Risk and Uncertainty Explained — Transcript

Full transcript

1. 0:00hi there let's take a quick look at two
2. 0:02related and important concepts in
3. 0:05business
4. 0:06risk and uncertainty
5. 0:10risk is a big issue for businesses large
6. 0:12and small
7. 0:14and a whole industry is devoted to
8. 0:15what's known as risk management trying
9. 0:17to mitigate or reduce the potential
10. 0:20damage from risk
11. 0:21and often risk is associated with the
12. 0:24concept of uncertainty so this video is
13. 0:25really just here to help explain the
14. 0:28subtle difference between the two
15. 0:30well what do we mean by risk well it's
16. 0:32the possibility or probability that
17. 0:35things don't happen as you wish that
18. 0:38they would bad things happen to the
19. 0:39business planned actions decisions don't
20. 0:42work
21. 0:43things go wrong in business
22. 0:45and it's a major issue for business is
23. 0:47risk
24. 0:49uncertainty is a slightly more subtle
25. 0:51concept it's the fact that in life as in
26. 0:53business
27. 0:54or in business as in life nothing
28. 0:57is certain you can't be sure about the
29. 1:00effect of your decisions whether they
30. 1:02will be successful or not because there
31. 1:03are factors that in most cases are
32. 1:06outside of your control so for example
33. 1:08the uncertainty about what might happen
34. 1:10if you launch a new product or change
35. 1:12the price of a product well we don't
36. 1:14know do we until until we try it
37. 1:16um so that's the concept of uncertainty
38. 1:18a different concept to risk
39. 1:21well
40. 1:22let's give you a few examples of risk i
41. 1:24mentioned that it's a major issue for uh
42. 1:27businesses actually in particular large
43. 1:29businesses because
44. 1:30the issue with risk
45. 1:32is that it has the potential to not just
46. 1:34damage the business but to threaten the
47. 1:36survival
48. 1:37of a business
49. 1:39so right at the top that i've put
50. 1:40perhaps one of the biggest risks that
51. 1:42all businesses face which is that of
52. 1:44cyber security and fraud the need to
53. 1:47maintain uh protection over sensitive uh
54. 1:50particularly for example customer data a
55. 1:51massive issue the threats to businesses
56. 1:54and their systems from cybercrime are
57. 1:57ever present and growing similarly the
58. 1:59whole issue around the need for
59. 2:01businesses to operate in an
60. 2:03environmentally sensitive and friendly
61. 2:05way and the costs and consequences of
62. 2:07damaging the environment that's a major
63. 2:09risk
64. 2:11for lots of businesses but obviously for
65. 2:12particular
66. 2:14sectors
67. 2:15lots of businesses are increasingly
68. 2:17facing issues around their supply chain
69. 2:19and what i've listed their shocks to the
70. 2:21supply chain so for example uh i don't
71. 2:23know a sudden a change in the
72. 2:25availability of containers
73. 2:28supplies no longer arriving on time when
74. 2:31you had anticipated a particular lead
75. 2:33time
76. 2:34so supply chain supply chain shocks are
77. 2:36a big issue so the whole issue of supply
78. 2:38chain management is an attempt
79. 2:40to manage the risks associated with that
80. 2:43and
81. 2:44the other source of risk i guess is just
82. 2:46to think about what else is out there in
83. 2:48the external environment so sudden
84. 2:50changes or major changes to regulation
85. 2:53business regulation and legislation can
86. 2:56be a risk to business as of course can
87. 2:58clearly
88. 2:59shocks to the economic system economic
89. 3:01conditions
90. 3:04what about uncertainty well uncertainty
91. 3:06as i say is a slightly different concept
92. 3:07here because in business managers have
93. 3:10to deal with uncertainty all the time
94. 3:12it's the unknowns isn't it
95. 3:14and you have to live with it in business
96. 3:16try to do all you can to to manage it
97. 3:19and to be as well informed as possible
98. 3:21so for example using market research as
99. 3:23a means of reducing uncertainty
100. 3:26but the kind of uncertainties that exist
101. 3:27really relate to business decisions
102. 3:29actions so for example how would the
103. 3:32market respond if you decided to change
104. 3:34your marketing mix in some way perhaps
105. 3:37increase your price what would the
106. 3:38effect be so you'd be thinking about
107. 3:40uh price elasticity of demand and also
108. 3:43market research to understand how
109. 3:44consumers might respond
110. 3:46if you're a new business how likely is
111. 3:48it or what is it what's the uncertainty
112. 3:50that you may be able to achieve what you
113. 3:51believe your breakeven output to be a
114. 3:54really key
115. 3:55concept
116. 3:56if you're choosing a new supplier how
117. 3:59likely is it
118. 4:00that they will be able to deliver on
119. 4:01time to the right quality and prove to
120. 4:03be a reliable partner
121. 4:05of the business and if you think about
122. 4:07human resource management and
123. 4:08uncertainty at the start of each year
124. 4:10for many businesses particularly
125. 4:12labor-intensive businesses is
126. 4:15whether you'll be able to retain
127. 4:17the right number of skilled
128. 4:20and experienced employees so you don't
129. 4:22know do you you don't know how many
130. 4:23employees are going to leave you might
131. 4:25have some information about labour
132. 4:26turnover for yourself and the industry
133. 4:28but it's an uncertainty and that's the
134. 4:30point about uncertainty businesses just
135. 4:32have to live with it and try to try to
136. 4:34do the best they can
137. 4:36to manage it
138. 4:37well there we go hopefully that's useful
139. 4:39that's just a brief introduction to
140. 4:41these two important concepts risk
141. 4:44and uncertainty
142. 5:05you