Question

1. Define risk.

2. List FIVE (5) types of risk and their examples.

3. What do you understand with risk management?

4. Give FIVE (5) reasons why do we need crisis management in our organization.

5. Give THREE (3) differences between crisis prone company and crisis prepared company (in table form)

6. List FIVE (5) features of crisis.

7. Briefly explain FIVE (5) consequences of risk and crisis.

Answer 1

1) Risk : In layman terms, risk could be defined as the probability of the actual returns varying from the expected returns. Higher the variance, higher is the risk.

Eg: Currently due to the COVID-19 pandemic, Consumer sentiment aroung tourism has become bleak. So investing in a hotel company might be a risky proposition

2) Five types of risk

a) Systematic risk: The risk that applies to the entire market (Eg - If Donald trump was to die due to Covid, the entire global markets would be hit by that shock, irrespective of their current fundamentals)

b) Unsystematic risk : Risk which applies to a specific company or sector ( Eg - Lithium ion batteries might disrupt lead acetate batteries, which could put those companies out of business)

c) Credit risk - The risk of default by an individual/ organization (Eg - Due to business closures across states during the pandemic, restaurant companies that have taken loans from banks might not repay)

d) Country risk - When a country cannot honor its debt obligations (Eg Argentina)

e) Inflation risk - When your real returns are reduced due to the effect of inflation

3) Risk management is the concept of actively montioring the risk of your portfolio, and taken the right decisions to manage those risk while keeping an eye out for the returns

4) The 5 reasons why we need crisis management are as follows

a) Because crisis will happen and you need to be ready

b) Because your internal stakeholders are watching how you deal with a crisis and you need to set a good example

c) You need to deal with a crisis to manage investor expecations

d) It allows for business continuity

e) It might help in growth, when your peers are simply not prepared to deal with the crisis

5)

	Crisis Prone	Crisis prepared
1	Business will come to a halt	Business will go on as usual
2	Customers will lose trust	Customers trust will only improve
3	Brand value will be damaged	Brand value will enhance

6) 5 features of a crisis

a) Loss of business

b) Loss of confidence

c) Loss in share price

d) Loss in market share

e) Loss of brand value

7) the consequences are as follows

	Crisis	Risk
1	Test of management skill	Risk comes with associated reward
2	Test of prepardness	Will make you think of loopholes
3	Could enhance business	If dealt with well, benefits could occur
4	Could enhance customer relations	Shows your appetite
5	Could enhance employee relations	Could dissolve the firm