Page 16 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx

Chapter 1

Identify
Categories (or sources) of risk risk areas

4.1 Political, legal and regulatory risk

Risks that businesses face because of the regulatory regime that they operate in.

 Political risk Risk due to political instability

 Legal/litigation risk Risk that litigation will be brought against business

 Regulatory risk Risk of changes in regulation affecting business

 Compliance risk Risk of non-compliance with law resulting in fines,
penalties, etc.

4.2 Business risk

Risks that businesses face due to nature of operations and products.

 Strategic risk Risk that business strategies (e.g. acquisitions) will fail

Risk of failure of new products/loss of interest in
 Product risk
existing products

 Commodity
price risk Risk of a rise in commodity prices (e.g. oil)

 Product reputation
risk Risk of change in product’s reputation or image

Risk that business operations may be inefficient or
 Operational risk
business changes may fail

 Contractual Risk that the terms of a contract do not fully cover a
inadequacy risk business against all potential outcomes

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