Likelihood of the risk occurring
On identification of a certain risk, one needs to determine the probability of the risk occurring. This is done by considering several factors such as;The origin/source of the threat, the capability of the source, and the motivation behind the threat.
Nature of the susceptibility.
How effective current controls, if any, are in mitigating or deterring the vulnerability (Sadgrove, 2015).Considering the above-listed factors, the possibility that a prospective susceptibility could be exploited can be highlighted as low, medium, or high.
According to the case study, the risks that can occur include;By-law Compliance Risk. It is an unlikely risk that excessive usage of water by the manager and the employees could attract fines for excessive usage of water. Moreover, there would be breaching of modern by-law. Manager’s Travel Risk. In spite of being a competent driver, driving through the sharp narrow climb up the range is difficult especially with trucks blocking the way. This could result in an accident.
There is the likelihood that cash being left on premises would be stolen as banking in the café was done every day. Some cash, around $4000, was left in the cash register overnight. There is a possibility that this cash would be stolen.
Consequences of the risks
Upon determining the likelihood of the risk occurring, there is the need to address the risk. If the risk is not addressed, there could be adverse consequences. Classifying risks based on their consequences gives four levels as explained below;Insignificant Risk. They have negligible impact on the environment, and there is little public concern. Insignificant risks may include no violation of licenses, no revenue loss and, no asset damage. Minor risk. These are the risks that have environmental damage requiring up to $250,000. These may include few assets being damaged, net revenue loss and a breach of internal procedures.Major Risks. Causes significant environmental damage of more than $250,000 (1-5 years). It causes damage to the image of the reputation of the firm at a national level. It may include causes like legislation and regulation of standards.
It has a long term environmental damage of more than five years. It also leads to damage of reputation at the global level (Chapman & Ward, 1996).
According to the case study, for each of the risks involved, the possible consequences are discussed below;By-law Compliance Risk. Failure to use the water effectively, the company will pay fines of up to $50,000. This is in line with the current by-laws. This will be a loss to the company. It is, therefore, a minor risk.Manage Travel Risk. If any accident occurs because of the long drive and steep narrow climbs, the company will insure the manager and find a substitute for him. This will slow down the café business. Therefore, it is a major risk.Banking Risk. Not banking money everyday makes it prone to theft. Besides, it is also hazardous to the employees in the café. Therefore, it is a major risk.Prioritizing risksRisks are prioritized by use of risk analysis. Risk analysis follows …