1.1 Analyse standards relating to the management of business risk
Unit J/506/2048 Establish business risk management processes This unit aims to provide candidates with the knowledge of business risk management and risk assessment approaches.
1 Understand business risk management models and techniques
1.1 Analyse standards relating to the management of business risk
1.2 Analyse the factors influencing different types of risk
1.3 Evaluate the relationship between risk management, business continuity and crisis management
1.4 Evaluate a range of scenario planning and crisis management models
1.5 Analyse methods of calculating risk probability
1.6 Analyse the effectiveness of a range of risk monitoring techniques
1.7 Analyse the significance of risk governance structures and ownership
2 Be able to develop business risk management processes
2.1 Review periodically the effectiveness of risk management strategy, policy and criteria
2.2 Take action to ensure that risk profiles remain current and relevant
2.3 Develop viable and affordable risk management processes that are consistent with business needs and the degree of potential impact of the risk
2.4 Develop contingency and business disruption processes that are commensurate with the degree of risk to business as usual and organisational reputation
2.5 Take action to ensure that risk management processes are integrated into operational plans and activities
3 Be able to evaluate the effectiveness of business risk management process
3.1 Appraise the suitability of a range of risk evaluation techniques to business risk management
3.2 Evaluate risk using valid quantitative and qualitative information
3.3 Identify areas for improvement in identifying and managing risk
3.4 Encourage a culture that accepts and manages risk
Assessment
There must be valid, authentic and sufficient for all the assessment criteria. However, one piece of evidence may be used to meet the requirements of more than one learning outcome or assessment criterion.
Sample Answer
1.1 Analyse standards relating to the management of business risk
Business risk management standards provide a structured approach to identifying, assessing, and managing risks in a consistent manner. Key standards such as ISO 31000 (Risk Management – Guidelines) offer organisations a framework for creating risk management policies and practices. These standards guide businesses in establishing risk management processes that help them anticipate potential threats, reduce their impact, and seize opportunities. Adhering to these standards ensures that risk management is embedded within the organisation’s culture, with a clear set of responsibilities and risk tolerance levels, allowing businesses to proactively manage and mitigate risk.
1.2 Analyse the factors influencing different types of risk
Several factors influence the types of risks faced by businesses. These factors can be grouped into internal and external influences:
Internal factors : These include organisational structure, culture, leadership decisions, operational processes, and resource management. For instance, poor leadership or ineffective operational systems may introduce operational risks such as inefficiencies or failures in processes.External factors : These involve economic, political, legal, technological, and environmental changes that can affect business operations. For example, changes in government regulations, technological disruptions, or natural disasters can significantly alter the risk landscape.
Understanding these factors allows businesses to categorise risks into strategic, operational, financial, and compliance-related risks, all of which require tailored management approaches.
1.3 Evaluate the relationship between risk management, business continuity, and crisis management
Risk management, business continuity, and crisis management are closely intertwined yet distinct functions.
Risk management focuses on identifying, assessing, and mitigating risks that could affect business operations. It is proactive, with the aim to minimise the likelihood or impact of risks.Business continuity ensures that critical business functions continue during and after a disruption, making it an extension of risk management that focuses on maintaining essential services during crises.
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