Studied by 17 people
What is international trade
Buying and selling exports and imports between countries
What is free trade
International trade conducted without the existence of barriers to trade e.g. tariffs and quotas
What is protectionism
Trade between countries is restricted through measures to reduce the number of imports coming into the country e.g. tariffs and quotas
What is a tariff What is a quota
Tax on imported goods coming into a country making it more expensive
Reasons for protectionism
Protect domestic industries
Protect domestic employment
Prevent dumping (selling goods at less than cost price by foreign producers to drive domestic producers out of business)
What is a trade bloc What is a single market
A trade agreement where there is free trade between member countries but those outside the bloc will be subjected to protectionist measures
A single market is a type of trading bloc that goes beyond the free trade of free goods and services. May involve free movement of labour and capital
Evaluation of free trade to businesses
ADV:
Help businesses access the best technologies, products and services in the
Can choose cheaper or higher quality suppliers outside the domestic market
Opportunity to become a market leader I'm the industry do interest
They have the ability to exports their goods to foreign markets without being exposed to tarries/quotas allowing them to increase sales revenue and economies
Lower tariffs on UK exports will enable a higher quantity of exports UK 🇬🇧jobs and economic growth
DISADV:
Small domestic businesses may struggle to compete with the price of goods imported from other countries
Foreign Goods are substituting domestic goods so domestic manufacturers may lose business
Foreign exchange loss to country by exporting goods
Discourage local manufacturing and may cause inflation
Competition can intensify
Export products subject to quality standards
Evaluation of free trade
ADV:
Deter unfair competitive practices such as dumping
Increases price of foreign products causes them to purchase domestic goods
Creates jobs for domestic workers
DISADV:
Competition can be beneficial for business
Tarrifs discourage foreign businesses from businesses from investing in the domestic country
Gives domestic businesses an opportunity to create a monopoly
Evaluation of businesses expanding to international markets
ADV:
Increase sales
Spread risk
New potential markets
Create strong brand awareness globally
Economies of scale
Take advantage of legal differences and differences in cost of production compared to UK
Innovation
DISADV:
People all over the world have different needs, priorities, incomes and tastes
Cultural differences
Exchange rate factors
Distribution problems
Management focus
Different legal such as consumer protection or health and safety standards
Language barriers
What is globalisation What factors have contributed to globalisation
Globalisation is the process of deeper economic integration between countries and regions of the world, resulting in more interdependent economies
Factors contributing to globalisation:
Improved communication technology
Deregulation of markets and reductions in barriers to trade
Quicker and cheaper transport
Consumers demanding more choice and more willing to purchase foreign products
What is an emerging market economy/ developing market
Describes a country in the process of rapid economic growth and industrialisation e.g. BRICS (Brasil, Russia, India, China). They have a growing middle class with more disposable income so have a higher demand for goods and services
They represent large untapped markets for many Western businesses.
Winners and losers of globalisation
Winners:
Consumers have greater choice of goods, at a better quality and for a cheaper price
Developing countries- Increase wealth by producing goods for export
Developed economies- Experienced low inflation because of falling prices of imports
Businesses who trade internationally- Benefit from increased sales, spreading of risk, new potential markets, expanding brand awareness, economies of scale, reduced costs due to choice of location, innovation
Losers:
Unskilled workers in Western economies- Real wages falling or jobs being 'relocated' to low-cost economies
Previously viable businesses who have been out competed by low cost competition from overseas
Workers in developing countries- Exploited by large businesses
Environment- Excessive development led to deforestation and flooding. Increase in transport= global warming
What is glocalisation
A business which makes adaptions to its products, services, marketing activities and working practices to ensure they meet the requirements of consumers in different markets
Evaluation of glocalisation
ADV:
Enhances firms success
Global awareness of brand
Avoid ethical issues/costs
Market oriented approach
DISADV:
Expensive
Must be constantly aware of changing consumer tastes
Time consuming
What is a multi-national corporation (MNC)
Organisation which have multiple production or service operations in at least two countries.
Evaluation of companies becoming MNC's
ADV:
Increase market share if at saturation point in domestic market
Secure cheaper premises and labour
Avoid tax or trade barriers
Government grants to move operations into country
DISADV:
More difficult to monitor facilities and can lead to inadequate safety of employees etc.
Labour costs in developing countries is increasing so MNC's having to move to lower labour cost countries which causes disruption and ethical issues
Diseconomies of scale
Social costs and benefits of MNC'S
Social benefits:
Provide large amount of employment
Provide goods and services that consumers wish to purchase
Can pass on benefits of economies of scale to customers
Invest large amounts into R&D to produce products which benefit consumers
Pay taxes to local government
Social costs:
Smaller local businesses struggle to compete
May use transfer pricing to avoid paying tax in some countries
May exploit workers in less developed countries
Negative effect on environment e.g. BP in Gulf of Mexico
Threat to local culture
What is the European Union Why is it said to be a single market
The EU was set up in 1957 as an economic and trade organisation to increase cooperation between European countries. 27 member countries.
The EU is based on four freedoms: Free movement of goods, free movement of services, free movement of labor and free movement of capital. Other features of the EU include:
No barriers of trade or transfer of resources between member states
Common tariff system
Free transfer of resources
Consistent standards from one country to another
Evaluate the impacts of the UK leaving the EU
ADV:
More control over immigration
Freed from EU laws and regulations
More control over trade
Save on EU membership cost
Weaken pound against euro to benefit exporters
DISADV:
Labour shortages as no more freedom of movement of labour= restrict supply to market
UK exporters still need to abide by EU legislation when selling into EU
No longer benefit from trade deals with EU
EU no longer provide funding to UK, which benefited businesses either directly from EU subsidies, or indirectly through development of infrastructure
Weaker pound makes imports more expensive which is passed onto consumers
Advantages and disadvantages of being outside Eurozone (Not having EURO currency)
Advantages:
Bank of England able to set interest rate which is regarded as key weapon in UK governments armory e.g. lower interest rates to encourage spending and help economy get out of recession
No initial changeover costs of joining Euro
Disadvantages:
Pay commission to bank every time businesses want to convert £ into Euros
Less price transparency
Exchange rate fluctuations create element of risk for UK businesses
Restricted access to size of market
What is aggregate demand
Demand for all goods and services produced in an economy.
What is monetary policy What is the aim of monetary policy
Monetary policy uses interest rates to influence the economy The main aim of monetary policy is to help keep macroeconomic stability in the economy and to maintain the value of money
What is the impact and government objective of a decrease in interest rates What is the impact and government objective of a increase in interest rates
Decrease= Consumers spend rather than save, borrowing becomes cheaper, aggregate demand increases Objective to create high employment and economic growth
Increase= Consumers save rather than spend, borrowing becomes cheaper, aggregate demand decreases. Objective to create stable, low inflation
What is fiscal policy What are the uses of fiscal policy
Fiscal policy is the use of government spending, taxation and borrowing to affect the level and growth of aggregate demand, output and jobs
Uses:
Boost total spending in the economy when there is unemployment e.g. spending on new hospitals= more jobs= increase in income and expenditure
If inflation in economy due to demand, fiscal policy used to reduce demand in economy e.g. reduce government spending
Raise taxes or cut spending on imports if there is a current balance deficit
May try to redistribute income by spending money or reducing tax on low income groups to give them more disposable income
What is taxation What does the government use money raised by taxation to do
Taxation is the charges that the government makes on the activities, earnings and income of businesses and individuals
Uses:
Pay for government spending on a variety of public sector activities
Affect factors in economy e.g. inflation/unemployment
What are the types of direct taxes
Income tax- Tax levied directly on income. Affects disposable income of households. Taxed at a progressive rate so marginal rate of tax rises at certain boundaries of taxable income
National insurance- System of compulsory payments by employees and employers to provide state assistance for those who are sick, unemployed or retired
Corporation tax- Tax levied on companies profits
Capital gains tax- Tax levied on profit from sales of property or investment
Inheritance tax- Tax levied on property or money acquired by gift or inheritance
What are the types of indirect taxes
Value added tax (VAT)- Consumption tax added to price of goods or services. Set as a percentage of the price of a good. Usually directly affects the selling prices of products bought
Customs duty- Tax imposed on imports and exports of goods
Excise duties- Tax charged on goods produced within the country and tax on production or sale of particular goods e.g. tobacco and alcohol
Council tax- Tax levied on households by local authorities based on estimated value of a property and number of people living in it. Pays for local services
Business rates- Tax on business properties so those who occupy non-domestic properties contribute towards the cost of local services
What are the three main areas of government spending
Transfer payments- Welfare payments made to benefit recipients such as the state pension or job seekers allowance
Current spending- Spending on state-provided goods and services that are provided on a recurrent basis e.g. NHS salaries, resources for state education and defence etc.
Capital spending- Infastructure e.g. roads, hospitals, motorways
Why do we need government spending
-Provide goods and services that would be underprovided if left to the private sector (merit goods) -Also used to stimulate demand in the economy -Key purchaser of some goods or services provided by businesses e.g. UK defence contractors, shipbuilders -Fund public services
What is a government subsidy What are reasons for government subsidies
An amount of money given directly to businesses by the government to encourage production and consumption
Reasons for:
Encourage output and investment
Achieve more equitable income distribution
Reduce cost of training and employing workers
What is interest
The cost of borrowing money and the reward for saving
What are the direct implications of an increase in interest rates for a business
Increase:
Overheads increase
Business wish to pay suppliers quicker to avoid being charged interest
Customers less likely to borrow money
Customer's existing borrowing becomes more expensive
Less disposable income for customers
OPPOSITE FOR DECREASE
What is inflation What are the two causes of inflation
A sustained increase in the average price level of a country
Two causes: Demand pull inflation- Occurs when total demand for goods and services exceeds total supply so businesses raise price. Associated with boom phase of business cycle Cost push- Occurs when firms increase price to maintain or protect profit margins after experiencing rise in costs of production e.g. rise in wages, raw materials
What is the impact of inflation on business
Increased costs of raw materials, wages, energy etc. May be passed onto customers
Discourages investment as creates uncertainty
Shoe leather costs (firms search around for best price on items)
Menu costs (firms constantly changing price lists because of increased costs
Wage negotiating by employees
What is deflation What is the impact of deflation
Deflation is a general fall in price levels
It can lead to:
A decrease in wage levels
Value of debts increase relative to value of assets and income
Expenditure discouraged so demand falls
What is an exchange rate Why do firms purchase foreign currency
Exchange rates are the price of one currency against another currency. They influence the price of imports and exports
Firms purchase foreign currency to:
Pay for goods and services bought from overseas
Invest in foreign companies
What is the impact on businesses when the £ appreciates
-Imports become cheaper therefore higher profit margins. Firms may also look to decrease selling price to become more competitive
-Exports become more expensive so firms must increase selling price abroad making them less competitive or leave selling price the same and experience a decrease in revenue
OPPOSITE FOR £ DEPRECIATING
Strong Pound Imports Cheaper Exports Dearer
What is economic growth
Economic growth is an increase in the value of goods and services produced by an economy over time, usually resulting in a rise in average living standards, creation of new jobs and lower unemployment. For businesses should result in increased profits, improved business confidence and increased capital investment. For government this should mean increased tax revenues used to fund more spending on government services
What is Gross Domestic Product (GDP)
Value of goods and services produced by an economy over a specific period made up of 4 elements:
Consumption
Investment
Government spending
Net exports
What is the business cycle
The business cycle shows the fluctuations of economic output in a country and is measured by looking at changes in GDP from one quarter to the next
Explain the 4 stages of the business cycle
Downturn- Less investment by businesses and business owners. Managers become more nervous about future and may start to cut back. Higher inflation so interest rates may increase. Less spending and unemployment increase. Economy may still to grow but at much slower rate
Recession- Economy shrinks in size. Recession is two consecutive quarters of negative economic growth, often caused by insufficient aggregate demand for goods and services within the economy. Rapid increase in unemployment, falling demand and investment, high levels of inflation and interest rates. Demand generally falls and likely to be redundancies. Businesses cut back on investment and levels of stock. Product ranges and pricing strategies change to suit new economic environment. Small businesses may close as they run out of cash
Recovery- Business and consumer confidence still low but demand may increase. Investment will increase but stay low. Unemployment stays high until businesses are sure that recovery is set to continue. However new jobs are creates and unemployment falls and consumers start to spend again.
Boom- Business confidence increases so investment of firms will increase investment into new machinery etc. to increase output. Increase in consumer demand so firms may be competing at full capacity to meet increased consumer demand. Economy may experience full employment which means businesses may struggle to recruit suitable labour in sufficient numbers, leading to poaching. If economy is unable to meet increased demand, demand pull inflation will occur. High consumer spending and confidence, increased investment by businesses and low unemployment
What are cyclical businesses What are counter-cyclical businesses
Cyclical- Demand is closely linked to GDP and business cycle e.g. electrical goods, fashion retailers Counter-cyclical- May benefit from economic downturn e.g. value retailers. pawnbrokers
What is unemployment
When someone who is ready, willing and available to start work is unable to find employment
What are the types of unemployment
Frictional unemployment- Unemployment due to people moving between jobs e.g. new entrants to labour market. Both unavoidable and desirable so that job vacancies can be filled
Structural unemployment- Appears when there have been large changes in patterns of demand or developments in technology which have caused long term unemployment in regions or industries e.g. robotics replacing jobs and unemployment caused by foreign competition
Cyclical unemployment- Appears as part of business cycle. As economy enters downturn, unemployment increases. Involuntary due to lack of demand for goods and services
What is social change
The way in which changes in society affect a business's activities Include:
Demographic changes
Lifestyle changes
What are demographic changes What are the two main demographic changes occurring in the UK
The changing structure of the population e.g. size, age, characteristics, mitigation patterns, wealth
2 main demographic changes in UK:
Growing population
Aging population
What are lifestyle changes and how do they effect businesses
A change in society and people's lifestyles e.g. changes in tastes and fashions, technology and media consumption, decreasing family sizes, concerns for sustainability and health
Lifestyle changes have provided businesses with many opportunities and threats:
Number of working women increased and are therefore economically active. Supermarkets focused on convenience and childcare industry boomed as household budgets increased
Society more health conscious
Change in how younger people consume media and purchase goods. Moved away from TV and onto streaming platforms and social media
Cultural changes
Fashion changes
Attitude towards environment
Increase in lone parent families
Marriages between opposite sex couples fallen
Young people living with parents increased
What is automation (with examples)
Automation is using robotics to carry out repetitive tasks e.g. self checkouts, robots that manufacture cars
Evaluation of businesses using automation
ADV:
Lower employee costs
Increased productivity
Less management time spent in disputes and negotiations
DISADV:
Greater environmental impact
Social costs
Costs of investment
Less flexibility
How has information and communication technologies (ICT) impacted businesses
Internet marketing- Internet sales increasing year on year
Web-based customer relationships- More than 4000 bank and building society branches closed in UK
B2B (Business to Business)- Finding commercial buyers for business output and sourcing components and raw materials over the internet
Manufacturing resource planning 2 (MRP2)- Used by manufacturing businesses to plant all aspects of business activity. Takes forecasts and turns them into a series of objectives and targets for each function and department in business
Electronic point of sale systems (EPOS)- Reading of bar codes at checkouts and a linked stock database that controls ordering and stockholding for retailers
Impact of technology on business
Shorter product life cycles as can develop and bring products to market much quicker
Outsourcing and relocating 'back office' operations worldwide as cost of operations much cheaper than in UK e.g. call centre
Outsourcing production- Quality can be remotely monitored and large businesses can reduce financial risk by letting other manufacturers manufacture products for them
Evaluation of technological change on consumers
ADV:
Easy price comparisons and more information
More choice
Lower prices
Improved quality
Convenience
DISADV:
Fraud
Call centre disruptions
Evaluation of technological change on businesses
ADV:
Reduction in costs as employees can be replaced by machinery
Improved quality as machines more precise and consistent than humans
Increased productivity
Reduce waste
Improve working environment as technology has made it safer, work more easier and tolerable
DISADV:
Initial costs may be high aswell as high maintenance, redundancy and training costs
Breakdowns/IT problems
Automated production lines are interdependent (if one part of the line breaks down, the whole process may stop
What is an ethical business
Ethics are moral guidelines which govern good behaviour. An ethical business is one that considers the needs of all stakeholders before making a decision
How should businesses act ethically towards different stakeholders
Employees- Should be treated as most valuable asset e.g. taking care of health and safety, good working conditions, fair pay. Legal consequences for those who do not comply. Those working for suppliers should also be equally as important
Suppliers- Sticking to agreed contracts, not forcing renegotiation, paying on time, not putting pressure on supplier's cash flow, use ethical suppliers
Customers- Customers want a quality product or service at a fair price. Businesses which act unethically fail to fulfil this moral commitment to customers
Local community- Should be aware of impact on local community e.g. pollution, litter, using local suppliers
The government- Duty to adhere by laws set by government, comply with legislation, pay correct amount of tax
What is the difference between the free market view and corporate social responsibility (CSR)
Free market view- Business's primary responsibility is to maximise profit for shareholders
CSR- Businesses have duties and obligations to go beyond generating profit for shareholders. Need to monitor and take responsibility for the impact they have on social welfare and the environment. May be due to fear of environmentalist and consumer pressure groups or the media, and concern for public image. Can sacrifice some profit in the short term but can pay off in the long run
How can businesses respond to environmental issues
Supply chain- Business only deals with companies that are sustainable. Consider ethical implications, environmental implications and distances involved in transportation
Production- Consider amount of energy used in process, make production more efficient, reduce waste, recycle
Packaging- Use more environmentally friendly, recyclable packaging without compromising quality
Distribution- If firm has own fleet, consider upgrading to greener vehicles. Subsidies available for this
Administration- Offices tend to only produce lower levels of emissions but remain vital in any sustainable strategy. Can use energy saving features on equipment, office recycling and printing policy
What is a sustainable business How do businesses become more sustainable
A sustainable business has no negative overall impact on the environment
Businesses can become sustainable by:
Minimizing or eliminating the use of hazardous chemicals and processes that produce harmful by-products
Using reusable/recyclable packaging
Switching to more sustainable suppliers
Using more energy efficient equipment/ using renewable sources of energy
Eliminating unnecessary activities
How do pressure groups fight their cause against businesses
Lobbying: Meeting and discussing issues with decision makers e.g. government ministers, senior managers
Direct action
Gain as much publicity as possible: Gain positive media attention as possible which can bring public onto their side
Legal action: May fight cause through the courts or questioning legality of proposed actions
Evaluation of businesses acting environmentally friendly
ADV:
Improved business and brand reputation
Recruitment of employees who commit themselves to ethical company objectives
Greater customer loyalty as growing number of ethical customers
Avoid legal penalties
DISADV:
Costs may increase e.g. processing waste, more sustainable suppliers. HOWEVER some practices may lead to reduced costs e.g. switching off lights
May need to change production techniques/materials
R&D spending may increase
What is company law What are examples of company law What is the impact on business/stakeholder
Company law ensures a firm the is incorporated (LTD/PLC) is a separate legal entity independent of directors and shareholders
Examples:
A company's property belongs to it and not to directors/managers. Prevents misuse of assets
A company is responsible for its own debts and liabilities. Shareholders and directors cannot be forced to pay them
Impact on business/shareholders:
Creates more competitive business environment, however may slow down business ventures e.g. mergers
What is employee and anti-discrimination law What are examples of this law What is the impact on businesses/shareholders
Employment legislation is designed to protect the interests of employees within the workplace
Examples:
Minimum Wage Act 1998
Equality Act 2010: Unlawful to discriminate against anyone at work because of age, disability, gender, race, religion etc.
Employment rights: Employees have to be provided with contract of employment within two months of starting which must state levels of pay, holiday entitlement, rights for maternity pay, pension rights, disciplinary procedures and length of notice period. Also protected against unfair dismissal
Health and Safety at Work Legislation: Employers have responsibility to ensure wellbeing and safety of employees. Employees also have responsibility to take care and abide by health and safety rules
Impact on business/shareholders:
Must keep up to date with changes in law
Increased costs due to minimum wage, holiday and sick pay, etc.
Staff have legal rights to request flexible hours from their employer
Treating staff fairly may lead to an increase in motivation
What is Consumer Protection law What are examples of Consumer Protection Law How does this impact businesses/stakeholders
This legislation is designed to protect the interests of consumers when making purchases of goods and services. Ensures businesses act fairly towards their consumers
Examples:
Sale and Supply of Goods Act: Goods must be of satisfactory quality
Trade Description Act: Goods and services must perform in the way advertised by the business
Consumer Credit Act: Protects customers when borrowing money or buying on credit
Impact on business/stakeholders:
Additional costs to business
Must create fair marketing activities
Affect business-to-business practices closely connected to customer e.g. trader supplying fair trade food products will need to ensure its labelling complies
What is Competition Policy What are examples of Competition Policy How does it affect businesses/stakeholders
Competition Policy focuses on controlling the abuse of market power of big business. Designed to control monopolies and restrictive practices within a market. Government believes competition results in better quality goods and a wider variety of products
Examples:
Fair Trading Act 1973: Defined what constitutes a monopoly (25% market share)
Competition Act 1998: Prohibits agreements, cartels or practices which prevent, restrict or distort competition
Competition and Markets Authority (CMA): Work to promote competition for benefit of consumers
Impact on business/stakeholders:
Benefits SME's
Fines for those who break law
What is the Data Protection Act What are features of the act
Controls how your personal information is used by organisations, businesses or the government
Businesses should make sure the information is:
Used fairly and lawfully
Used for limited, specifically stated purposes
Used in a way that is adequate, relevant and not excessive
Accurate
Kept for no longer than necessary
Handled according to peoples data protection rights
Kept safe and secure
What is the Intellectual Property Law What does it cover
Intellectual Property Law covers the legal rights of individual and companies in regard to designs, inventions and artistic works
Features:
Trademark: Covers designs and artwork such as labelling, brand logo design and product design
Patent law: Covers inventions and stops others from making, using or selling invention without permission from owner
Copyright law: Gives creator of literacy, dramatic, musical and artistic works rights to control the way their information is used
What are examples of internal causes of change
Changes in size of a business
Change in ownership
Introduction of new technology
Changes in leadership
What are examples of external causes of change
Changes in social behaviour and consumer tastes
Government
Changes in workforce/flexible working processes
Competition
Changes in economy e.g. business cycle
Changes in technology
What is change management What is the difference between step change and incremental change
Change management involves the process that ensures a business responds to the environment in which it operates
Step management- Dramatic or radical change in one fell swoop. Quick so may require some coercion Incremental change- On-going small, gradual change which takes place as part of an organisations evolution and development. Less coercive and more inclusive
What steps must a business undertake to prepare for change
Employee preparation- May involve reskilling to enable employees to carry out new tasks effectively or need for recruitment so business has workers with new skills or managers who can force the pace of change
Increased R&D expenditure- This develops new products, methods of production and technologies
Additional capital investment- Change can create the need for investment in new technology and equipment. Often expensive and undertaking
What are J. Storey's four different approaches to change management
Imposed Total Package (biggest shock, resistance. Autocratic)- Change is implemented all in one go. Done by senior management and no consultation or negotiation with employees e.g. downsizing
Very little decision time needed
Only works in culture where employees willing to accept directions from managers without question
Imposed Piecemeal Initiative- Change still implemented without consultation or negotiation with employees but implemented in stages
Gives time for workers to adapt to changes
Longer implementation time
Negotiated Total Package- Change first negotiated and consulted with employees but implemented all at once. Involves trade unions/worker groups and likely to offer improvements/rewards in working place as incentive
Happier workforce
Very hard to achieve, long time to implement
Negotiated Piecemeal Incentives- Gradual implementation of change, workers and managers consult and agree on various changes as needed.
Happier workforce
Very hard to achieve, numerous talks=delays
Why is there resistance to change
Workers fear unknown
Affect working relationships
Employees and managers fear unemployment if can't carry out new tasks
Managers may lack skills/expertise to manage change successfully
Owners may not want to pay cost of change
May go against culture of business
How can managers remove resistance to change
Discussions with those affected by the change
Attempt to prevent misinformation and rumours
Keep employees informed about changes
Training so employees can cope with new operations
Ensure that organisational culture fits in with new operations and organisation
What change model did Kurt Lewin develop
3 steps:
Unfreezing- Creating motivation for change by making people realise change is necessary as many people naturally resist change. Communication especially important as the more we know about change and the more we feel it is necessary and urgent, the more motivated we are to accept the change
Changing- A process where the organisation must transition or move into this new state of being. Education, communication, support and time are critical for employees as they become familiar with the change
Refreezing- Establishing stability once changes have been made. Positive rewards and acknowledgment of individualized efforts are often used to reinforce the new state
What is the difference between a quantifiable and non quantifiable risk
Quantifiable- Can be measured e.g. loss of overseas sales due to exchange rate Unquantifiable- Cannot be measured e.g. adverse effect on company image if product isn't successful
What are examples of internal risks
Failure of equipment/technology
Employee error (due to lack of training)
Skilled staff leaving
Public relations (e.g. Tesco horsemeat)
Injuries through hazards in workplace
Product failures
What are examples of external risks
Supply problems/price increases
Economic factors e.g. Brexit
Legal changes
Competitor activities
Natural disasters
Terrorist activities
What is the difference between insurable and uninsurable risks
Insurable risks are risks that can be protected under insurance coverage An uninsurable risk is a risk that an insurer will not take on
What is risk management
The process of understanding and minimising what might go wrong in an organisation. It involves the activities undertaken by a business which are designed to control and minimise threats to the continuing efficiency, profitability and success of its operations
What are the stages of the risk management process
Identification and analysis of risks to which the organisation is exposed to
Measurement of the likelihood of the risks occurring
Assessment of potential impacts on the business
Deciding what action can be taken to eliminate or reduce risk
What are examples of risk management strategies
Taking out insurance
Training staff appropriately
Regular backing up of IT systems
Robust quality assurance systems
Install sprinkler/ fire extinguishers
Why are contingency plans prepared
Contingency plans are prepared in recognition of the fact that things do go wrong from time to time. The aim is to minimise the impact of a foreseeable event and to plan for how the organisation will resume normal operations after the crisis
What is a quota
A physical restriction on the number of goods coming into a market to reduce supply of limit amount of foreign imports available
What is crisis management
Crisis management is where a firm puts in emergency measures to deal with an unforeseeable disaster/event that threatens to destroy or severely disrupt in a major way to the continued operation of normal business activities
What are the more difficult risks to manage
Uninsurable risks are more difficult to manage as the probability of the risk occurring is impossible to quantify, so insurance companies are unable to price the risk
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