Risk Assessment Report: How Risky Is Your Company?

Risk Assessment Reports

Top management in present’s firms are facing the frightening task of navigating their organization safely though an increasingly challenging market environments and business conditions. Due to these dynamic scenarios, the risks associated with the firm are increasing and modern day businesses are becoming more problematic. These problems are not easily identifiable, more anxiety provoking, and less easily managed. According to Nishat Faisal et al., (2007) the risks evident in the present competitive environment are ubiquitous and spread through the entire functionalities of an organization. Therefore, in present scenario the main objective of the business is to identify the main risks associated with the organization and try to reduce as well as minimize the exposure.

Therefore the present report is emphasising on the risk assessment reports which comprises of three important sections – pressure point due to growth, pressure point due to culture and pressure point due to information management. Moreover, the report would also focus on the mitigation strategies, i.e. how risks can be reduced.

In order to analyze the risks and its weight, risks exposure calculator is used. Risks exposure calculator is not a precise tool such as cash flow analysis and an electronic spreadsheet, its outcomes is directional.  It helps the management of an organization to find out organization’s risks level is in the danger, safety and caution. Once the management can understand an organization’s risks level, they can make effective steps to solve them or can align it with business strategies (Shedden et al., 2010).

Fast increasing market businesses are often exciting and they are operating in an intensely competitive market environment. A growing organization attracts the employees’ interest as well as emphasising on the aspect of business profitability. In pursuing organizational strategies, greater importance is given on ensuring sales improvements and revenues growth. Moreover, the person who is doing well within the organization is offered with better rewards and incentives as compared to the other individuals. A person performing excellently within an organization is offered with better career growth opportunities and this can lead to a lot of pressure and stress on the other employees and this would eventually have a negative impact on their performance at the workplace (Merna and Al-Thani, 2011). Expansion in operations is another growth related pressure point in business. In order to succeed in a competitive market, business establishments must increase their existing production line by ensuring the utilization of innovation techniques and setting up of new production facilities. Without proper planning, infrastructure support, and lack of distribution channels in the market today’s organizations are likely to face a lot of challenges and complexities in the rapid expansion. This would eventually lead to an overload, resulting in compromises in their product and service quality. Inexperience among the employees and the staff’s members could sometime create the growth related pressure point at the workplace. Organization needs a huge amount of manpower for satisfying their business needs and requirements and at times the manager could make the mistake of not checking their social background, experience and education qualifications which could invariably have a negative impact on the organization in a negative manner (Tjoa et al., 2008). As an outcome, employees have lack of an adequate knowledge and skills which makes them unable to understand their work roles and responsibilities.

Risks description Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	Probability of occurrence	Loss size(days)	Risks exposure in days
pressure for performance	35%	10	3.5
rate of expansion	25%	14	3.75
inexperience of key employees	45%	25	11.25

Pressure Point due to Growth

From the above calculation it can be identified that among three disks description such as pressure for performance, rate of expansion and inexperience of key employees, the high risks exposure is related to inexperience of key employees. This is due to fact that, if a business can hire the person who is inexperienced or not fit for the job, this leads misunderstanding about the job. For example if an employee’s has lack of skills and understanding about how to manage the customers, then they cannot provide adequate services which could satisfy the needs and expectations of their customers. . This can lead to dissatisfaction from the customer’s end thereby severely compromising the market position as well as sales performance of the organization (O’Donnell and Schultz Jr, 2005). Experience in the workplace brings in some other issues mainly in terms of high innovation and unstructured business. It takes too much time and effort on the part of an organization to make their employees realise and understand the organization values. Therefore to mitigate these risks, the management of an organization needs to implements effective strategies, such as before their final induction into the workforce, the organization needs to put them through comprehensive training and development classes (Simons, 1999). In addition to this, management needs to build effective strategies regarding what percentage of new employees could be filled up for these posts so that the organization performance and output would not be hampered. Next, risks exposure is rate of expansion, thus to solve this problems the management needs to analyze their available resources and conducts the market research before implementing any strategies regarding expansion (Koller, 2005).                                      

In present competitive environment no business can survive for long haul without entrepreneurial risks considering the fact that it is the main determinant of organizational creativity and innovation. But the success can make confident risks takers too much complacent about their abilities and this would make them overconfident which is not good in the long haul. Sometime it can be seen that successful business enterprises invest lots of money in undertaking risky deals and alliances with business establishments that may not have much ability to fulfil the changing needs and preferences of the customers (Manuj and Mentzer, 2008). Again, it could be seen that rewarding the entrepreneurial initiative might not be the right things to do as sometimes it could increase the risks exposure to an organization. In order to compute the risks assessment and exposure, the management of an organization might need to find out the percentage of business based on new services and products that have been produced by their creative and risk taking workers (Dunovic et al., 2013). The higher the numbers of such workers, the larger would be the risk exposure to the organisation. Another reason of the higher score of the percentage is the internal working environment within the organisation. 

Risk Description

Executive resistance to bad news is considered another pressure point due to culture. Executive resistance to bad news has negatively impact on organization performance and eventually hampers the organization growth by making business establishments lose out on the market competition with their business rivals (Merna and Al-Thani, 2011). Therefore, it is imperative for the management of an organization to focus on the improvement of this issue as this would eventually help them to sustain the business competition in the market for the long haul by accomplishing better organisational performance. In order to compute the risks exposure, management of an organization needs to focus on the how much bad new they hear on a daily basis and how it could be minimised. By finding out the answers to these problems, business establishments would be able to solve their business risks in a better manner (O’Donnell and Schultz Jr, 2005).                                             

Internal competition is also considered one of the main risks associated with the organization. Senior executives of an organization mainly established a healthy competition at the workplace in order to stimulate an exceptional effort from all their employees (Dumbrava, & Iacob, 2013). Moreover, it could be observed that internal competition at workplace could create many other issues such as workplace politic and lack of trust and understanding among the employees. This would result in potential credit losses, loss of business assets as well as the market reputation of the organization.   

Risks description	Probability of occurrence	Loss size(days)	Risks exposure in days
rewards for entrepreneurial risk taking	22%	8	1.76
executive resistance to bad news	20%	12	2.4
level of internal competition	55%	15	8.25

From the calculation and findings of risks exposure, it can be observed that among them level of internal competition is more rather than the other two factors. Therefore to solve these issues in successful manner, management of an organization needs to implement effective communication procedures within their business domain. Additionally for mitigating these risks in a better manner, the management needs to accomplish or conduct regular meetings with their staff members. This would help them to indentify the main issues related to customer satisfaction and market demand in a successful manner. Apart from that management needs to incorporate better motivation strategies which would help them to increase the organizational performance and mitigate these issues in a successful manner (Nigro and Abbate, 2011).

Information is a critical component of any modern day business organization without which they would not be able to sustain their business competition in the market. Information plays a vital role in the daily organizational functionalities and it helps management of the business establishments to undertake better and informed decisions for ensuring the future organizational growth and productivity in the market (Nigro and Abbate, 2011).

Pressure Point due to Culture

An effective flow of information within a company is critical to its market performance and in the absence of an effective information management systems the organizations are invariably exposed to greater market risks. Product and service innovation is a vital instrument of success in a competitive marketplace. By fostering greater innovation and creativity within their existing product and service offerings and bundling their new products with their existing ones, organizations are invariably increasing complexity of business transactions (Shedden et al., 2010). Such complexities could arise from the cross-border agreements in international operations and the creative financing of customer`s purchases wherein there is a need for formulating highly complex contractual agreements. Furthermore, if only a handful of experts are able to understand and realise the resulting obligations and cash flow contingencies that would be encountered by an organization from such transaction complexity, it would really pose a threat to the normal smooth functioning of the organization in the near future (Calow, 2009).

Increasing the volumes of transactions is another crucial factor that would put greater burden or pressure on their existing organizational information systems. Excessive transactions would invariably create an overloading of the information systems and this would lead to a greater leniency in the process of scrutinising the business transactions in order to ensure that they strictly adhere to preapproved organizational policies. Overloaded computer information support systems would not be able to perform in an optimum manner and as a result they would not be able to capture and present the accurate information or data that is crucial to ensure organizational growth and productivity. This would also increase the organizational risk in the long haul (Simons, 1999).

The gaps in the diagnostic performance are another critical factor that contributes towards greater organizational risks. The existing amount of pressure put on the internal reporting systems of an organization would invariably decide how effectively they are able to monitor and analyse the organizational performance and productivity in the market. The internal reporting systems which measures organizational performance variables such as return on capital employed, product and service quality must be monitored in a regular manner so as to ensure that there are no gaps or bottlenecks that could eventually threaten the organizational performance (O’Donnell and Schultz Jr, 2005). This would help them to ensure effective risk identification and risk management systems within their organizational domain which would eventually help an organization to tackle and manage their business risks in a better manner.

Risks description	Probability of occurrence	Loss size(days)	Risks exposure in days
transaction complexity and velocity	15%	5	0.75
gaps in diagnostic performance	32%	15	4.8
degree of decentralised decision making	65%	25	16.25

The degree of decentralised decision making process which is inherent within an organization is another crucial factor that would contribute towards greater business risks for an organization. The greater the amount of decentralisation, the more would be the confusion in the decision making process as there are more managers and branches involved in a decentralised working environment (Koller, 2005). This is why the organizational decision making process gets further complicated due to the lack of consensus and understanding among the different mangers who are working in different offices in a country. There would be more time consumed in the process of organizational decision making and this would invariably compromise the organizational performance and decision making (Calow, 2009). Thus, the organization would be facing a greater risk in their business operations in the near future.

From the table above, it is clear to us that the degree of decentralised decision making is the most critical component that has a much higher chances of occurrence as compared to the others. This is closely followed in second place by the gaps in diagnostic performance which has the second highest probability of occurrence and finally transaction complexity and velocity has the lowest possibility of occurrence within an organization.  

Conclusion 

From the above findings and analysis it can be said that risks considered the important element for any business and has a negative impact on organization performance. In order to solve risks in a better manner management of an organization needs to implement better risks assessment procedures and also computer the risks exposure. This would help them to determine the most effective risks elements that impact the performance of an organization 

References

Calow, P. P. (Ed.)., 2009. Handbook of environmental risk assessment and management. John Wiley & Sons.

Dunovi?, I. B., Radujkovi?, M., & Vukomanovi?, M., 2013. Risk register development and implementation for construction projects. Gra evinar, 65(1), 23-35.

El-Sayegh, S.M., 2008. Risk assessment and allocation in the UAE construction industry. International journal of project management, 26(4), pp.431-438.

Koller, G. R., 2005. Risk assessment and decision making in business and industry: A practical guide. Chapman and Hall/CRC.  

Manuj, I., and Mentzer, J. T., 2008. Global supply chain risk management strategies. International Journal of Physical Distribution & Logistics Management, 38(3), 192-223.

Merna, T., and Al-Thani, F. F., 2011. Corporate risk management. John Wiley & Sons.

Nigro, G. L., and Abbate, L., 2011. Risk assessment and profit sharing in business networks. International Journal of Production Economics, 131(1), 234-241.

Nishat Faisal, M., Banwet, D. K., and Shankar, R., 2007. Information risks management in supply chains: an assessment and mitigation framework. Journal of Enterprise Information Management, 20(6), 677-699.

O’Donnell, E., and Schultz Jr, J. J., 2005. The halo effect in business risk audits: Can strategic risk assessment bias auditor judgment about accounting details?. The Accounting Review, 80(3), 921-939.

Shedden, P., Smith, W., and Ahmad, A., 2010. Information security risk assessment: towards a business practice perspective. Elsevier

Simons, R., 1999. How Risky Is Your Company?. [online] Harvard Business Review. Available at: https://hbr.org/1999/05/how-risky-is-your-company [Accessed 1 Oct. 2018].

Tjoa, S., Jakoubi, S. and Quirchmayr, G., 2008, March. Enhancing business impact analysis and risk assessment applying a risk-aware business process modeling and simulation methodology. In Availability, Reliability and Security, 2008. ARES 08. Third International Conference on (pp. 179-186). IEEE.