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Explain the term ‘risk management’ - Leaving Cert Business - Question B - 2008
Question B
Explain the term ‘risk management’. Illustrate three methods that can be used to reduce risk in a business.
Worked Solution & Example Answer:Explain the term ‘risk management’ - Leaving Cert Business - Question B - 2008
Step 1
Explain the term ‘risk management’
Answer
Risk management refers to a systematic approach aimed at identifying, assessing, and prioritizing risks followed by coordinated efforts to minimize, monitor, and control the probability or impact of unfortunate events. This approach is crucial for safeguarding the interests of an individual or business against potential threats. It involves:
- Identification of Risks: Cataloging all possible risks such as fires, employer negligence, etc.
- Assessment of Causes: Determining the causes of potential losses, including personal injury and legal liability.
- Measurement and Evaluation: Measuring how likely the event is to occur and the potential impact.
- Cost Management: Evaluating and managing the costs associated with the various methods of risk mitigation.
Step 2
Illustrate three methods that can be used to reduce risk in a business
Answer
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Insurance: Companies can transfer risk to an insurance company by paying a premium. This ensures that the company can recover losses incurred due to unforeseen events, thereby reducing financial strain.
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Safe Procedures: Establishing strict guidelines for how work should be conducted can significantly reduce hazards. This includes proper training for handling equipment and adherence to safety protocols.
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Health and Safety Regulations: Following regulations that mandate the identification of hazards and implementing safety statements helps ensure a safer work environment. This could involve regular training and inspections to uphold safety standards.