An organizational entity works the best of its ability for the company profit. The world is changing faster than theoretical limits of risk calculations. The benefit of any firm depends on several factors of it. For example, management, customer demands, technology enhancements and much more. But, the great success involves high risks. It is essential to understand the business risks whether you are the student or individual businessman. Business Risk homework help explains the topic with ease.
Understanding Business Risk
It is important to realize that there is a problem involved to solve it. If the enterprise does not recognize the issue, it will be bigger as the time goes.
How to identify that the business risk is associated?
The simple definition of operations risk is “low return on investment.” When a company is getting less profit than the total calculated investments, it is the dangerous area where the company may be exposed to its bottom line.
It is easier to take mitigation steps and implement the risk management plan if the type of business risk is identified correctly.There are various types of business risks as explained by Business Risk homework help. If the risks are not dealt properly, it can result in a severe profit loss or even bankruptcy. Some large organizations have the separate department for risk management, conflating the team of experts who saves the company from danger. But, small scale companies often neglect the thought of business risk as they want to run ahead of time for profit. It is the best practice to take time for business risk planning and preparing the mitigation steps for different types of risks.
How many kinds or Business Risks are there and How to identify them?
There can be N number of categories for unforeseen hazards to the organization. Business Risk homework help gives five main categories to differentiate the uncertainties associated with the enterprise.
Classes of Business Risks
- Strategic Risk
Each business has its monopoly and money making tactics. The core idea on which the firm was established is called its strategy. A business owner or management experts take the concept to the next level and develop a business model.
At some point in time, when an organization fails to perform in the alignment with its strategy, business starts giving negative results, like less profit.
Let’s understand it with real life example:
Company XYZ makes a type of chocolates which has a unique test in the world. The formula of the chocolate is the core concept of profit making tactic. As a company keeps its valuable details confidential, the recipe is not shared with anyone but the owner.
List of strategic risks involved with the enterprise:
- Someone copied the formula of chocolate.
- The only ones who know the formula are no more.
These risks are strategic level business risks.
- Compliance Risk
When the organizationis founded, it has to go through the check of conformity with government laws and follow certain policies. Over the period government changes and the lows too. When the change in state policies starts interfering the level of organization profit, it can be identified as compliance risk.
Take the example of chocolate company XYZ, for the second time. There are some scenarios which can result is compliance risk as explained by Business Risk homework help.
- Government puts a ban on the chocolate because of particular ingredient involved in it.
- Company XYZ is importing ingredients from the company ABC of Country A for manufacturing purposes, and government of Country A decides not to export the items anymore.
These can be the scenarios of compliance risk.
- Operational Risk
Every organization generates the revenue working day by day. Daily operations are responsible for accomplishing the big targets of the firm. Failure in following the day to day goals can lead the organization towards the operational risk. It can be related to people or process as well.
Company XYZ again can help us to understand the operational risk in better ways.
- Suppose the thousands of employees of company XYZ go on strike for several days. It can be an enormous amount of loss for the owner.
- The core production system, the everyday chain of production becomes faulty; it will be a loss due to operational risk.
If this type of risk is not managed quickly, it can be majorly dangerous.
- Reputational Risk
A company or a product runs by its reputation. Once the reputation is built, it has the high risk of falling in reputational risk. Because it takes years to build proper identity and a second to lose it.
After going through all the risks, company XYZ has developed a respected level of reputation. But, there are ways in which it can fall in reputational risks.
- Someone dies due to allergy after eating the chocolate of XYZ because of company XYZ did not mention particular ingredient on it. The company can be in huge loss of customers in such scenario.
- The company will lose honest customers inevitably when people come to know if product manufacturing is being done in the dirty area.
- Financial Risk
This type of risk is pretty self-explanatory as the name says, the loss in finances is identified as financial risks. This risk involves money, and it can be triggered when the inflow of money is stopped due to some reasons. If the inflow of money is stopped, the manufacturing cannot be completed and eventually it stops giving profit.
- Think that company XYZ has taken the loan and paid the interest rate of 10%. All of a sudden, if the interest rates upsurge by 15%, it can be a huge risk financially for the company.
- Company XYZ is importing items from Country A, and money exchange rates of Country A becomes higher than ever. This scenario also gives the financial risk.
There can be the danger of natural disaster, the risk of change in customer demand, and technological changes as well. Business Risk homework help can perceive the concepts of Business Risks which can help individuals to save the business from jeopardy.