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Explain the term 'risk management' - Leaving Cert Business - Question B - 2006
Question B
Explain the term 'risk management'. A planned approach to the handling of the risk that the individual or business is exposed to is known as risk management. It inv... show full transcript
Worked Solution & Example Answer:Explain the term 'risk management' - Leaving Cert Business - Question B - 2006
Step 1
Explain the term 'risk management'.
Answer
Risk management is a systematic approach to identifying, assessing, and mitigating risks that may adversely affect an individual or organization's ability to achieve its objectives. It involves several key steps:
- Identification of Risks: This step includes recognizing all potential risks such as fire hazards, employee negligence, and other operational risks.
- Analysis of Causes: Determining the underlying causes of risks, including personal injuries or legal liabilities, helps in addressing these issues effectively.
- Risk Measurement: Evaluating the likelihood of risks occurring through various methods ensures that businesses prepare for potential issues.
- Cost Management: Calculating the costs associated with risk management strategies aids in determining their effectiveness and helps in protecting against potential losses.
Overall, risk management is essential for safeguarding a business's assets and ensuring its sustainability.
Step 2
Illustrate three methods that can be used to reduce risk in a business.
Answer
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Insurance: This method involves transferring the risk to an insurance company by paying a premium. In case of a loss, the insurance company will cover the damages, thereby mitigating the financial impact on the business.
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Safe Procedures: Establishing strict procedures for handling tasks and hazards is crucial. This can include employee training, adherence to safety regulations, and the use of safety equipment. Regular monitoring of these procedures ensures compliance and reduces the likelihood of accidents.
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Health and Safety Statements: Developing comprehensive health and safety policies is vital. This includes training staff, conducting regular safety drills, and providing necessary protective gear. Additionally, appointing health and safety representatives in the workplace encourages reporting of safety issues and promotes a proactive safety culture.