1. List and describe four (4) weakness of risk management...

Written Assessment Task
BSBRSK501 MANAGE RISK
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ATTACHMENT A
PART THREE Tasks - Risk Management Action Plan
1. The elements and components of a risk management action plan.
    ELEMENTS
    COMPONENTS
    The key elements of a risk management plan include process, integration, culture and infrastructure. A mix of all the elements is required for developing an effective risk management plan. The above mentioned elements are flexible as strategies, risk profiles and organisation culture differ from organisation to organisation (ICWA, 2019).
    The components of a risk management plan are roles and responsibilities, budgeting, timing, scoring and interpretation, thresholds, communication, tracking and auditing. There is a requirement for integration of all the components for effectiveness of the risk management plan. Generally, managers are required to look after the process. However, third party can be engaged for obtaining better results. Risk appetite of the company should be clearly known before implementation of the plan to ensure that the plan can be implemented effectively and efficiently (IRM, 2018).
2. Explain the purpose of each of the elements of a risk management plan. Identify five (5) strategies to implement this action plan
    PURPOSE
    LIST 5 STRATEGIES TO IMPLEMENT
    The purpose of each element of risk management action plan are as follows:
Process: As stated by Lusardi (2015), the process ensures that the action plan covers all the aspects and the plan is a comprehensive one.
Integration: It ensures that all the pats strive towards achievement of a common goal.
Culture: It ensures that the plan action plan suits the culture of the organisation and ensures effectiveness throughout the organisation.
Infrastructure: The purpose of this element is to ensure that the organisation has the relevant resources for implementing the risk management strategies.
    Strategies to implement the risk management plan include programme development, risk identification, risk prioritisation and treatment of risks. These will ensure that the action plan can implemented effectively and efficiently. Effective identification of risk can enable the firm in mitigating the risk up to a great extent. Upon identification, there will be a number of risk that will be identified. Prioritisation will enable the firm to deal with the issues effectively. According to the views of Aven (2016), once the risk to be treated first is identified, the same strategy can be formed and implemented with ease to deal with the same.
3. Management of the risks: Consider your knowledge of risk identification, risk assessment, assess the likelihood or risks occurring, assess the impact or consequences of risks occur and then evaluate and prioritise risks for treatment/control.
Physical inspections
Identify the areas, activities, equipment, etc. that would require physical inspections to identify risks at. How often would each of these need to be inspected?
    Physical inspection item
    Frequency
    Inventory
    weekly
    Receivables
    weekly
    Cash and cash equivalents
    daily
    Fixed assets
    Half yearly
Identify the key risks in your organisation including the name, description, cause/s, and consequences.
    Risk
    Name
    Description
    Cause/s
    Consequence
    
    Liquidity risk
    As noted by Brooks (2019), liquidity risk is the risk related to the availability of liquid funds to meet the day-to-day expenses of the entity
    There is a shortage of funds as funds are block in receivables for a long period
    It leads to lack of cash for other operating expenses.
    
    Inventory management risk
    It is the risk related to loss of inventory due to theft, pilferage, excessive storage of inventory or stock-out of goods
    Inefficient inventory management system and absence of proper security controls.
    It leads to loss for the organisation, which affects the top line and the bottom line of the company.
    
    Capital structure risk
    It is the risk related to mix of internal and external funds for long-term financing. Excessive debt may question the solvency of the company.
    Expansion plans require external funding and lack of internal funding may lead to such a capital structure issue.
    Increase in fixed interest cost and lack of confidence of investors regarding the future of the company.
Risk analysis
Complete this document using the risk matrix to determine the likelihood, consequence, and level of risk.
    Risk
    Likelihood
    Consequence
    Level of risk
    Liquidity risk
    High
    According to DeAngelo and Stulz (2015), liquidity issue leads to shortage of funds, which affect the overall business of the entity. There is a decrease in the top line and bottom line of the company.
    Very High
    Inventory management risk
    High
    It leads to overstocking or stockout of inventory. This hampers the operations of the entity, which affects the profits. Excessive stock increases the cost of holding inventory whereas stock out affects the production schedule negatively.
    High
    Capital structure risk
    Medium
    Capital structure risk involve excessive as well as very less use of debt in the capital structure. Lack of debt indicates inability of company to obtain the advantage of external financing. Excessive use of...