CIMA Paper P2 Advanced Management Accounting Ian Kusano and Nathi Thela
13 Chapter Risk Management 1
Risk What is risk ? • ...the chance that future events or results may not be as expected Why incur risk ? • To gain competitive advantage • To increase financial return 2
CIMA’s Risk Management Cycle Establish risk management group Identify risk areas Business strategy and set goals Understand and Review and refine assess scale of process risk Information for decision making Implementation Develop risk and monitoring of response strategy controls Implement strategy and allocate responsibilities 3
Risk Identification 4
Risk Mapping Impact/Consequences Low High High Probability/ Likelihood Low 5
Risk Treatment Methods • Avoid risk • Transfer risk • Pool risks • Diversification • Risk reduction • Hedging risks • Risk sharing 6
Risk Mapping : TARA framework Impact/Consequences Low High High Mitigate and Control control Probability/ Likelihood Transfer/ Accept share Low 7
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