Risk management is considered as the concept through which financial and other business risks are forecasted and evaluated and it also identify the procedures through which the impact of these risks can be avoided and minimized.
This business report is based on the case study of Sonkrag Inc. an international solar component organization, as this organization engaged in selling the solar panels and its components to both industry and consumers. Structure of this report is divided into two divisions that are consumer division and industry division. First two sections answer the issue related to consumer division and last two sections answer the issue related to capital investment. At the end, brief conclusion is stated to conclude the report.
Loss related to computerized systems and confidential data will affect the working of organizations in adverse manner. It further affects the ability to generate profits, produce products, and serve to the customers. Additionally, loss related to sensitive information about the customers will cause reputational damage and loss of profits for the organization. Following are the weakness related to controlling environment and internal control systems in the organization which led to loss of data-
This section of the report states the recommendations which can be used by the organization in terms of protecting the consumer data-
Limit the access- There is no need to give the access of consumer data to each and every person in the organization. Access of third parties on consumer confidential information must be limited by the organization, which means, access is given to only few peoples who genuinely need the access. This automatically reduces the opportunities for hackers to steal the data related to the organization (Li, Lou and Ren, 2010).
Collect only important data- Unnecessary data of the customers must not be collected by the organization, as it not only waste the time and resources of the organization but also increase the opportunities for the hackers to steal the data. In other words, only such data is collected which is important for processing the transaction with the customers, and any confidential information such as credit card details and identity card details of the customers must be protected by recognized security tools.
Monitoring tools- There must be effective and efficient monitoring process in the organization, as it necessary for monitoring the practices and other actions of the employee in context of ensuring the data security in the organization.
Destroy data- Data of the consumer which is already used by the organization or the transaction for which such data is collected is already completed, and then organization must destroy that data. It helps the organization in restoring the confidence of consumers in terms of privacy measures and transparency.
Ensure accountability- Management must held the employees accountable for any breach occurred in the consumer data security system, as it make the employees and related department more accountable in this context. Policies and programs related to data security must be communicated at each level of the organization, and management must ensure that each organization understands it and complied with it. This can be understood with the help of example, employees must be restricted to use the outside computers or laptops, transfer of data from one computer to any outside computer in any way must be banned, etc. (Chen and Zhao, 2012).
Capital asset pricing model is the theoretical model that is used to determine the required rate of return that is appropriate in relation to an asset in the given situation. This model is applied in order to make decisions regarding the addition of assets to some well-diversified portfolio so as to maximise the returns on such portfolio. The CAPM model tells about the relationship of risk and the rewards related to a particular security. The rate that is derived from the use of CAPM model is used to discount the cash-flows under a particular project so as to make effective capital appraisal investments (Womack & Zhang, 2003). However, the said model suffers from certain limitations which are discussed below:
The assumptions on which CAPM model works are not realistic and thus they are not suitable in real world hence they are not applicable in the real business cases.
Conclusion
After considering the above facts, it can be said that Sonkrag fails to ensure the effective control environment in their organization and this is the biggest reason, because of which confidential data of the organization is lost. There are number of weakness in the internal control system such as easy access and lack of monitoring. There is number of organization which gives easy access to the third parties to their confidential data in context of supporting the different functions of business. Lack of monitoring creates the loop holes in the security system of the organization and cyber criminals take advantage of these gaps.
Another issue is resolved with the help of Capital asset pricing model is the theoretical model that is used to determine the required rate of return that is appropriate in relation to an asset in the given situation. This model is applied in order to make decisions regarding the addition of assets to some well-diversified portfolio so as to maximise the returns on such portfolio. The CAPM model tells about the relationship of risk and the rewards related to a particular security.
References:
Barberis, N., Greenwood, R., Jin, L. and Shleifer, A., 2015. X-CAPM: An extrapolative capital asset pricing model. Journal of financial economics, 115(1), pp.1-24.
Chen, D. and Zhao, H., 2012, March. Data security and privacy protection issues in cloud computing. In Computer Science and Electronics Engineering (ICCSEE), 2012 International Conference on (Vol. 1, pp. 647-651). IEEE.
Džaja, J. and Aljinovi?, Z., 2013. Testing CAPM model on the emerging markets of the Central and Southeastern Europe. Croatian Operational Research Review, 4(1), pp.164-175.
Hanim Fadzil, F., Haron, H. and Jantan, M., 2005. Internal auditing practices and internal control system. Managerial Auditing Journal, 20(8), pp.844-866.
Hermanson, H.M., 2000. An analysis of the demand for reporting on internal control. Accounting Horizons, 14(3), pp.325-341.
Li, M., Lou, W. and Ren, K., 2010. Data security and privacy in wireless body area networks. IEEE Wireless communications, 17(1).
Womack, K. and Zhang, Y., 2003. Understanding risk and return, the CAPM, and the Fama-French three-factor model.
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