5 Business impacts
When risks do happen the impact can often have a serious effect on a business. Take a look at these case studies that describe some impacts of businesses getting risk management decisions wrong in different ways.
Remember to open these links in a new tab (right-click on the link and click on the option to open the document in a new tab or window) so you can look at them in relation to the course, and get back to the course easily.
Now take a look at Video 3, which is the Rolls-Royce timeline.
Now have a go at Activity 2.
Activity 2 Risks to scale
Click on the link below to load this interactive activity. Place these risks on the scale provided based on your work experiences of taking risks. For example if you think that organisations should normally aim to make an aspect of their business (say, cyber security) ‘low risk’ then select ‘low’.
|Breaking the law||Investing in volatile countries, markets or financial products||New market technologies|
|Safety of employees||Recruiting and retaining talented people|
|Environmental harm||Bringing new products to market|
|Safety of products|
|Protecting key facilities from natural disaster|
|Changes to regulations, tariffs or access to markets caused by governments|
- Zero: While you might want ‘Zero risk’ for something (e.g. a zero risk attitude to employee safety) in practice the only way this can be achieved is to remove the risk completely, therefore in many cases achieving ‘zero risk’ is impossible.
- Desire to take little risk: Although ‘zero risk’ is impossible, there are many areas where risk exposure should be minimised. These would typically be risks where we could harm people or the environment or break laws or regulations. However, there may be critical business activities that should not be exposed to high levels of risk: protecting facilities and IT might also be areas where risks are not wanted.
- Ability to accept some risk: There will then be areas where some risk is acceptable in order to achieve goals. When investing in countries it might be desirable to operate in areas with high growth and easy access to the necessary resources, but it would be considered an unacceptable risk to operate in areas with high corruption and low ethical standards. Similarly in recruiting and retaining talent, taking the steps to obtain the best people is key but exploiting individuals or using labour practices that might be viewed as unfair would be an unacceptable risk.
- Accepting high risks: There will be some areas where the company is prepared to take high risks. In bringing a new product to market, especially if the product is essential to the success of the company, the company may be willing to put a vast amount of investment behind the project. Similarly in investing in new technology, if a company believes the technology is a ‘game changer’ it may try to ensure significant capital is available, the stakes for not doing so may be too high not to invest (see Rolls-Royce or Kodak earlier).
Throughout this activity it is important to recognise that risks do not occur in isolation. This means that a company will have differing risk appetites across and even within its activities. For example it may have a high-risk appetite for introducing new technology, so will do everything it can to bring it to market, but because it has a low-risk appetite for breaking the law, ‘doing everything it can’ excludes breaking any laws.