Applied Science

KBL RISK MITIGATION PLAN 1

KBL RISK MITIGATION PLAN 5

KBL Risk Mitigation Plan

Rawda Ismail

Rasmussen College

Author’s Note

This paper is being submitted on August 13, 2020, for Ashley Cobb Section GEB3422CBE Business Project Management.

KBL Risk Mitigation Plan

Project planning is a subset of project management that involves procedural and systematic scheduling of tasks to ensure the successful completion of tasks. Project planning involves clearly defining the project goals and deliverables and creating complementary project schedules to monitor, control, and execute the project. An effective project plan should include a risk mitigation plan since projects are bound to face risks before completion. Risks are uncertain events or occurrences that have the potential to negatively affect a project (Powell & Huang, 2016). A risk mitigation plan is a risk management plan that is designed to minimize or eliminate the negative effects of risks. These plans involve the identification, evaluation, and mitigation of risks.

While acquiring a competing company has the potential to increase growth for Kingston-Bryce Limited (KBL), it is important to consider the risks accompanying such an acquisition. Having a risk mitigation plan will be important in ensuring the acquisition does not have adverse effects on KBL. The potential risks that KBL faces in this acquisition can be classified into; cost and financial risks, technical risks, and contractual risks. Insufficient due diligence resulting in overpayment is a potential cost and financial risk that KBL can face in this acquisition (Powell & Huang, 2016). The selling company is responsible for providing financial statements that show the company’s performance and potential valuation. Misrepresentation of these documents can result in overvaluation and consequently an overpayment that will lead to loss of money for the company. KBL also faces a cost and financial risk if the company has an extensive loss history, has low margins, or is in debt.

Potential technical risks that KBL faces in acquiring a competing business can be divided into technological and intellectual property (IP) risks. KBL faces the technological risks of acquiring the company while it uses open-source software that ends up compromising the company’s operations and profits. Although the company being acquired could have exclusive technology, it could also have escrow arrangements with a third party on the use of this technology which could render KBL powerless on the use of said technology (Powell & Huang, 2016). The IP risks that KBL faces is acquiring the company while it has infringed on the IP rights of a third party. This IP risk can lead to potential lawsuits and defamation for KBL. Trade secrets that determine the success of the selling company can also pose a risk for KBL once the company is acquired. The contractual risk that KBL faces is acquiring the company while it has ongoing contracts with other third parties. Contractual obligations such as Union contracts can be costly for KBL.

After the identification and evaluation of the potential risks that KBL faces in the acquisition, the next important step is developing mitigation strategies to reduce the impact of these risks. Risk mitigation strategies that KBL can implement include; risk avoidance, risk sharing, risk reduction, and risk transfer. Risk avoidance is a mitigation strategy that involves the implementation of techniques to avoid risk. Risk-sharing involves the formation of partnerships and other relationships to share the impact of risky occurrences (Sardana & Zhu, 2020). Risk reduction involves the investment of funds and resources to help in the mitigation of risks. Risk transfer is a risk mitigation strategy that reduces that shifts the impact of risky events and occurrences from one party to another. KBL will implement these risk mitigation strategies to reduce or eliminate the potential negative effects of the risks accompanying the acquisition.

To mitigate the cost and financial risks, KBL can implement risk reduction and risk avoidance strategies. A risk reduction strategy will allow KBL to invest adequate funds to conduct exhaustive due diligence to avoid making overpayments. Exhaustive due diligence will allow KBL to understand the financial position of the selling company. From the information collected from exhaustive due diligence conducted, KBL can choose to implement the risk avoidance strategy if the company’s financial position and value are negative. Risk-sharing strategies like insuring the technology and patenting innovations can be implemented by KBL to mitigate technical risks (Sardana & Zhu, 2020). To mitigate contractual risks accompanying the acquisition, KBL can implement risk transfer strategies. Risk transfer strategies will allow the KBL to transfer the effects of pending contractual obligations to the selling company. These strategies will be vital in the elimination of the impact of risks that KBL will be exposed to in the acquisition.

References Powell, R., & Huang, P. (2016). Method of payment and risk mitigation in cross-border mergers and acquisitions. Journal of Corporate Finance, 40, 216-234. Sardana, D., & Zhu, Y. (2020). Multinational enterprises’ risk mitigation strategies in emerging markets: A political coalition perspective. Journal of World Business, 55(2), 101044. Sadgrove, K. (2016). The complete guide to business risk management. Routledge. García-Sánchez, I. M., & Noguera-Gámez, L. (2017). Integrated reporting and stakeholder engagement: The effect on information asymmetry. Corporate Social Responsibility and Environmental Management, 24(5), 395-413. Yuanyuan, S. U. I., & DUMITRESCU–PECULEA, A. (2016). Financial risk identification and control of cross border merger and acquisition enterprises. The Audit Financiar journal, 14(144), 1368-1368.