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Business Studies
Revision
Pack 2 - Risk and Uncertainty
Business risk is a circumstance or factor that may have a large, and negative impact on the operation or
profitability of a given firm
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• A potential loss of overseas sales due to an increase in exchange rates
• A major customer goes bankrupt and does not pay us the money owed
• Operational risk - machinery breakdown, theft of equipment
• Strategic - new competitor enters the market
• Compliance - new H&S legislation
Quantifiable risks can be planned for
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As these risks cannot be predicted they are difficult to plan for
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The contingency plan will provide a strategy for continuing production, sales and other important business
functions
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- If it is a high risk decision, managers may want to reduce the risk or at least take steps to reduce the risk by gathering
data on which they can base decisions
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This links with the type of decision being made
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Methods of risk management
Risk assessments (commonly used in terms of H&S) & Risk registers
- Helps identify risks and considers how to reduce them
- Ensures policies & procedures are put in place
- Reduces the risk of H&S accidents
Careful strategic planning
- The more planing & research goes into a major decision, the more the risk is reduced

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