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Lesson 1 - What Risk Is and Why It Is Important

The document provides an overview of business risk management, defining risk and its importance in both personal and business contexts. It outlines various types of risks faced by individuals and organizations, including financial, operational, and reputational risks. Additionally, it emphasizes the significance of understanding and managing risks to ensure safety, innovation, and informed decision-making.

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Robert Oo
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4 views11 pages

Lesson 1 - What Risk Is and Why It Is Important

The document provides an overview of business risk management, defining risk and its importance in both personal and business contexts. It outlines various types of risks faced by individuals and organizations, including financial, operational, and reputational risks. Additionally, it emphasizes the significance of understanding and managing risks to ensure safety, innovation, and informed decision-making.

Uploaded by

Robert Oo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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BFR6123_BFRF6123

BUSINESS RISK MANAGEMENT

Chapter 1
What risk is and Why it is
important
Learning Outcome
1. Definitions of risk and risk management.
2. Types of risks
• Daily risks face by human
• Risks face by business entity
• Banks
• Business organization
3. Understanding risk
• Why understanding risk is important?
• Why managing risk is significant?
4. Risk and reward
• What is the relationship between risk and reward?
Definitions of risk
According to the Merriam-Webster dictionary,
Risk is defined as "the possibility of loss or injury:
peril."

In layman’s terms,
Risk refers to the possibility that something bad might
happen.

In a business environment,
Risk refers to the possibility that an action or decision
could lead to negative consequences or financial loss.
Facilities risk

Types
Mental health of
risk risks
 Daily risks face by human
Transportation risk

Academic risk

Financial risk

Career risk

Social risk
Security risk – collateral, physical & cybersecurity risk

Types of risks
Facilities risks - transportation


Market risk Risks face by business entity
a) Risk face by banks:
Credit risk.

Operational risk

Liquidity risk

Compliance risk
Market
Politicalrisk
risk
Types of
Operational risk
risks
 Risks
Human face
resource riskby business entity
b) Risks face by business organisation
Financial risk
Economic risk
Transportation risk
Technological risk
Liquidity risk

Reputational risk
Technological risk
Understanding risk
Why understanding risk is important?
1. Ensure safety.
2. Innovation
3. Avoid unnecessary problems
4. For informed decision
5. Increased confidence
Managing risk
Why managing risk is significant?
• Innovation
• Cost saving
• Reputation
• Protection
• Compliance
Risk and reward
What is the relationship between risk and reward?

 Risk reward relationship


 Risks affect the operation & profitability.
 Managing risk – ensure smooth flow of the operation, increase
productivity & profitability – avoid financial losses
o Need to be innovative
 E.g. product risk – quality & market acceptance – changes in
market demand or buyer appetite
o Develop new product or improve the existing product feature
Class Activity - Optional
1. Split into groups (max 7 per group)
2. Prepare a 5 minutes presentation slides on these topics.
• Group 1 : Daily risks face by human
• Group 2 : Risks face by banks
• Group 3 : Risks face by business organization
• Group 4 : Why understanding risk is important? Relationship
between risk and reward.
3. Presentation to be announced
Thank You

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