Business Mold

1.
Business risk management
CHIȘINĂU 2018
Objectives:
1.The introduction. The notion

and essence of risk.
• 2.Types of Business Risk
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Risk is the potential of gaining or losing something of value. Values
(such as physical health, social status, emotional well-being, or financial wealth) can
be gained or lost when taking risk resulting from a given action or inaction, foreseen
or unforeseen (planned or not planned). Risk can also be defined as the intentional
interaction with uncertainty.
Riscul este potențialul de a câștiga sau de a pierde ceva de valoare.

Valorile (cum ar fi sănătatea fizică, starea socială, bunăstarea
emoțională sau averea financiară) pot fi câștigate sau pierdute atunci
când riscați să rezulte dintr-o anumită acțiune sau inacțiune,
prevăzută sau neprevăzută (planificată sau neplanificată). De
asemenea, riscul poate fi definit ca interacțiunea intenționată cu
incertitudinea.
Uncertainty is a potential, unpredictable, and

uncontrollable outcome; risk is a consequence of
action taken in spite of uncertainty.
Incertitudinea este un rezultat potențial,
imprevizibil și incontrolabil; riscul este o
consecință a acțiunilor întreprinse în ciuda
incertitudinii.
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A probability or threat of damage,
loss, or any other negative occurrence
that is caused by external or internal
vulnerabilities, and that may be
avoided through preemptive action.
O probabilitate sau o amenințare de

deteriorare, pierdere sau orice altă apariție
negativă provocată de vulnerabilități externe
sau interne și care poate fi evitată prin
acțiuni preventive
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Types of Business Risk
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Business risks can arise due to the influence by two major risks:
internal risks (risks arising from the events taking place within the
organization)
external risks (risks arising from the events taking place outside the
organization).
Riscurile de afaceri pot apărea datorită influenței cauzate de două

riscuri majore: riscurile interne (riscurile generate de evenimentele
care au loc în cadrul organizației) riscurile externe (riscurile generate
de evenimentele care au loc în afara organizației)
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Internal risks
Internal risks arise from factors
(endogenous variables, which can
be controlled) such as human
factors (talent management,
strikes), technological factors
(emerging technologies), physical
factors (failure of machines, fire or
theft), operational factors (access
to credit, cost cutting,
advertisement).
Riscurile interne apar din factori
(variabile endogene care pot fi
controlate), cum ar fi factorii umani
(gestionarea talentelor, greve), factorii
tehnologici (tehnologii emergente),
factorii fizici (eșecul mașinilor, focul sau
furtul) , reducerea costurilor,
publicitate)
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External risks
External risks arise from factors (exogenous
variables, which cannot be controlled) such as
economic factors (market risks, pricing
pressure), natural factors (floods,
earthquakes), political factors (compliance and
regulations of government).
Riscurile externe decurg din factori (variabile
exogene, care nu pot fi controlate), cum ar fi
factorii economici (riscuri de piață, presiune
asupra prețurilor), factori naturali (inundații,
cutremure), factori politici (conformitatea și
reglementările guvernamentale).
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2.Causes of Business Risk
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Business Risks
 Competition
 Compliance
 Country Risk
 Credit Risk
 Currency
 Economic Risk
 Financial Risk
 Health
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A business risk is a future possibility that may
prevent you from achieving a business goal. The
risks facing a typical business are broad and
include things that you can control such as your
strategy and things beyond your control such as
the global economy.
Un risc de afaceri este o posibilitate viitoare care
vă poate împiedica să atingeți un obiectiv de
afaceri. Riscurile cu care se confruntă o afacere
tipică sunt largi și includ lucruri pe care le puteți
controla, cum ar fi strategia dvs. și lucruri care
nu țin de controlul dvs., cum ar fi economia
globală
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There is a strong relationship between risk and reward. It's generally
impossible to achieve business gains without taking on at least some
risk. Therefore, the purpose of risk management isn't to completely
eliminate risk. In most cases, risk management seeks to optimize
therisk-reward ratio within the bounds of the risk tolerance of your
business. The following are common types of business risk.
• Există o relație puternică între risc și recompensă. În general,
este imposibil să se obțină câștiguri din afaceri fără a se asuma
cel puțin un risc. Prin urmare, scopul gestionării riscului nu
este acela de a elimina complet riscul. În cele mai multe
cazuri, managementul riscurilor încearcă să optimizeze rata de
recompensă în limitele toleranței la risc a afacerii dvs.
Următoarele sunt tipuri comune de risc de afaceri
11/7/2018 Agenția Achiziții Publice 14

1. Competitive Risk
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What is Competitive Risk?
The risk that your competition will
gain advantages over you that prevent you
from reaching your goals. For example,
competitors that have a fundamentally cheaper
cost base or a better product.
• Riscul ca competiția dvs. să obțină avantaje față
de dvs., care vă împiedică să atingeți obiectivele.
De exemplu, concurenții care au o bază de cost
fundamental mai ieftină sau un produs mai bun.

Competitive Risk
Competitive risk is the potential for actions of a
competitor to negatively impact your business. In a
healthy competitive market,competitive risk drives
improvements such as cost reductions and quality
improvements.
Riscul competitiv este potențialul acțiunilor unui

concurent de a avea un impact negativ asupra afacerii
dvs. Pe o piață concurențială sănătoasă, riscul competitiv
conduce la îmbunătățiri, cum ar fi reducerea costurilor și
îmbunătățirea calității. Următoarele sunt exemple
comune de risc competitiv.
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Pricing
Steep discounts by a competitor can be a significant threat to a business,
particularly a business that has a higher cost than the competition.
Discounts may be driven by excess inventory due to supply/demand issues
or as a aggressive pricing strategy that sparks aprice war.
Prețuri Reducerea bruscă de către un concurent poate reprezenta o amenințare
semnificativă pentru o afacere, în special pentru o afacere care are un cost mai
mare decât concurența. Reducerile pot fi determinate de inventarul excesiv din
cauza problemelor legate de ofertă / cerere sau de o strategie agresivă de stabilire
a prețurilor care declanșează războaie aprică
Innovation
Innovation by a competitor can threaten a firm's entire business model
Inovaţie Inovația de către un concurent poate
amenința întregul model de afaceri al unei firme

Locations
A competitor who opens a location next to yours or who secures abetter location. In
some cases, competition close by isn't a bad thing as it can attract more customer
traffic.
Resources
A competitor who is viewed as a more attractive employer may result in a loss of
skilled resources.
locaţii Un concurent care deschide o locație alături de dvs. sau care asigură o
locație mai bună. În unele cazuri, concurența în apropiere nu este un lucru rău,
deoarece poate atrage mai mult trafic client.
Resurse Un concurent care este privit ca un angajator mai atractiv poate duce
la pierderea unor resurse calificate.
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Promotion
A competitor's promotion may attract your customers away. In some cases, a
competitor's promotion may directly or indirectly paint your brand or products in a
negative light.
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Promovare Promovarea unui concurent
poate atrage clienții dvs. departe. În unele
cazuri, promovarea unui concurent poate
picta direct sau indirect marca sau
produsele dvs. într-o lumină negativă.

Distribution
A competitor may achieve a preferred position with your distribution partners such as
retailers.
Intellectual Property
A competitor may secure key intellectual property that is important to current and future
products
distribuire Un concurent poate obține o poziție
preferată cu partenerii dvs. de distribuție, cum
ar fi comercianții cu amănuntul.
Proprietate intelectuală Un concurent poate
asigura o proprietate intelectuală cheie care
este importantă pentru produsele actuale și
viitoare

2. Economic Risk

2. Economic Risk
The possibility that conditions in the economy will increase your costsor reduce
your sales.
• Economic risk is the probability that

changes in the greater economy will result
in a loss to you or your organization. It is a
term to describe the potential impact of
global, national or regional economic
fluctuations on your ability to achieve your
goals.
3. Operational Risk

3. Operational Risk
• The potential of failures related to the day-

to-day operations of an organization such
as a customer service process. Some
definitions ofoperational risk claim that it is
the result of insufficient or failed
processes. However, operational
processes that are deemed to be complete
and successful also generate risk.
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• Operational risk is the chance of a loss
due to the day-to-day operations of an
organization.
• Every endeavor entails some risk, even
processes that are highly optimized will
generate risks. Operational risk can also
result from a break down of processes or
the management of exceptions that aren't
handled by standard processes.

The following are a few examples
of operational risk.
1. Human Error
A mechanic leaves a tool inside an jet
engine resulting in the blowout of the engine
during flight. The aircraft is able to return to
the airport but the passengers are shaken,
the airline's reputation is damaged, they face
a government investigation and the engine
must be completely replaced.

2. Information Technology
A critical network device experiences an

error that results in a 4 hour outage for the
website of an online retailer. Revenue is lost
and customer satisfaction declines for the
month.

3. Insufficient Processes
The settlement process for an investment bank

is only designed for regular market volume.
One day there is a market crash and volume on
the stock exchanges spikes to 50x normal. The
settlement process fails because it involves
manual steps and the bank doesn't have
enough trained staff to complete the processes
in a timely fashion. Customers are impacted as
their orders don't show as settled within the
regular time. The bank suffers a loss
of reputation with its customers and trading
counterparties.
4. Process Failure
A customer service process breaks down

due to a lack of training. A number of
customers who were entitled to refunds
according to local regulations are mistakenly
told they do not qualify. The customers
complain to regulators who launch an
investigation of the company. The company
faces fines and negative publicity.

5. Quality Risk
An electronics company establishes a

quality assurance process that catches
99.99% of defects in their vacuum cleaners.
They therefore expect that 0.01% of their
products with have a minor defect and they
establish a return policy that allows
customers to get a replacement product
should they discover a problem. The
company budgets for such returns in their
cost forecasts.
4. Process Failure
A customer service process breaks down

due to a lack of training. A number of
customers who were entitled to refunds
according to local regulations are mistakenly
told they do not qualify. The customers
complain to regulators who launch an
investigation of the company. The company
faces fines and negative publicity.

4. Legal Risk

4. Legal Risk
The chance that new regulations will disrupt

your business or that you will incur
expenses and losses due to a legal dispute.

What is Legal Risk?
• Legal risk is the potential for losses due to regulatory

or legal action. There are several major types of legal
risk:
• 1. Regulatory Risk
• A risk of changes to regulations that result in new
compliance costs.
• 2. Compliance Risk
• The potential for fines and penalties for an
organization that fails to comply with laws and
regulations.

• 3. Contract Risk
• The potential for a partner, customer or
supplier to fail to meet the terms of a
contract resulting in losses. Contract risk
can also result from your failure to meet
the terms of a contract resulting in
penalties or legal disputes.

• 4. Non-contractual Rights
• The potential for a third party to infringe on
its non-contractual obligations to you. For
example, a competitor who infringes on
your patents.

• 5. Non Contractual Obligations
• The potential for you to infringe on a third
party's rights such as trademarks or
patents resulting in legal costs and
penalties.

6. Dispute Risk
The potential for a legal dispute to arise as a

result of your business activities.

7. Reputational Risk
The potential a decline in reputation due to

legal actions. For example, if regulators
charge a company for breaking the law the
company may lose customers, employees
and investors due to damage to its
reputation.

5. Compliance Risk

5. Compliance Risk
The chance that you will break laws or

regulations. In many cases, a business may
fully intend to follow the law but ends up
violating regulations due to oversights or
errors.

• Compliance risk is the potential for
losses and legal penalties due to failure to
comply with laws or regulations. In many
cases, businesses that fully intend to
comply with the law still have compliance
risks due to the possibility of management
failures. The following are a few examples
of compliance risks.

1.Environmental Risk
• Potential for damage to living organisms or

the environment arising out of an
organization's activities.
• 2. Workplace Health & Safety

• Risks related to all aspects of health and
safety in the workplace such as accidents
or repetitive strain injuries.

• 3. Corrupt Practices
• The potential for corrupt practices such as bribery
or fraud. Organizations are generally responsible
for the actions of their employees and agents in
this regard.
• 4. Social Responsiblity
• The risk that your business activities will harm
your workers or the people in the communities in
which you operate.

• 5. Quality
• Releasing a low quality product or service that fails to
meet the expected level of due diligence in your
industry or that violates laws and regulations.
• 6. Process Risk
• The risk that your processes will fail resulting in legal
violations such as failure to meet your responsibilities
to your customers or partners.Process failures can
also result in reporting or accounting errors that
breach your duties to your investors.

6. Strategy Risk

6. Strategy Risk
The risks associated with a

particular strategy.

• Strategy risk is the chance that a strategy
will result in losses. Every strategy has
risks that can be estimated as part
of strategy planning. Risk is part of any
strategy and isn't necessarily the result of
a flawed strategy. The goal of strategic
planning is often to optimize the risk-
reward ratio rather than eliminating all risk.
The following are a few examples of
strategy risks.
• 1. Liability Risk
• A concert promoter develops a strategy for a
summer music festival that they expect to
attract sizable crowds. They identify the risk
of legal liability if anyone is injured at the
event. The promoter decides toreduce the
risk by engaging local public safety agencies
such as the fire department. They also
establish a budget for health, safety and
security services.

• 2. Marketing Risk
• A record label signs an unknown act and
commits to a marketing spend to promote
the artist. There is a risk that the artist
won't be popular and the marketing spend
will result in a loss. However, the record
label sees a large potential market for the
music and views therisk-reward as
acceptable.

• 3. Change Management
• A company plans a complete reorganization of its departments but
anticipates the risk that employees will resist the change resulting
in process disruptions and employee turnover. They mitigate the
risk by engaging employees early on in the planning process.
• 4. Program Risk
• A large retail bank plans to found an investment bank. The strategy
involves a large scale program with dozens of projects that have
interdependencies. Due to its overall complexity, the program has a
large risk of failures such as cost overruns and schedule misses. The
bank reduces the risk by hiring an accomplished program
management team.

• 5. Project Risk
• A luxury yacht manufacturer has a strategy to
improve their sales processes by
implementing a new sales system. They
document the risk that the implementation
project will run late, experience cost overruns
or disrupt the sales process.
They transfer the risk by outsourcing the
project with contractual penalties for project
failures.

• 6. Competitive Risk
• A software company establishes a
conservative strategy that makes minimal
changes to its products. The strategy
represents a risk because competitors are
quickly improving their products. As
competitors innovate, the company risks
losing market share due to its conservative
approach. This is an example of a risk that
results from inaction as opposed to action.

• 7. Innovation Risk
• An automobile manufacturer aggressively
innovates adding new technologies to their cars
twice as fast as the competition. They dramatically
change the dashboard of their vehicles to have a
cutting edge user interface. In the rush to change
things as quickly as possible they face increased
risks of quality problems. The company also risks
alienating their loyal customers who expect a
consistent driving experience from one model year
to the next.

• 8. Merger & Acquisition Risk
• A robotics company is threatened by innovative
small competitors that are entering the market.
They establish a strategy to acquire a number of
these innovative companies. The company
identifies a number of risks related to these
acquisitions such as failed integration of
technology platforms. They accept the risks
because they believe therisk/reward ratio is
attractive as they seek to dominate the market.

• 9. Operational Risk
• A telecom company plans layoffs in their customer
service department as part of a cost cutting
strategy. The strategy risks serious disruptions to
their customer service processes as employee
morale drops at the same time that wait times for
customers increase. As both employees and
customers are put under increased stresses, the
potential for heated exchanges becomes a risk.
Potential negative outcomes include bad publicity
and a customer exodus.

• 10. Security Risk
• A bank plans a new international money
transfer service. They identify a number of
security vulnerabilities and threats related
to the service. The bank plans
to reduce these risks by implementing
innovative new security infrastructure and
services.

• 11. Compliance Risk
• An investment bank develops a strategy to
launch an innovative new financial
instrument. Executive management
consider the risk that regulators may deem
the product out of compliance with existing
financial regulations. They reduce the risk
by engaging regulators to ask for an
interpretation of the rules.

• 12. Economic Risk
• A home builder decides to build an additional
1,000 homes in its annual strategy plan. The
builder considers the risk that the economy
will go into recession dampening demand for
new homes. The company decides
to reduce the risk by closely monitoring
economic data and changing their plans if
they see signs of economic weakness.

• 13. Design Risk
• A solar panel company plans to launch an
innovative design with improved efficiency.
As the design is new they identify a risk
that the panels will experience failures in
real world conditions such as harsh
climate conditions. The
company reduces the risk by limiting the
launch to a handful of pilot projects.

• 14. Procurement Risk
• An automobile manufacturer develops a strategy
to reduce input costs by switching suppliers for
key parts. Some of the new suppliers are smaller
companies that have a high debt load. The
company documents the risk that these small
suppliers with fail to deliver or go bankrupt. The
manufacturer decides to reduce the risk by
establishing a supplier qualification process that
ensures that all suppliers are able to deliver and
have a healthy financial condition.

• 15. Exchange Rate Risk
• A luxury brand plans to open retail
locations in eight Asian countries. The
company makes revenue and profit
projections based on assumptions about
future exchange rates. The company
identifies exchange rates as a risk and
plans to reduce the risk with foreign
exchange derivatives.

• 16. Liquidity Risk
• A company decides to build a new building
for its headquarters using cash. The strategy
represents a liquidity risk because buildings
can take months or years to sell. In other
words, the capital invested in the building
isn't easily converted into cash. The
company avoids the risk by arranging a line
of credit with the building as collateral.

• A food manufacturer has a strategy to launch
a new line of ice cream. Initial plans are to
use ingredients that are controversial and
therefore may face future regulations due to
studies that suggest they are unhealthy. Such
regulations might essentially ban the product,
resulting in a costly disruption in sales. The
company decides to avoidthe risk by
choosing ingredients that are recognized as
healthy.

• 18. Infrastructure Risk
• A company has a strategy to open a new
office in a suburban location. The primary
location being considered is only serviced by
a single telecom provider that is known to be
somewhat unreliable. This is deemed an
unacceptable risk because any disruption to
internet services would be extremely costly
for the firm. The company puts the strategy
on hold and commissions a study to research
more acceptable locations.


• Reputational risk is the chance of losses

due to a declining reputation as a result of
practices or incidents that
are perceived as dishonest, disrespectful
or incompetent. The term tends to be used
to describe the risk of a serious loss of
confidence in an organization rather than a
minor decline in reputation.

• Reputational risk is the chance of a loss due
to damage or a decline in your reputation.
• Business reputation can be damaged by
actions that are perceived to be dishonest,
disrespectful or incompetent. In some cases,
a decline in reputation can result in large
financial losses stemming from difficulty
raising capital, loss of sales and increased
costs such as fines or legal fees

The following are a few
examples of reputational risks
1. Accounting
• A company finds an error in its accounting
and need to restate its results for the past 2
years. The stock price crashes and the
company looses all credibility with investors.
They have difficulty raising capital and their
cost of capital rises dramatically. The
accounting scandal generates waves of
negative publicity that result in a decline in
sales.

• 2. Information Technology
• A retailer experiences a security incident in
which an attacker publishes their
customer's private information such as
name, address and credit card details.
They face lawsuits, regulatory inquiries
and a severe drop in sales as customers
close their accounts or avoid their website.

• 3. Quality
• An electronics company releases a phone that gains a reputation for
being easy to break. Sales and the value of the brand decline. The
quality of the next model of phone improves but sales falter because
the brand is widely viewed as cheap and unreliable.
• 4. Project
• An IT company wins a major contract to implement a new pension
administration system for a government. The project comes in
dramatically late and over budget. As a result, the company is
effectively banned from further business with the government as
news of the failed project is much talked about amongst the
government's senior administrators and leaders. The government
also refuses to make final payment for the project resulting in years
of legal wrangling and bad publicity.

• 5. Customer Service
• A customer's wheelchair is damaged in
luggage handling by an airline. The airline
has an inappropriate response that is
recorded by the customer. The customer
manages to get the public interested in the
story and the airline suffers a loss of
reputation. Sales on some of its most
competitive routes decline and the airline is
forced to further discount its prices.

• 6. Executive Management
• An executive of a fashion company says something insulting
about overweight customers while giving a television interview
resulting in a customer backlash and declining sales.
• 7. Operations
• A bank's systems go down during a stock market crash and
its customers can't trade their stocks for several critical hours.
The crash gains much publicity and regulators investigate the
bank. The outage becomes a key selling point for competitors
who claim to have more stable systems. Customers close
their accounts and regulators impose fines.

8. Program Risk

What is Program Risk?
The risks associated with a particular

business program or portfolio of projects.

• A program risk is a potential outcome that
causes a program to fail to meet a goal. It
is related to individual project risks with a
focus on risks that have cross-project
impact. For example, integration
risksbetween projects are commonly
tracked at the program managementlevel.

9. Project Risk

9. Project Risk
The risks associated with a project. Risk

management of projects is a relatively
mature discipline that is enshrined in major
project management methodologies.

Project risks
• Project risks are uncertainties that exposes

a project to potential failure to achieve its
goals. Identifying, evaluating
and treating risks is an ongoing project
management activity that seeks to improve
project results
by avoiding, reducing or transferring risks.
Project risk management also provides
stakeholders with visibility and clarifies
accountability for accepted risks. The
following are types of riskcommonly
encountered by projects.
• 1. Scope Creep
• Scope creep is uncontrolled change to a
project's scope. For example, urgent projects
may be attempted on a best effort basis that
neglects rigorous management of project
change.
• 2. Budget Risk
• The risk of budget control issues such as cost
overruns. Budget estimates are based on
forward-looking estimates that typically
involve some degree of uncertainty.
• 3. Resistance To Change
• Resistance to change is a common
occurrence whereby departments and
individuals defend the status quo and actively
resist projects or organizational changes.
• 4. Integration Risk
• Activities involving integration of
technologies, information, processes or
organizations tend to be particularly high
risk and are oftenunderestimated.
• 5. Resource Risk
• The inability to secure sufficient
resources such as skilled workers and
budget.
• 6. Contract Risk
• The risk that a counterparty such as a
contractor will fail to deliver on their
contractual obligations to you.

• 7. Disputes
• The risk of disputes that delay the project that
potentially progress to litigation.
• 8. Sponsor Support
• Risks related to the responsibilities of the
project sponsor.
• 9. Technology Risk
• Technology risks such as service
outages that disrupt the project.

• 10. Schedule Risk
• Schedules usually incorporate a significant
degree of uncertainty including forward-
looking estimates and assumptions.
• 11. Project Dependencies
• Project dependencies can be evaluated for
risk. For example, a task that is
a precondition for a large number of
activities might be identified as a risk.
• 12. Project Assumptions
• Any potential that project assumptions will
be invalidated can be documented as
risks.
• 13. Skills Risk
• Risks related to training, skill transfers or
resources who are inexperienced at a
particular task.

• 14. Architecture Risk
• Architecture risk is the potential failure of
new or existing architecture to support
project requirements.
• 15. Stakeholders
• Any risks related to stakeholders fulfilling
their commitments to the project.

• 16. Operations Risk
• Operations Risk is a failure of an organization's
core processes. It is a particularly sensitive area of
risk because operational disruptions can result in
costs, revenue loss and damage to reputation.
Projects that touch core business processes often
perform a detailed analysis of operational risks.
• 17. Benefit Shortfall
• In some cases, a project delivers to requirements
but is viewed as a failure because it fails to meet
the benefits stated in its business case. These
risks can be documented as project risks.

• 18. Exchange Rates
• If your budget involves payments or revenue
in multiple currencies there is typically an
associated exchange rate risk.
• 19. Health & Safety
• Health & safety is a special category of risk
that requires alignment with the best
practices of your organization and industry.
Health and safety is typically granted priority
over other project concerns and
hascompliance implications.
• 20. Legal Risk
• Any risk of future litigation related to your
project.
• 21. Quality Risk
• Risks related to the quality of project inputs or
outputs.
• 22. Requirements Quality
• If your requirements are low quality or haven't
been properly validated these factors can be
documented as risks.

• 23. Project Complexity
• Complexity is a function of the size and intricacy of a
project relative to the capabilities of your organization.
It is a known risk factor that complex projects are
generally more likely to fail.
• 24. Force Majeure
• The chance of a major negative event beyond the
control of your organization such as a war or
earthquake.
• 25. Supplier Risk
• The potential that a supplier will fail to meet their
obligations to you such as timely delivery of orders.

• The possibility of new regulations that impact your
project. Particularly relevant if your project is
implementing compliance related functions.
• 27. Procurement Risk
• The risk of failure of a procurement process such
a request for proposal.
• 28. Security Risk
• The risk of a physical or information
security incident.

• 29. Project Estimates
• It is common for project estimates to be a
significant source ofschedule risk. This relates
both to the quality of estimates and to the inherent
uncertainty of forward looking estimates.
• 30. Political Risk
• The chance of a political event that disrupts your
project.
• 31. Design Risk
• The potential that a design will fail to meet
requirements or will berejected by stakeholders.

• Risks associated with the infrastructure needs of
the project such as roads required to access a
construction site.
• 33. Program Risk
• Program risks that impact your project or vice
versa.
• 34. Reputational Risk
• Any major exposures the project has that could
potentially impact thereputation of the sponsoring
business.

• 35. Partner Risk
• The potential for a partner to fail to meet their
obligations to the project.
• 36. Information Security Risk
• Any risk that your project will
introduce information security vulnerabilities.
• 37. Facility Risk
• Availability of facilities for the project such as
offices or data centers

• 38. Market Risk
• Market risks such as the price of a
commodity. Market conditions are a common
cause of benefit shortfall whereby a project
fails to achieve its stated business results.
• 39. Project Planning Risk
• The potential for project management itself to
fail. This is typically documented as a risk
when the project manager is required to take
short cuts that deviate from the established
best practices of an organization or industry.
Why Innovation Risk Is Different?

10. Innovation Risk
Risk that applies to innovative areas of your

business such as product research. Such
areas may require adapting your risk
management practices to fast paced and
relatively high risk activities.

• Innovation is an approach to change that seeks
revolution over improvement. Businesses that
innovate are able to leapfrog the competition by
creating designs, technologies, processes,
capabilities and experiences that are an order of
magnitude better than the current state of the art.
• Innovation typically requires an elevated level of
risk taking as it's hardly possible to revolutionize
an industry by thinking conservatively. As
such, innovation risk is considered a special
category of riskwhereby a business expects
regular failures as it tries many things to see what
works.
High Probability, Low Impact
• Early stage innovation risks are unique in that they
are usually high probability, low impact. Early
stage innovation involves experiments that are
essentially expected to fail. At this stage, risk
management is focused on the design of
experiments to fail cheaply and safely. This is
typically a lightweight process that involves
reviewing an experiment for risks related to
budget, reputation, business disruptions, safety,
health and the environment.

Low Probability, High Impact
• As innovation progresses towards launch, risks
may shift towards low probability, high impact risks
that require standard risk managementdue
diligence. If you're launching a product that's truly
an order of magnitude better than the state of the
art there are usually risks that it will be rejected by
the market, experience operational failures or
cause impacts such as environmental damage. As
such, innovation risk management is particularly
intensive and may be centered around
theprecautionary principle.

What is Country Risk?

11. Country Risk
Exposure to the conditions in the countries

in which you operate such as political
events and the economy.

• Country risk is the potential for losses
due to investments or business activities in
a particular country. Each country has a
different risk profile with some nations
having a highly stable political process and
mature economy and others that have
unstable politics and severe economic
fluctuations. The following are a few types
of country risk.
• 1. Political Risk
• The risk that political events or conditions will result in
losses. In extreme cases, political events can
completely disrupt business activity in a country for an
extended period of time.
• 2. Taxation Risk
• The risk of a change in tax law or interpretations.
Unexpected changes in tax law can drive down asset
prices. New tax regulations can also make it difficult or
prohibitively expensive to operate a business in a
particular country.

• 3. Exchange Rate Risk
• Investing or operating a business in a foreign
country may expose you to exchange rate
risk.
• 4. Economic Risk
• Exposure to the economic conditions of the
country such as
recessions, inflation and credit conditions.
What is Quality Risk?

12. Quality Risk
The potential that you will fail to meet your

quality goals for your products, services and
business practices.

• Quality risk is the potential for losses due
to quality that fails to meet your quality
goals. Quality defines the value of your
products and services and can include
a wide range of factors.

What is Credit Risk?

13. Credit Risk
The risk that those who owe you money to

fail to pay. For the majority of businesses
this is mostly related to accounts receivable
risk.

• Credit risk is a potential that an organization,
business or person is unable or unwilling to pay a
debt. Typically, investments with a higher credit
risk pay a higher rate of interest. Credit risk
fluctuates with time as the financial condition of a
debtor changes.
• Credit risk can result in a delayed flow of
payments, loss of principle and in many cases
results in legal costs as creditors may need to
launch legal action in an attempt to recoup losses.
• The following are a few examples of credit risk.

• 1. Bonds
• Bonds issued by governments,
organizations and businesses are typically
rated for their credit risk by organizations
known as Bond Rating Agencies. The
interest paid on a bond depends upon
these ratings and the appetite for credit
risk in financial markets.

• 2. Loans
• Loans to organizations, businesses and
individuals include a wide variety of financial
products such as mortgages, lines of credit and
credit cards. Loans may be secured or unsecured
with a secured loan being based on the value of
an asset that will be sold to pay the debt under
certain conditions. Financial institutions that make
loans may use a variety of credit rating agencies
to calculate credit risk. Interest rates are usually
based on such risks. For example, unsecured
loans often have a higher interest rate than
secured loans.
• 3. Accounts Receivable
• Companies that sell things typically have customers that owe
them money. These debts are known as accounts
receivables. Customers have incentive to keep their money as
long as possible and often try to delay payments. Customers
who are in poor financial condition may delay payments for
long periods of time even when legal actions are taken to
recover funds. In some cases, customers will ultimately fail to
pay due to bankruptcy or as the result of some dispute.
According to accounting rules, companies must regularly
judge the credit risk associated with their accounts receivable
and recognize losses for doubtful accounts.

14. Exchange Rate Risk
The risk that volatility in foreign exchange

rates will impact the value of business
transactions and assets. Many global
businesses have high exposure to a basket
of currencies that can add volatility to
financial results such as operating margins.

• Exchange rate risk is the possibility that
changes in currency exchange rates may
affect the value of assets or financial
transactions. It is common for exchange
rates to be reasonably volatile as they are
impacted by a broad range of political and
economic events. The following are a few
examples of exchange rate risks.

• 1. Foreign Assets
• An individual investor needs to sell their vacation property in a
foreign country to help fund their retirement plan. The property
has gone up slightly in value in the local market but the
country's currency has dropped by 40% over the years. The
investor is forced to take a large loss.
• 2. Foreign Sales
• An American luxury brand expands to 27 countries that use 11
different currencies. They report their financial statements in
US dollars. After the expansion, the company's net profit
becomes volatile from one financial quarter to the next as
currencies impact their sales margins.

• 3. Foreign Debt
• An American company issues bonds in Europe to take
advantage of a low interest rate environment. They face the
risk that the value of the Euro will increase relative to the US
dollar before the debt is due for repayment.
• 4. Foreign Listing
• A Chinese company lists its stock on a US stock exchange
and must therefore report its earnings in US dollars. The
company has a good year with net revenue increasing 25% in
the local currency. However, the local currency declined 30%
relative to the US dollar. As a result, the company must report
declining net revenue in its financial statements.

• 5. Foreign Procurement
• A European automobile manufacture signs
contracts with part suppliers in the United
States with prices in US dollars. The US
dollar rises dramatically on a long term basis,
making the parts more expensive in Euro.
The manufacture needs to pass on these
costs to its European customers by
increasing prices. As a result of the higher
prices its sales decline.

What is Interest Rate Risk?

15. Interest Rate Risk
The risk that changes to interest rates will

disrupt your business. For example, interest
rates may increase your cost of capital thus
impacting your business model and
profitability.

• Interest rate risk is the probability that
business costs or the value of assets will be
negatively affected by changes in interest
rates.
• The price of most assets are sensitive to
interest rates and it is common for asset
prices to rise or fall as rates change. Interest
rates also impact business costs, particularly
in capital intensive industries. The following
are a few examples of interest rate risks.

• 1. Asset Prices
• The Canadian government suddenly increases interest rates in
response to unexpectedly high inflation. The corresponding
increased rates for new mortgages make houses less affordable.
Buyers leave the market and some homeowners with floating rate
mortgages decide to sell as their monthly payments increase. The
average selling price for real estate declines across all major
Canadian cities resulting in losses for real estate investors.
• 2. Business Costs
• A European shipping company that operates on thin margins has
large financing needs for its fleet of ships. Interest rates suddenly
increase just as the company must refinance some its largest
vessels. The increased cost of the new financing terms make the
company unprofitable and its stock declines.

What are Taxation Risks?

16. Taxation Risk
The potential for new tax laws or

interpretations to result in higher than
expected taxation. In some cases, new tax
laws can completely disrupt the business
model of an industry.

• Taxation risk is the chance that tax rules may
change resulting in losses due to higher than
expected taxes. The following are a few examples
of taxation risks.
• 1. Investment Risk
• An investor buys the stock of a company
incorporated in a developing country. In the past,
the country has allowed dividends to be paid to
foreign owners without taxation. However, they
suddenly announce a 40% tax on dividends to
foreign nationals. The value of the stock drops on
the announcement as foreign investors sell.

• 2. Business Risks
• A small business hires 5 employees and
makes financial plans based on current tax
laws. After hiring the employees, the
business hears of a new payroll tax that
employers will need to pay in the coming
year. The new tax results in higher costs
than anticipated.

17. Process Risk
The business risks associated with a

particular process. Processes tend to be a
focus of risk management as reducing
risks in core business processes can often
yield cost reductions and improved revenue.

• Process risk is the potential for losses related
to a business process. It is usually
considered a type of operational risk as most
processes are part of the day-to-day
operations of a business. The following are a
few common types of process risks.
• Infrastructure outages such as failure of basic
communications linkages can trigger process
failures.

• 2. Information Technology Risk
• The risk of technology errors or security
incidents that disrupt or invalid processes.

• 3. Human Error
• Errors or oversights can result in low quality or failed
processes. For example, if a stock trader incorrectly
enters an order the order may execute at the wrong
price or quantity, potentially representing a significant
loss. It is often possible to reduce human error by
designing processes that are human-friendly and error
tolerant.
• 4. Workplace Safety
• Potential threats to human health and safety such as a
physical accident or injury due to repetitive strains.

• 5. Mechanical Failure
• Breakdown of equipment can disrupt processes such
as manufacturing or supply chain operations.
• 6. Process Quality
• In many cases, it is the quality of a process itself that
leads to failures. A low quality process may not
properly anticipate real world conditions and may
break down with changes in the business
environment. For example, a customer service
process may work under normal conditions but may
fail when call volumes spike.

What is Resource Risk?

18. Resource Risk
The chance that you will fail to meet

business goals due to a lack of resources
such as financing or the labor of skilled
workers.

• A resource risk is the chance that you will
fail to meet a goal due to a lack of
resources. Resources can include
financing, time, skilled workers and
anything else you need to achieve a
particular goal.

19. Political Risk
The potential for political events and

outcomes to impede your business.

• Political risk is the probability that political
decisions, events or conditions will result
in losses. Politics affect everything from
taxes to interest rates and political events
can dramatically impact the price of assets
or cost of doing business. The following
are a few types of political risk.

• 1. Trade Barriers
• Trade barriers such as tariffs can decrease margins or
make it impossible to compete in a foreign market. In
many cases, trade barriers are the result of local
politics or trade wars between nations.
• 2. Taxes
• Changes in taxes can reduce the profitability of a
business and affect the price of assets such as stocks.
Complex tax rules can also be a burden on small
businesses who may need to invest limited resources
in understanding and complying with new rules.

• 3. Legislation
• New legislation can result in compliance costs as
businesses may need to make changes to
operations, products or business processes.
• 4. Administration
• Political turmoil can result in administrative delays.
For example, a government may start to delay
business critical approvals such as building
permits.

• 5. Political Instability
• Political instability such as terrorism, riots, coups,
civil war, and insurrection can completely disrupt
business operations in a country for long periods
of time.
• 6. Economics
• In many cases, politics can influence economic
management such as the interest rate decisions
that impact asset prices and business costs.

What is Seasonal Risk?

20. Seasonal Risk
A business with revenue

that's concentrated in a single season such
as a ski resort.

• Seasonal risk is a term that's applied to a business
that produces a high concentration of its revenue
in a single season. Examples include ski resorts,
ice cream manufacturers and retailers who
achieve most of their sales at Christmas.
• The concentration of revenue in a particular
season leaves a business particularly exposed to
risks such as weather or any event that disrupts
sales for a few months. In many cases, seasonal
risk can bemitigated by diversifying. For example,
a ski resort may develop a water park to attract
summer tourists.

• Causes of Business Risk
• 1. Natural Factors
• There are certain nature factors like floods, earthquake etc. which can damage the business. For
human beings nature is uncontrollable, so any loss due to nature calamities is unavoidable and
uncontrollable.
• 1. Factori naturali Există anumiți factori de natură, cum ar fi inundații, cutremure etc., care pot deteriora
afacerea. Pentru ființele umane natura este incontrolabilă, astfel încât orice pierdere din cauza
calamităților naturii este inevitabilă și incontrolabilă.
• 2. Competition
• When business have strong competitors in the market and the manufactures indulge in cut throat
competition by cutting down price of the goods or by producing cheaper quality of the product,
which is a great hazard for business.
• 2. Concurența În cazul în care întreprinderile au concurenți puternici pe piață și producătorii se dedau la
reducerea concurenței prin reducerea prețului bunurilor sau prin producerea de produse mai ieftine, ceea
ce reprezintă un pericol major pentru afaceri.
• 3. Change in demand for the product

• If there is a sudden change in demand for a certain product can create a business risk. For instance, when
Samsung introduce S III mobile it certainly affected the market for Apple in many country.
• 3. Modificarea cererii pentru produs Dacă există o schimbare bruscă a cererii pentru un anumit produs, acesta poate crea un
risc de afaceri. De exemplu, atunci când Samsung a introdus S III mobile, acesta a afectat cu siguranță piața Apple pentru
multe țări.
154
• 4. Use of Modern Technology
• If a company is financially sound can install heavy machinery and use modern techniques of production. By doing
this per unit cost of production of goods decreases, for small business units it is not possible to do so. It is lead to
suffer their business.
• 4. Utilizarea tehnologiei moderne Dacă o companie este solidă din punct de vedere financiar, poate instala utilaje
grele și utilizează tehnici moderne de producție. Prin acest lucru, costul unitar de producție al mărfurilor scade, iar
pentru unitățile de mici dimensiuni nu este posibil să se facă acest lucru. Aceasta duce la a-și suferi afacerea.
• 5. Human Causes of Business Risk
• Business loss may also occur due to theft, forgery, lavish expenditure and top heavy management.
• 5. Cauzele umane ale riscului de afaceri Pierderi de afaceri pot apărea, de asemenea, din cauza furtului, a
falsificării, a cheltuielilor generoase și a gestiunii superioare grele.
• 6. Change in Government Policies
• Government policies are unavoidable for business. If a sudden change comes in monetary and fiscal policies of
government which is not favorable for business will lead to loss.
• 6. Schimbarea politicilor guvernamentale Politicile guvernamentale sunt inevitabile pentru afaceri. Dacă o
schimbare bruscă vine în politica monetară și fiscală a guvernului, care nu este favorabilă pentru afaceri, va duce la
pierderi.
• 7. Mismanagement
• Sometimes management is not capable to run the business which is the important cause of business risk. Due to
improper planning or what they planned cannot attain the planned objectives which increased the risk. All these
can lead bad cash flow, increase in per unit cost.
7. Gestionarea defectuoasă Uneori managementul nu este capabil să conducă afacerea, care este
cauza importantă a riscului de afaceri. Datorită planificării necorespunzătoare sau planificării lor nu se
pot atinge obiectivele planificate care au crescut riscul. Toate acestea pot duce la un flux de numerar rău,
la creșterea costului unitar
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1.

Business risk management

1.The introduction. The notion

• 2.Types of Business Risk

Riscul este potențialul de a câștiga sau de a pierde ceva de valoare.

Uncertainty is a potential, unpredictable, and

O probabilitate sau o amenințare de

Riscurile de afaceri pot apărea datorită influenței cauzate de două

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Riscul competitiv este potențialul acțiunilor unui

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• Economic risk is the probability that

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• The potential of failures related to the day-

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A critical network device experiences an

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The settlement process for an investment bank

A customer service process breaks down

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An electronics company establishes a

A customer service process breaks down

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The chance that new regulations will disrupt

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• Legal risk is the potential for losses due to regulatory

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The potential for a legal dispute to arise as a

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The potential a decline in reputation due to

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The chance that you will break laws or

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• Potential for damage to living organisms or

• 2. Workplace Health & Safety

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The risks associated with a

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