5-2- Risk Impact Assessment
Subject: MBA 620
Measuring Success in an Organization
Submitted By- Tanisha Das
Submitted To- Professor Jeremy Glines
Date of Submission-10/06/24
TransGlobal Airlines is at an edge of change, and proper understanding of the risks would help
the organization in long-term performance appraisal. We will outline two risks that would
materially affect the performance of the company and further appraise the probability of
occurrence along with the potential impact of each to then recommend mitigation strategies.
Risk 1: Fuel Price Volatility (High-Impact Risk)
Financial: There is a great influence on the operating cost of an airline and profitability based
on fuel prices.
Internal Processes: Price volatility in fuel influences the strategy for fuel procurement and
hedging within the company.
Customer/Market: Every fluctuation in fuel costs may affect ticket prices and thus directly
influences demand from customers.
Learning and Development: The need for innovation in more fuel-efficient technologies to
reduce dependence on conventional fuels persists.
Risk Type: This will be a strategic risk as it impacts the long-term goals of profitability in
business at TransGlobal.
Evaluation:
Probability: Medium. This is a very common occurrence; various geopolitical and economic
factors make the outcome quite uncertain. However, it is possible for the airlines to anticipate
to a certain extent some fluctuations in the fuel prices and hedge against them.
Impact: High. Fuel is a significant operating expense for airlines. Thus, heavy increases in
price have the effect of reducing profitability. Fuel price increases may also drive TransGlobal
to increase ticket prices, further depressing the demand for air travel.
Mitigation Strategies:
Hedging Strategies: Transglobal should reduce fuel price volatility by hedging fuel through
contracting or options with a view to stabilizing its costs.
Fleet Modernization: Modernization of the aircraft fleet will decrease fuel consumption and
eventually make the airline less vulnerable to any future price changes.
Fuel Diversification: Diversification into other types of fuels, such as biofuels or other
sustainable alternatives, presents an opportunity that could help TransGlobal stabilize its costs
while helping it move closer to attaining sustainability goals.
Risk 2: Cybersecurity Violation:
Financial: The financial impact could be in the form of direct monetary loss, legal claims
against the company, or disruption in business activities.
Internal Processes: These will include direct impacts on the IT infrastructure of the company
and the internal security mechanisms.
Customer /Market: Customer trust may be compromised in the case of cybersecurity breaches,
thereby causing erosion in brand reputation and customer loyalty.
Learning and Development: There is a continuous need to invest in IT security personnel and
infrastructure so as to prevent these breaches.
Type of Risk: Operational risk, as this situation involves processes internal to the company and
their IT infrastructure, though impacts can cascade into even strategic issues like customer
trust and reputation.
Evaluation:
Likelihood: High. The airline industry is one such sector where attempts at cyberattacks are
very often made because the value of its customer data is high and also that of the IT systems.
Impact: Medium. While a successful cyber attack would increase the financial losses apart
from causing loss to the company's reputation, such an attack is not likely to result in a
complete halt of activities or bankruptcy.
Mitigation Strategies:
Rigorous Cybersecurity Framework: TransGlobal should focus on investing in advanced
cybersecurity technologies and protocols such as encryption and periodic security audits for
safeguarding customer data and critical internal systems.
Employee Training: Routine trainings to update employees with the cyber risks, particularly
phishing and social engineering attacks, are considered as the easiest entry points of breaches.
Incident Response Plan: Establishment of a detailed Incident Response Plan and regular
updating will enable Transglobal to respond promptly and reduce the damage caused in case a
violation occurs.
Conclusion
TransGlobal Airlines are heavily at risk due to both external and internal factors. The volatility
in fuel prices is one strategic risk that could shake the bottom line of a company or its long-
term objectives. Simultaneously, cybersecurity breaches are an operational risk because these
situations may disrupt the internal processes and damage the company's brand reputation. It is
through the implementation of these mitigation strategies, including hedging against fuel price
fluctuations, fleet modernization, and enhancement of cybersecurity practices that TransGlobal
will be better equipped to surmount the main challenges and increase its competitive
advantage.
Both these risks will require ongoing monitoring and reassessment as the business environment
changes. Proactive management will place TransGlobal in a good position to counteract any
emerging threats against its financial performance, as well as brand reputation.
References:
DeBenedetti, J. (2017, November 21). How to measure operational risk in the balanced scorecard
approach. Small Business - Chron.com. https://smallbusiness.chron.com/measure-operational-
risk-balanced-scorecard-approach-77732.html.
Kaplan, R. S., & Norton, D. P. (1996). The balanced scorecard: Translating strategy into
action. Harvard Business School Press. https://www.hbs.edu/faculty/Pages/item.aspx?
num=8831
IATA,. (2021). Managing airline risk in a complex world. International Air Transport
Association. https://www.iata.org/contentassets/bd3288d6f2394d9ca3b8fa23548cb8bf/
iata_safety_report_2021.pdf
