Risk Assessment

Risk Assessment

Complete the three parts of this assignment.

 

  1. In the space provided below, please provide a description of your business and your business’s specialty to provide and introduction and context for the assignment. Your description should consist of at least 100 words.

 

The business is a large multinational corporation that focuses in the manufacture and distribution of vehicles and vehicle parts. The corporation has its headquarters in the United States and subsidiaries across the world. As such, it produces vehicles and vehicle parts from different parts of the world. The corporation has five brands of vehicles, all cars. However, there are plans to start manufacturing trucks in the near future. The corporation sources materials used in manufacturing from different parts of the world. Due to the global nature of the business, the corporation is exposed to both local and international risks. Some of the risks have a low impact, while others could result in significant loss if they occurred. This paper is an examination of current and possible risks facing the business.

 

  1. Using the table provided below, list at least eight risks with which your business is faced, possible solutions for these risks, the risk type (P=process, M=marketing, F=financial, H=human resource, L=legal), and the risk impact to your business (L=low, M= medium, H=high). Remember that some risks can be applicable to more than one risk type.
Risk Description Risk Type Risk Impact Potential Action for Improvement
Damage to physical property Process risk High Risk mitigation through insurance
High debt with near maturity Financial risk High Implement an effective administrative and accounting system
Fluctuation in currency exchange rates Marketing risk Low Hedging of currency
High employee turnover Human resource risk Medium Better work conditions including salary and benefits
Inability to attract and retain top talent Human resource risk High Attractive remuneration packages and employee benefits
Economic recession Financial risk Low Downsizing
Regulation and compliance L M Introducing a legal risk management program
Technology risk due to failure to innovate P High Research and development

 

  1. Please explain, in a paper of at least 500 words, how you determined whether each risk was low, medium, or high impact, and include a more detailed plan for improvement.

The first risk facing the organization is damage to physical property. This risk is in the category of high risk. The risk is categorized as high risk because of high probability of occurrence and the potential damage that may result. The risk may arise from fire, severe flooding, riots, and from other hazards. The organization can mitigate this risk by insuring the business physical premises against the various hazards. Another risk facing the organization is high debt with a near maturity date. The risk impact is high. This is because such debts can lead to liquidation of the company. In addition, accumulation of debt can ruin the organization’s reputation. The solution is to ensure there is an effective administrative and accounting system in the organization. This would help in ensuring the organization does not borrow excessively.

The third type of risk is currency exchange fluctuations. The risk is categorized as low because it has a low possibility of occurring and low severity. In addition, the organization can be able to take corrective action once the risk occurs. A potential action for improvement is currency hedging. Hedging refers to a type of investment that an organization makes to eliminate the adverse effect of price movements (Carbaugh, 2009). Another risk is high employee turnover whose impact is low. The impact of employee turnover is low because the organization can be able to recruit new employees from a large pool of qualified employees. A potential action for improvement is better remuneration and working conditions for employees. For instance, the organization may decide to pay employees above the industry standard. This would dissuade the current employees from leaving the organization.

The organization may also be unable to attract and retain a talented pool of employees. The risk impact is high because this may severely affect innovativeness and consequently the ability of the organization to remain competitive. The organization can attract a talented pool of employees by offering attractive remuneration packages and employee benefits. The organization faces the risk of an economic recession. The risk is categorized as low because the probability of occurring is also low. The organization cannot be able to prevent this risk from occurring. A potential action for improvement is downsizing. Downsizing involves cutting down the workforce to match the organization’s operational levels. The organization can also close down subsidiaries that are poorly performing.

Regulation and compliance is a key legal risk. The risk is categorized as medium because it can only affect the organization in a significant way if it is unable to adopt effectively to the new provisions of the law. A possible plan for improvement is the introduction of a risk management program (Khatta, 2008). This program may be critical in assessing and monitoring regulatory risks and ensuring that the organization complies with all regulations. The last type of risk is technological risk, which is categorized as high. The risk is high because there is a high possibility of occurring. In addition, the consequences of technological risk could lead to business failure. The organization can improve on this risk by ensuring there is a dedicated team involved in research and development. This would help in ensuring continuous product improvement.

References

Carbaugh, R. J. (2009). International economics. Mason, Ohio: South-Western Cengage   Learning.

Khatta, R. S. (2008). Risk management. New Delhi: Global India Publications.

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