Page 192 - SBL Integrated Workbook STUDENT 2018

Chapter 15

3.2 Operational risks

 refer to potential losses that might arise in business operations

 include risks of fraud or employee malfeasance, poor quality production or lack
of inputs for production

 can be managed by internal control systems.

3.3 Categories of risks

Note: In the exam you may be required to identify risks, or types of risk, facing a
business. The risks listed below are not exhaustive but illustrate many of the
typical risks that affect a business.

 Business risk refers to the classic risks of the world of business such as
uncertainty about demand for product (Product risk.)

 The risks businesses face will vary greatly between companies and derive from
a number of different sources, including those shown below.

 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.

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

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

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

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

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

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