Question

-Discuss the causes for increasing significance of risk management in today’s business environment.

Note: You need to provide the details of explanations with logical explanations and appropriate examples.

-Example: Globalization (Explain 5 causes).

30 Marks - 200 words

Answer 1

Every Organization is focussing on taking strategic decisions based on risk assessment and analysis. It allows the organizations to decide how much risk they are willing to take to gain something of more value in return. In order to attain a balance between risk taken, and goal achieved the emphasis has increased on Risk management in today's business environment. Businesses could be at supply risk, procurement risk, weather risk, location risk, natural calamity risk, investor risk and many other risks of such kind. Thus analysing each type of risk in the given scenario is important to plan on how to mitigate the risk and maximize the returns for the organization. Below are a few examples of the risks through which it would be easily understandable.

a.) Location Risk: when working at a new location it is important to assess the risk of whether same frequency of customers can be maintained or not, and whether their are any other legal matters which could impact the business, would help in analysing the risk and deciding whether organization would want to go through with setting up operations at new location or not. This will also help companies estimate returns if the new location is acquired and work is started.

b.) Risk from natural calamities: Suppose the office is an area which is frequently hit by cyclones, in that case it is important for the organization to assess the risk that office would face and the impact of the risk, so that they can decide whether they would still want to continue operation at the same office or move somewhere else.

c.) Risk from competitors: In today's world performing competitor analysis and always keeping an eye on competitors strategy is very important to assess the risk competition would have on your Business. For example your competitor is launching a product line which you serve to customers as well, but the competitor is lowering the prices enormously for the same product. Then it becomes important to analyse the risk it might cause to the organization and based on that plans should be formulated to mitigate the risk.