Applied Science

Kingston-Bryce Mitigation Plan 1

Kingston-Bryce Risk Mitigation Plan

Rawda Ismail

Rasmussen College

Author’s Note

This paper is being submitted on July 16, 2020, for Ashley Cobb Section GEB3422CBE Business Project Management.

Introduction

In project management, a risk mitigation plan is an essential tool. It allows the project team and the management to identify potential risks that may interfere with the success of the project and devise strategies to address them. In the case of Kingston-Bryce Limited (KBL), a risk mitigation plan is needed to ensure a successful acquisition of the competitor. The five main components of a risk management plan are risk identification, risk measurement and assessment, risk mitigation, risk reporting and monitoring, and risk governance (Sadgrove, 2016).

Risks

The project is faced with various types of risk. In company acquisition, financial risks can have adverse effects on an organization's continuity. An example of risk under financial risks is the issue of overpayment. The acquisition is a complex process that requires buyers to have a sound acquisition strategy. Since KBL might face competition from another potential buyer, the risk of an overpayment is high. This is because KBL managers may decide to pay more for the company to climate competition. Nonetheless, the overpayment may not be worth it in the long run. One of the disadvantages of an overpayment is increased financial problems. Considering the fact that the company may be forced to obtain a loan to cover for the acquisition costs, KBL will have unnecessary debts after the acquisition. It is important to note that the main objective of acquiring a firm is to increase organizational growth through market expansion. Thus, overpayment should be avoided to avoid financial crises.

The project is also faced with a contractual risk. During company acquisition, contractual agreements between the seller and the buyer must be made. It is critical for the buyer to have enough information about the contract before signing it. Notwithstanding, the issue of information asymmetry may contribute to contractual risks. Information asymmetry in business arises when one party in a transaction has inadequate information. The party with enough information about the transaction can use it to benefit from the deal (García-Sánchez & Noguera-Gámez, 2017). KBL may be forced to move faster to acquire the company before another firm does. The risk of agreeing to unsuitable contractual agreements is high because the company may not have enough information for decision making.

As far as technical risks are concerned, some technical issues may affect project completion. Notably, the KBL and the company to be acquired have some technical differences. Integrating the company into KBL organizational structure may pose technical risks. An example of technical risk is data migration challenges. Differences in data management approaches between the two companies may make it difficult for the information technology (IT) team to effectively migrate data into KBL’s information systems. Another risk is information security. Integrating KBL’s information system with KBL’s systems may lead to security issues if the competitor was affected by cybercrimes.

Actions to Mitigate the Risks

Sound strategies are needed to address the risks associated with the project. In risk mitigation, the following must be considered:

 Risk avoidance: Includes measures put in place to prevent events that may have negative effects on an organization.

 Risk sharing: the impacts of risk are shared among different entities to ensure that an adverse effect will not affect one entity only.

 Risk reduction: It involves the implementation of strategies to reduce risks and their associated consequences.

 Risk transfer: potential risks are transferred from one party to another. An example is purchasing insurance to transfer risks from the company to the insurance company.

A key action to minimize the impacts of the risks is research. Company acquisition is a risky process that may have devastating effects on a company’s financial health (Yuanyuan & DUMITRESCU–PECULEA, 2016). Data is needed to provide data that can be analyzed to identify the best ways to go about the accusation process. A key factor that contributes to financial risks in an acquisition is information asymmetry. Data collected through research will be used to understand the company and eliminate the problem of information asymmetry. Research can also play an important role in preventing contractual risks. As long as KBL has information about the company, the management will be in a position to avoid contractual issues.

Moreover, information collected through research will provide technical information for decision making. The data will be used by the IT team to lay the foundation for integrating information systems from the company into KBL’s IT infrastructure. Another action to reduce the impacts of risks on the project is staff training. A training program is needed to ensure that the staff at KBL can effectively integrate business functions from the company being acquired. Training is especially important for IT professionals for the proper integration of information systems in the two companies.

Conclusion

Risk mitigation is an important activity in project management. Company acquisition is associated with risks like financial, contractual, and technical risks. Each of these risks may have detrimental effects on KBL’s operations. The two main actions to reduce the impacts of these risks on the project are research and staff training.

References

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.