- 20 Marks
Question
Every business venture has some measure of risk exposure that must be identified, measured, and adequately prepared for. Indeed, each business entity should have in place a good risk management strategy.
As a risk manager, clarify the following in ways that will be comprehensible to a greenhorn in business:
(a) Risk identification. (5 Marks)
(b) Importance of ranking risks. (3 Marks)
(c) Examine the impact of risks on categories of stakeholders. (12 Marks)
Answer
- (a) Risk Identification
- Explanation: Risk identification is the foundational stage of a risk management framework where a company determines various internal and external risks that could potentially impact its operations, goals, and overall business environment.
- (b) Importance of Ranking Risks
- Explanation: Ranking risks is crucial because it allows businesses to prioritize the most significant risks, ensuring that resources are allocated efficiently to control measures for those risks that could have the most severe impact on the company.
- (c) Impact of Risks on Stakeholders
- Explanation: Risks impact various stakeholders differently. For example:
- Employees may face job insecurity or health risks.
- Investors could see their returns affected by financial risks.
- Lenders face credit risk if the company’s ability to repay debt is compromised.
- Explanation: Risks impact various stakeholders differently. For example:
- Topic: Risk Management and Corporate Strategy
- Series: MAY 2023
- Uploader: Theophilus