Discuss about the Determination and Management of Financial Risks for Oshwal Limited.
Risk refers to a state of uncertainty in a given business venture or other set-ups (Wright, 2016). On the other hand, investment risks relate to a possibility of incurring losses as opposed to the profit that the investor expects afterward (Nikitin, Zagaynova, Zagaynov, Blinova, & Safina, 2016). A peril is an essential instrument that investors check on before deciding on whether to invest in a business venture or abandon the whole idea. Business persons prefer experiments that pose little risk to their investment capital. Recent research has shown that less risk incurred during investment yields a profitable venture. On the other hand, high risk of investment creates a significant return on capital.
A business setup should define an elaborate management strategy to deal with risks. The strategy should be in line with the Australian standards on risk management. The strategy should be in line with the company’s aims and objectives. The strategy should also be systematic, timely, and have an appropriate structure that the employees can understand. Moreover, the administration of the company should ensure that the risk management techniques are economical to the firm. An appropriate management strategy should yield more profits to the organization than previous gains. After the formulation of the strategy, the firm should alert the employees about them.
The management of a business entity should ensure that their communication strategies are logical and accurate. The mode of communication needs to provide relevant and complete information to the employees. The process of relaying information should follow the conclusion of the strategic process. Therefore, the employers should feed the employees with the data in an appropriate time. There are numerous methods that the management can use in relaying information to the staff members. The techniques include graphs, reports, and gatherings. The organization should also manage the assessment strategy to maximize profits. This essay will explore the financial investment risk factors for Oshwal limited. Furthermore, the paper will explore risk management and assessment strategies for the same company.
Business risk is one that occurs as a result of a given security. The risk is high level and possesses a threat of embarrassing loss of investment capital (Hillson, & Murray-Webster, 2017). The risk is of significant magnitude and makes a business entity to be volatile to liquidity. The risk emanates from eventualities on the side of the company issuing the security to the investor. A security company which undergoes bankruptcy cannot pay principle or interest in the event of a bond.
The issuance of municipal bonds relates to perils of taxation. The hazard is moderate level but may lead to loss of profits. The magnitude is relatively large and can lead to liquidity in case of improper management (Hillson, & Murray-Webster, 2017). A security which is tax-free can lose its status before its maturity date. The low rates of interests attached to such bonds reduce their returns due to the factor of taxation.
The perils are also called the risks of purchase. The risks do not pose a serious threat to investment. Moreover, the hazard is of low magnitude and cannot lead to the closure of a business organization. Inflation is a common occurrence in different countries, and it affects the currency of a given nation (Hillson, & Murray-Webster, 2017). The valuation of income or asset reduces during inflation. Therefore, the buyers can sell their products at lower prices than the normal estimate. The investors are thus exposed to the risk of losing their capital in the event of elevated inflation rates.
The risks involve the political stability of a given state. Furthermore, the change in business policies can adversely affect an enterprising firm (Brink, 2017). An example of undesirable system involves high taxation on goods and services. Oshwal limited deals in electronics and home appliances. The move by the national administration affects businesses and lead to the closure of a majority of companies. The government should enact favorable legislation to ensure economic growth.
The process of risk management strategies involves identifying, assessing, and prioritizing perils. The Oshwal management should then minimize, monitor, and regulate the effects of the risk should it occur (Sadgrove, 2016). The administrators should also reduce resource allocation to highly risky ventures. On the other hand, investors should allocate more resources to business sectors with reduced chances of eventualities. Every organization should carry out risk management to reduce the chances of incurring losses and protect its returns. Proper management of risk enables a business to speculate on the possible profit margins at the end of financial year.
Risk refers to any eventuality that leads to losses or profits to a business (Kou, Peng, & Wang, 2014). Oshwal Company should look at the possible causes of benefits and gains for the firm. The organization can also identify the risks regarding the external environment which includes the competitors. Perils can occur due to external or internal factors. Oshwal firm should use appropriate software to determine the variety of possible risks.
The analysis follows the identification process. The first stage of study is the determination of the level of the peril (Kou, Peng, & Wang, 2014). The hazard can be of a high, moderate, or minimum level. Risk analysis is also through the determination of its magnitude. Moreover, the business administration should look at the standards of the volatility of the risk. Therefore, the organization should analyze possible impact of the risk on the behavior of the consumers. The firm should also check for the effects of the peril on the company and its operations.
Oshwal Company limited can start by treating the worst peril after identification and analysis. The company should first explore the techniques of reducing the possible undesirable impacts of the risk (Toma, & Dedu, 2014). Secondly, the firm should improve the possibilities of desirable outcome from the peril. The institution should come up with contingency and preventive measures to eliminate surprises during the implementation process.
Oshwal limited should look at the variables that the risk affects when it occurs. Moreover, the organization should look at the likely threats to the implementation process (Toma, & Dedu, 2014). The treatment of the emerging issues should be in tandem with the process of tracking the threats due to the perils. There are comprehensive strategies for risk management. The techniques depend on the levels, magnitude, and volatility as a result of the business hazard.
Avoiding risk is the cheapest way of peril management in any business organization. A firm stays clear from hazards by not participating in risky ventures (Bandaly, Satir, & Shanker, 2014). An example is when a multinational like Oshwal declines to establish a branch in a politically unstable nation. The disadvantage of avoidance is the loss of possible profits in case of absent risk occurrence.
Mitigation refers to reducing the possible impact of a risk on a business entity (Bandaly, Satir, & Shanker, 2014). Reduction is effective in events where the firm cannot completely avoid the occurrence of an eventuality. An example is when a business spends three-quarters of the capital to open a new branch. The Oshwal Organization saves the remaining amount due to the fear of perils. The reduction process reduces the losses that a firm incurs when the risk occurs.
The process of transferring risk involves spreading the effects of an eventuality to other firms. Oshwal shift risks by making regular premium payments for risk protection from an insurance firm (Giannakis, & Papadopoulos, 2016). The insured organization obtains financial compensation from the insurance company in case of loss due to risk occurrence. An example is when an Oshwal receives an insurance cover against fire to its valuable assets. The insurance firm compensates the insured company in the event of a fire.
Accepting the occurrence and the effects of peril is another efficient way of risk management. Oshwal Limited agrees with the profit or loss as a result of the hazard (Giannakis, & Papadopoulos, 2016). Moreover, the firm pays for the damage that the risk causes to the institution. An example is when an organization experiments to gauge the efficiency of a new product. The institution should be ready to pay for any losses due to the test.
The administration of Oshwal should make the staff aware of the risk management methods and assessment strategies. An appropriate example involves informing the staff of the insurance company that is offering protection in case of undesirable eventualities (Blake et al., 2015). The information should be accurate and logical. Moreover, the Oshwal management should provide complete details of the risk management and assessment strategies. The organization should take the shortest possible time to relay the risk management framework to the members of staff. Moreover, the firm should use dynamic templates in the workstation to transmit the information. The institution can call for meetings to inform the staff members of the strategies. Other means of communication involves the issuance of memos and reports.
There are viable risk management strategies that Oshwal limited can use to reduce losses due to eventualities. The first strategy involves avoiding the risk (Bromiley, McShane, Nair, & Rustambekov, 2015). The institution can achieve this by preventing a venture that leads to undesirable eventualities. The second strategy is through risk minimization. The organization mitigates risks by reducing the expenditure on new projects. A financial institution can also transfer the peril by seeking insurance cover from an insurance company (Aven, 2016). Furthermore, an institution can accept risks due to projects that they have to undertake. The company has to come up with an efficient framework to implement the risk management strategies.
Oshwal limited requires numerous resources to implement the risk management strategies. The first resource is the labor force. The organization should expose the workers to relevant training to equip them with desirable knowledge and skills. The implementation process requires a significant period hence the management must be patient with the staff members. The administration should train the staff in accepting the result of risks that they cannot avoid (Ho, Zheng, Yildiz, & Talluri, 2015). Moreover, the Oshwal administration should explain the terms of the insurance cover to the employees. Therefore, human resource is the first requirement in the process of implementation.
The Oshwal institution also requires financial back-up to implement the strategies for risk management. The first form of the economic component is the liquid cash. The firm needs money to pay for the regular premiums to the insurance institutions. Moreover, the institution requires capital to train the employees on the techniques of reducing risks in the workstation (Uhl, & Gollenia, 2016). The firm should also sell shares to individuals and other financial firms to spread the risk of any eventuality. The shareholders assist the firm to pay for the premiums and contribute cash to cater for undesirable occurrences in case of the accepted risks.
The Oshwal firm also requires technological advancement to implement the strategies. The technological improvement can be regarding physical, system, and viable processes that assist in risk management (Brustbauer, 2016). Advanced software helps the organization to detect a possible occurrence of a peril. Furthermore, the technology can reveal whether the hazard can yield positive or negative results. In case of an undesirable outcome, modern technology is capable of predicting the extent of the loss. The financial institution requires the insight to prepare for the possible risk. Furthermore, the firm can make itself financially for the possible loss due to risk occurrence. Technology is therefore indispensable in the implementation plan.
The Oshwal limited must know the extent of their assets for the easy taking of insurance cover. The firm must insure properties such as office space, buildings, and supplies when taking an insurance cover. The firm must protect its reputation by accepting certain perils. The frequent occurrence of eventualities destroys the reputation of a firm. The organization should invest in public relations services to rectify its image (Grace, Leverty, Phillips, & Shimpi, 2015). Moreover, a firm should improve its marketing strategies to protect its reputation. The institution should minimize the risk by avoiding large investments in untested projects. The process of transferring also protects the image of an organization.
The Oshwal organization has to put an elaborate management plan to enforce the implementation strategy. The firm can achieve the management by setting procedures for the members of staff to follow. The procedures must state the requirements for each employee to ensure a successful implementation process (Farrell, & Gallagher, 2015). The first action is the creation of a viable financial plan. The organization must set aside funds for regular premium payment to the insurance company. Moreover, the organization requires funds to train the employees on reducing the number of risks. The acceptance of certain risks also requires a financial backup.
The firm should also come up with relevant promotional strategies to enforce the implementation plan. The organization can invite shareholders to the organization through the strategies. The issuance of shares to individuals and other financial companies assist the parent firm to spread the risks (Gatzert, & Martin, 2015). The organization must acquire all the resources they need to implement the strategies. Moreover, the institution should rank the strategies of risk management. The first should prioritize the avoidance of risks due to the little financial requirement of the strategy. The second strategy on the list should be the mitigation of the perils. The other strategies should follow the two techniques in any desirable order.
There are specific actions that Oshwal limited should take to implement the plan. The firm should assign a specific task to every employee (Sweeting, 2017). A section of the staff should operate the technology machine that monitors the risks and their possible outcome. The members of staff should work in strict timelines to encounter risks. An elaborate communication strategy is essential in the implementation process (Malhotra, 2015). The risk information should be accurate and logical. Moreover, the implementation information to the employees should be relevant and complete. The organization should use appropriate workstation templates to relay the implementation plan to the staff.
Oshwal limited must run a range of evaluation techniques to check on the effectiveness of the implementation plan. The strategies should meet the goals of the financial institution. Moreover, the techniques should reduce the risks and increase the profit margins of a certain institution (Wu, Chen, & Olson, 2014). The goal of any financial institution is to avoid the occurrence of an eventuality. The second objective involves mitigating the effects of certain risks. The third and the fourth objectives are to accept certain risks and transfer the effects of a risk to other individuals or institutions. A method that meets all the above goals is effective and requires immediate implementation.
Evaluation involves focusing on three main sides of the implementation strategy. The first step is evaluating the situation of Oshwal limited before the implementation process. The second phase focuses on the current state of affairs as the firm is implementing the strategies (Kozubíková, Belás, Bilan, & Bartoš, 2015). The third and the final stage focus on the future of the firm. An ideal institution expects different effects of risks before the inception of the risk management techniques. However, an appropriate implementation plan should reduce the effects of the perils. The technological advancement machine should show a reduced undesirable effect of eventualities in the future.
The monitoring method should benefit and the costs of the implementation plan. The expenditure should be reasonable and lead to significant reduction of the undesirable risk outcomes. The implementation schedule should be flexible and avoid interfering into the working hours. Moreover, an alternative plan is necessary in case of failure of the present strategy (Hoskisson, Chirico, Zyung, & Gambeta, 2017). Oshwal limited should benchmark in other companies to compare the risk management plans. The techniques should meet the firm’s objectives and goals in the long run (Giambona, Graham, & Harvey, 2017). The company should ditch a strategy that fails to fulfill its requirements. Furthermore, the organization should search for strategies that are economically viable during implementation.
The process of evaluation should review the intended results after implementation. Oshwal institution expects a reduction in the number of risks after the risk management strategies (Hoskisson, Chirico, Zyung, & Gambeta, 2017). The organization needs to compare the situation of the perils before and after the implementation process. The firm should then gauge the success rate of the implemented technique (Thakur, & Srivastava, 2014). A significant reduction of the risks and their aftermath indicates a popular success of the strategy. On the other hand, little reduction in the number of perils indicates minimal success. Therefore, the organization should look for other methods that yield the greatest results.
Conclusion
A risk is an eventuality that results in the negative or positive outcome for a given institution. Oshwal limited needs to assess the risk before implementing an appropriate management strategy to curb the effects of the peril. The first assessment procedure is the identification of the possible financial hazard. The organization should then analyze the consequences of the risks. Furthermore, the firm should come up with possible methods of treating the risk. There are different risk management strategies that a firm can develop to counter the perils and their undesirable outcomes.
The first strategy is avoiding the risk by not investing in unpredictable businesses. The second strategy is mitigating the perils of certain occurrences. The third strategy involves accepting risks that must happen in financial institutions. The final strategy is the transfer of risks through the acquisition of insurance coverage. The organization should come up with a viable implementation process to manage the strategy. Financial firms require different resources such as financial and human capital to implement the risk management strategies. An idea process of evaluation indicates whether the process of implementation is viable or otherwise. Oshwal limited should enact the risk management and assessment strategies to maximize its profits.
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