESPONSE
• Businesses should respond to business risks that have been identified.
• Respond based on the ranking / priority of the business risks identified.
• If the risk is above the tolerable level = unacceptable risks.
• Respond to unacceptable risks.
• If the risk ranking / priority is below the tolerable level = accept the risk
(consequences if the risk would materialise)
• Different types of responses management can adapt for different risks
LU2: Study Guide, Page 16 - 17 Copy Right Reserved © University of the Free State 2024 20
TYPES OF RISK RESPONSES:
LU2: Study Guide, Page 16 - 17 Copy Right Reserved © University of the Free State 2024 21
HOMEWORK AND
A D M I N I S T R AT I O N :
• Class changes
• Independent learning classes
• Question 2.1 (Will be posted on Blackboard)
• Question 2.2 (Will be posted on Blackboard)