Deliverable 1 - Defining and Categorizing Various Forms of Risk

Professor Cobb

Risk Management

July 22, 2018

Identifying Risk Exposures

It is significantly important to identify risk exposures in any business. It enables a business to anticipate problems and identify ways to prevent or minimize them by outlining preventive ideas (Identification of Risk, n.d). It helps improve decision-making and prioritization of activities and tasks to be done. It contributes to better allocation of resources and capital. Lastly, it helps a business to improve delivery of its products or services within its budget and time frame. Organizations that fail to adequately identify risks tend to miss out opportunities, fail to minimize impact caused by risks, fail to detect project failure at early stages, and waste resources such as time and finances among others (mindtools.com, n.d). Loss of customers and disruption of operations and supplies can also be experienced.

LTD can encounter market risks such as interest rate risk where fluctuations in interest rates could expose the company to losses. It could experience equity and property risk where fluctuation in market value of assets and equities. It could also experience foreign currency risk where relative changes in currencies values could lead to depreciation of assets in foreign currencies. Other market risks include changes in consumer preferences and increased competition from rivalry companies (qld.gov, 2017).

LTD could encounter business risks such as operational risks that could lead to late delivery of services. It could experience technological risks as it is likely to lack adequate technology and technical expertise. It could also experience financial risks due to government financial policies (Identification of Risk, n.d).

LTD might face compliance risks that include legal issues such as resolving disputes, insurance issues and non-compliance with regulation. Other risks could arise from employee protection regulations, environmental concerns, and those resulting from best practices for investment reasons. Human capital risks include reputational risks that could lead to loss of employee confidence and reduced earnings due to bad reputation (Griffin, 2018). Staffing can also be a challenge to the company.

Risk management activities affect the planning, operation and performance of a company. Risk management plans affect project success by identifying both external and internal risks and listing effective ways to mitigate the risks. Minimizing risks or mitigating their effects enhances smooth running of the business essential for increased productivity. For instance, high risk events cause significant increase in budgets as well as disrupt schedule that affect overall productivity. Preventing the occurrence of such risks or mitigating their effects avoids increased budgets that can be allocated for other activities. Risk management activities maximize results by minimizing and eliminating negative risks thus increase productivity (Duggan, 2018). Mitigating exposures to problems allows a business to capitalize on its strengths enhancing productivity.

References Duggan, T. (2018, July). Why Is Risk Management Important to Project Success? Retrieved from Chron: http://smallbusiness.chron.com/risk-management-important-project-success-56920.html Griffin, D. (2018, July). Types of Business Risk. Retrieved from Chron: http://smallbusiness.chron.com/types-business-risk-99.html Identification of Risk. (n.d). Retrieved from fao.org: http://www.fao.org/docrep/t8166e/t8166e03.html Identifying Business Risk. (2018, July 22). Retrieved from Queensland Government: https://www.business.qld.gov.au/running-business/protecting-business/risk-management/identifying-risk Risk Analysis and Risk Management. (n.d). Retrieved from Mind Tools: https://www.mindtools.com/pages/article/newTMC_07.htm