Research Korner: Business Risk Samples

Harley-Davidson Motor Company

In 1903, Harley-Davidson Motor Company was launched by William Harley and his friends Arthur and Walter Davidson in the year. Their first intention of building a quality engine was to be established in races. But later on their plans took a different course. The bike that was supposed to race only became a transporting vehicle.             The first officially Harley-Davidson to be exported was distributed by a merchant by the name of C. H. Lange. It was distributed to Chicago, a city who was famous for motoracing and auto touring. Another of the Davidson brothers, William, joined the company, which soon burst the seams of its first manufacturing center and, by 1906, had to move to larger quarters in Milwaukee, Wisconsin.             Harley-Davidson’s encountered a lot of problems when they were just starting their business. This is a normal occurrence to all business that started from scratch. They need to establish themselves in the business and at the same time they need to prove the quality of their product.             In 1990, they have 31 percent of international sales which costs $268 million from the total of $864 million. Harley-Davidson bike became famous to Japan, Germany, Australia and Canada. This great achievement was followed by a problem. Foreign distributors and dealers needed two things to grow more and to expand in the market share. The first was the local pricing of currency. As their distributor and dealers from different countries they need to stabilize a price that they would all agree to. It was difficult to do so because of their need to cover currency exposure. Harley needed to sell its motorcycles to foreign dealers and distributor with the local currency. They have difficulty in finding solution to benefit them all.             Then the manager of international finance John Hevey had an idea. It was to introduce the idea of risk-sharing to their system. This idea was not new during their time. The thought of risk-sharing is plain. They need to maintain the exchange rate from the quotes Harley have given as price of foreign currency. This allowed the foreign dealers and distributors to be assured of predictable and stable prices.             Harley-Davidson should continue with this arrangement as long as the dealers and distributors conform to their agreement.                      After several years of hardwork Harley-Davidson achieved their goal. They went international and became famous to many places as manufacturer and distributor of the bike. The Harley-Davidson came to be America's most recognized motorcycle.

Harley-Davidson Motor Company

In 1903, Harley-Davidson Motor Company was launched by William Harley and his friends Arthur and Walter Davidson in the year. ...

Individual Assignment 2 :Risks and Business

Risks and business Risk has its origins both within and outside a given organizational environment. For example, many of the risks businesses face lie outside their control because they arise outside the business’ realm of operations. Government regulations fall into this category. Companies that produce hazardous substances, for instance, chemical companies, are always concerned that government will change environmental laws in such a way that it becomes difficult to produce their products cost-effectively. Other examples of external sources of risk include the actions of competitors for example, they have just introduced a new product that makes one of the company’s product lines obsolete, demographic trends for example, the aging of the population reduces demand for youth-oriented products) or acts of nature for example, a sustained drought causes a dramatic drop in the output of agricultural products. Because external risks lie outside a company’s control, they are limited in the direct actions they can take to handle them (Frame 2003).    Nonetheless, organizations can still manage these risks by developing strategies to deal with them effectively once the untoward risk events rise. Other risks lie more directly in the company’s realm of control because they occur within a particular organizational environment. These are internal risks. Examples include risks associated with using aging equipment, risks posed by employing an incompetent workforce, and risks associated with organizational politics. Many of these risks, particularly those associated with carrying out operations, can be mitigated by fixing the source of problems. Old equipment can be replaced, employees can be trained, and competent workers can be hired. Even within a defined organizational environment, however, there are internal risks that are difficult to handle directly. Office politics is an example. Still, there are defensive steps a business can take to deal with them indirectly. For example, it can nurture good relations with two parties who are at political loggerheads, thereby avoiding some of the flack that might arise when they join each other in battle (Frame 2003). The situation of taking and facing risks can happen to any organization. Risks can be based from the internal or external environment. One company that was exposed to risks is Apple Computers Inc.  Apple Computers Inc is considered to be one of the businesses that created a huge amount of change and improvements in the computer industry.   It brought about different changes to the industry; these changes are still visible in the present and it still provides benefits to different people even at this times.  The products of the company provide benefits not only to the clients but to competitors as well. The company’s products were used as a basis by other computer company’s in designing the specifications and physical characteristics of their product. It also serves as a meter of how products are designed. The company offers various products for the different market it targets. Apple Computers Inc. has made products for its consumers found in various parts of the world. It has reached places not reached by its competitors and it tries to satisfy all the needs the needs of their clients wherever they are. Major risk of apple Traditional anti-competitive concerns with respect to the formation of strategic alliances stem from the conviction that these transactions usually facilitate reducing output and fixing prices. In other words, strategic alliances are thought to be like cartels. In network industries, nonetheless, competition is based on quality features far more than prices. The collusion concerns should be put on the risk of decreasing innovation when competitors form strategic alliances (Gottinger 2003). In network industries, the markets are often oligopolistic rather than competitive owing to the enormous irreversible costs, economies of scale, sophisticated as well as compatible technologies, and network effects. As a result, for example, in the semiconductor industry, a dominant CPU producer can enter into cross licensing or grant back agreements with other semiconductor firms to obtain the next generation microprocessor technology developed by these semiconductor firms (Gottinger 2003).   The dominant firm thus can easily leverage market power in the existing CPU market into next generation's microprocessor market. This is particularly true when the market power of existing product is reinforced by the network effects. That is to say, the existing CPU has technical compatibility with a computer operating system and the applications software desired by a significant number of computer users. For a new entrant it must be very difficult to attract support from software developers who are generally unwilling to consign development resources to an unproven demand. At the same time, consumers that already have many existing software applications that were written for particular microprocessor architecture would be reluctant to switch to a new and incompatible microprocessor architecture. Computer system manufacturers also would not risk alienating such consumers (Gottinger 2003). Risk will always be a part of business, when one doesn’t take risk he/she might not achieve his/her goals. Businesses who doesn’t take risk may lose the competitive edge it has and it may not have to change to gain a better standing in the industry. When businesses fail the problem is not because they took the risk, the problem lies on the subsequent actions they have done after experiencing the effects of the risk.   For different kinds of business there are different kinds of risks that are dictated by the situation in the environment. For apple the major risk involves conquering the aggressive competition in its market. The company has to find means to conquer its competitors. The company is continuously making products that they know will give them advantage over their competitors.  The company is exposed to such risk because the industry the company belongs to has diverse kind of business. Each business in that industry offers something different and it offers something new to clients. The diversity of products creates a harsher competitive environment, for the company to survive in this kind of environment it has to make sure that their products are much better than others. Apple is vulnerable to the continuous improvements in the products of their competitors. This can be prevented through the company jumping the gun on competitors and creating more innovative products. Other risks that the company has to face In general terms, risk management is the process by which an individual tries to ensure that the risks to which she is exposed are those risks to which she thinks she is and is willing to be exposed in order to lead the life she wants. This is not necessarily synonymous with risk reduction. As indicated, some risk is simply tolerated, whereas others may be calculatedly reduced. In still other instances, some individuals may conclude that their risk profile is not risky enough (Culp 2001). A man who is extremely late to an important meeting and about to watch his bus pull away from the curb may not only willingly fail to look both ways at a cross walk, but he/she might perhaps quite rationally conclude that the risk of being late is so much higher than the risk of being hit by a car that bounding across the intersection when the light is green seems like the right judgment call. The process of risk management can differ based on both the risks being managed and the agent managing them. First and foremost, risk management is a problem faced by individuals. Although organizations are just collections of individuals, organizations face a set of risks all their own (Culp 2001).   Unlike individuals whose risk management objectives are clearly defined with respect to personal well being, however, organizations have a muddier risk management mandate. One factor that blurs the clarity of the problem is whose risks an organization is managing. If the interests of all the participants in an organization were perfectly aligned, the risk management objective of an organization would not matter so much (Culp 2001). But the interests of various stakeholders in an organization are not only rarely aligned, but often in actual conflict.  In conventional corporate risk cultures, risk management is perceived as a cost center whose primary purpose is the reduction of financial risks that are seen to be undesirable virtually a priori. Risk reduction is usually achieved with the aid of expensive analytical systems and costly risk transformation products provided by swap dealers, insurance companies, exchanges, and clearing houses products that appear to have little or no value to shareholders aside from helping companies avert catastrophic losses (Culp 2001).    Aside from conquering stiff competition other risks that Apple has to face includes lowering the prices of their products to meet the financial capability of their client. Part of the stiff competition is the battle of products that costs less. The company has to take some risk in having products that have low prices but with the same standard as their other products.  Another risk is introducing systems or processes that will ensure that their products cannot be imitated. Piracy and imitation of products is prevalent in today’s world. Almost everything can be copied and can be sold at a much lower price, this is one of the causes of businesses closing or lessening its employees. Apple can take a risk in introducing systems that will prevent their products to be copied. The company is exposed to these risks because the financial capability of clients is changing. Clients have been looking for products that cost less.  Apple is vulnerable due to the changing economy of the countries they operate in.  Risk and its evaluation Risk can occur in any situation in the company. Risk can appear at any given situation in the business’ operation. A company can determine its potential risk area when there are many choices with regards to making decisions and all this choices can give benefit to the company. Organizations know that taking risk is a crucial activity for the company. Any wrong move in taking risk can lead to more problems for the company. Organizations also believe that following the steps in risk management is important so that they can focus on the goal of overcoming the risk and so that they will maintain a culture of time importance wherein the lesser time should be used in undergoing necessary risks. Organizations need to adhere to the steps in risk management to survive the negative effects of the risk they have to make.  Organizations create a risk assessment summary through gathering various information about risk and the different effects it can create to the company.   The different information about the risk comes from situations or events that other companies encounter whenever they have to take certain types of risk. The organizations base their actions on the risk with what was done by other companies who experienced such problem, combining the risks together with the effects and threat levels they have against the company can help in summarizing, compacting and determining which risk can create the worst effect to the company. A company then formulates strategies for management of risk and it involves various activities.  Organizations first know the risks they have to take; they determine which risk would give their company more problems and which risk may have a negative effect to their operations. The organizations then determine the strategies that they can use in risk management.  These strategies should at least relate to risk management and it should be effective enough to counter the effects of taking risk. Organizations then match the different strategies with the different risk identified. This ensures that for every risk taken, an appropriate strategy is readily available to counter its effects. The next thing organizations do is to organize the risk together with the strategies so that proper use of risk can be made. Organizing the risk together with the appropriate strategies lessens the effect of the risk.    Evaluation of the data obtained from the risk assessment involves a number of steps. This process includes the calculation of risk factors for the workforce as a whole, identification of high risk groups and individuals, understanding the links between exposure and consequences, and an assessment of the acceptability of the risks identified (Clarke & Cooper 2004). Organizations know that there is an impending risk they have to make after creating any decisions. Companies believe that decision making entails risk evaluation wherein after the effect of the decision is felt the next thing that happens is knowing if there are risks to be taken and whether such risk is beneficial. The risks that Apple can take should help the company gain a better position in its market and have a better standing against competitors.  Taking calculated risks can lead to better things for the company.   References Culp, CL 2001, The risk management process: Business strategy and tactics, Wiley, New York.   Frame, JD 2003, Managing risk in organizations: a guide for managers, Jossey-Bass, San Francisco.   Gottinger, H 2003, Economies of network industries, Routledge, New York.   Lant, TK & Shapira, Z (eds.) 2001, Organizational cognition: computation and interpretation, Lawrence Erlbaum Associates, Mahwah, NJ.   Lerbinger, O 1997, The crisis manager: facing risk and responsibility, Lawrence Erlbaum Associates, Mahwah, NJ.   Luhmann, N 1993, Risk: A sociological theory, Aldine De Gruyter, New York.   Meyer, DJ 2003, The economics of risk, W.E. Upjohn Institute for employment research, Kalamazoo, MI.   Volberda, HW 1999, Building the flexible firm: How to remain competitive, Oxford University Press, Oxford, England.

Individual Assignment 2 :Risks and Business

Risks and business Risk has its origins both within and outside a given organizational environment. For example, many of the risks busin...

Risk Management in the Construction Industry

Risk Management in Construction               Risk is very common not only for organizations but to individuals as well, there a lot of risks that we are encountering in our everyday lives. However, proper management could eventually, if it could not be effectively prevented, it could be minimized or be avoided. This paper will discuss about Risk Management in the Construction Industry. Furthermore, the paper will also identify the process of Qualitative Risk Analysis and Quantitative Risk Analysis. In addition, the paper would focus on Quantitative Risk Management and what innovative implications it can give if it would be applied by an organization and its efficiency towards the betterment of the company.   Risk Management             Risk Management is a Management process in which it deals with planning, leading, and controlling the use of the organization’s budget or resource in order to diminish its risk of loss effectively. It is the process of balancing the risk of loss from unexpected causes against the economic cost of protection. (Wikipedia) Furthermore, it is imperative to have a good project management practice where you learn how to manage risk to improve outcomes by identifying and analyzing a wider range of issues and proving a systematic way to make informed decisions. (ETWB, 2005) As these definitions suggests, it is a very important process in every organization and as the paper suggests it is integral in the Construction Industry.   Risk Management in the Construction Industry             In the construction industry perspective, risk management is viewed as function, which is mostly related to insurance. Mostly, the contractor's wrong assumption about it is that they think of Risk Management as an equivalent to Insurance Management in which its goal is to seek out the most favorable economic insurance coverage for the insurable risks. (Ahmed & Azhar & Ahmad, 2003) Furthermore, Risk Management in this kind of industry is more likely to face almost same kinds of problems, however these problems seems to occur consecutively or simultaneously. As a result, most Risk Management in the Construction Industry could not fully fulfill its obligations to its stakeholders.   Kinds of Risk in the Construction Industry There are 2 types of risks; they are the controllable and uncontrollable risks. Controllable Risks are those losses that originate from a source that can be controlled. These are risks that a decision-maker embarks on his own will and the outcome can be controlled by his or her decisions. (Öztaş, n.d) Uncontrollable Risks are those in contrary with the latter. These are risks than cannot be prevented by man or the organization; it is an unexpected event in a man, or an organization cannot stop. These risks usually emanate from the external environment, the political, social or economic spheres. (Öztaş, n.d)             Below is a table of the kinds of Risks that are commonly managed in the construction industry. However, these two kinds of risks are somewhat interchangeable to the fact that a strategy could be implemented to manage the risk even if it would be an uncontrollable. Forecasting would be an effective way of doing it. However, the division within controllable and uncontrollable risk has shades of grey. In which: 	<li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	Some 	aspects that can be controlled</li> 	<li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	Those 	aspects that are controlled by others but then you do not have the power to 	control, but then you are forced to interact.</li> 	<li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	Those that are a function of 	government action such as a change in the planning regulations building code 	or the rate of taxation</li> 	<li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	Aspects 	in which the organization or any human cannot control (e.g. weather, 	earthquake, storms, etc.) (Öztaş, 	n.d)</li>             The importance of knowing the types and its categories is to fully understand the kinds of risks that the construction industry faces. In order to determine an effective quantitative and qualitative risk analysis, it is significant to determine what the factors that affect such losses are.   Qualitative Risk Analysis (QRA)             From the word itself, Quantitative Risk Analysis is a non-quantitative method of assessing risks. The analysis is based on a descriptive and a subjective approach of assessment. Like in most case studies and researches, Qualitative Risk Analysis is based on surveys and interviews made by the organization to the employees and their laborers.             Qualitative Risk Analysis is done in accordance to a scheme in coordination to the project.  Furthermore, Risk Tolerance should have been clearly proliferated among the members of the organization, the project managers and the main stakeholders in order to have a meaningful Qualitative Risk Analysis. The ability to represent a seemingly complex idea into simple and meaningful terms is the key benefit of Qualitative Risk Analysis. It is also used to change the level of urgency of a management response and so it does have business value. (Kwak, 2003)             Below is a table of an example of a qualitative risk analysis matrix. In which it depicts how a risk should be attended. Table 2. Qualitative Risk Analysis Matrix (Joy, 2005)             The above-mentioned table shows the consequences and the probability of risks within the organization. It is the basic kind of qualitative risk assessment in which it determines if a risk would be categorized as high, medium or low. Furthermore, the table identifies the severity of a certain risk to the stakeholders and the organization. Qualitative Risk Analysis should be effectively implemented in order to plan a good Quantitative Risk Analysis Technique. This method is appropriate to the construction industry because it determines, if not all, most of the risks that are being maintained as mentioned in Table 1. In addition, this method of assessment is integral on every Risk Management of every organizations.   Quantitative Risk Analysis             Contrary to Qualitative Risk Analysis, the Quantitative Approach focuses more on the numerical figures rather than on the description of the problem. Estimation and Probability are the keywords for the Quantitative Approach. Furthermore, the Quantitative Approach involves the calculation of probability and sometimes consequences. In the calculation of numeric figures, numbers represent the probability of a selected outcome, in which it is a percentage of how seldom or how frequent a risk is occurring. (Joy, 2005)   Techniques to Quantitative Risk Analysis             There are various approaches to Quantitative Risk Analysis here some descriptions to some of them. Although all of them seems to be effective to any organization or industry, some of which are just an upgraded version of the basic techniques to Quantitative Risk Analysis.   Decision Tree Analysis – it is a kind of Quantitative Approach in which, it calculates the results of a certain interdependency of risk in a project. A technique determines the overall risk associated with a series of risks. This would be best if: <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> 	<li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	Risks are 	sequential or risks having caused by another risk.</li> 	<li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	The 	decisions can have probable results, not an infinite one.</li> 	<li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	There are 	some financial or monetary losses to the risks being calculated. (PMI, 2004)</li> </ul>             Furthermore it assesses the level of risk associated with different courses of action in accordance to the decision and is appropriately used for risk-based decision-making. In this process, it starts from a single node in which it represents the decision to be done. After which, branches originate from the main node that represents options for action. These options are then evaluated and investigated and the most appropriate options will be discernable. (ETWB, 2005)   Sensitivity Analysis             In sensitivity analysis, the approach is to determine which risks have the most potential impact on the proposed project of the organization. It checks the incompetence and uncertainty of the project elements to the other uncertain elements that are held on their baseline values. In which it is similar to the "tornado diagram" – a figure, in which it compares the significance of variables that have high degree of uncertainty that are more stable. (PMI, 2004)             In addition, sensitivity analysis can be considered and included in the expected monetary value and simulation analysis technique. It involves the altering of the parameters of a certain set of probability or impact variables for a particular activity. After the altering, a simulation would be re-runned to create the sensitivity of the partial assumptions to the risks. Moreover, simulation software can instantly produce sensitivity diagrams to analyze the risks. Such information prioritizes risks, which will have most impact on output parameters like total cost and time. (ETWB, 2005)   Expected (Monetary) Value Analysis and Simulation and Modeling Analysis             According to the ETWB, (2005) in the construction project context, the most common methods are Simulation and Expected Value. Hence, these two techniques would be the appropriate Quantitative Analysis Technique for the Company.   Expected (Monetary) Value             Expected Monetary Value (EMV) Analysis, as a technique in Quantitative Risk Analysis, calculates the average outcome when the risks could potentially happen or not. The EMV of opportunities would be expressed as positive values, in contrary to it; risks would be marked as negative values. EMV is computed by multiplying the value of the possible outcomes by its probability of occurrence, and it is done separately before adding them all together. EMV is commonly applied to the Decision Tree Approach. (PMI, 2004)             This Approach is used commonly for contingencies, (monetary sum to the cost estimate or days to the program), “To explain the logic behind this method of assigning contingency, consider the following example. A particular risk is assessed as having a probability of 20% and an impact of $50,000. Therefore, a contingency amount of $10,000 is assigned to the budget.” (ETWB, 2005) However, Expected Value is also used “to prioritize risks for treatment (since the expected value of each risk can be calculated and so risks can be put in order – risk with the highest expected value being treated first)” (ETWB, 2005)   Simulation and Modeling             In this kind of Technique, it uses a model that translates the uncertainties specified at detailed level of the project into their potential impact on project objectives. In a simulation, the proposed project is computed redundantly, with the values inputted randomly from a probability distribution function chosen for each iteration from the probability distributions of each variable. A probability distribution is calculated. (PMI, 2004)             ETWB (2005) states that “Simulation is industry standard and considers the effect that the variability of project risks is likely to have on the project outcome, both in terms of cost and time. The main difference between expected value calculation and simulation is that simulation is able to model an array of different probability distributions that reflect the identified risks associated with the activity. For example, a uniform distribution considers that the value of the activity has an equal probability of falling at any point between two values. Other distributions such as discrete or normal are also commonly used to model the uncertainty and inherent variability of the cost and time impacts of activities. Simulation gives a much more realistic view of the characteristics of project delivery.” (ETWB, 2005)   Implementation of Quantitative Risk Analysis             In order to have a Quantitative Risk Analysis, an organization must have an effective Qualitative Risk Analysis, in order for it to estimate and forecast the probability of the risks that have been identified. The Quantitative Approach relies on the Qualitative Approach, so to speak.             In addition, Quantitative Risk Analysis generally follows the Qualitative Risk Analysis process, although experienced risk managers sometimes perform it directly after Risk Identification. In some cases, Quantitative Risk Analysis may not be required to develop effective risk responses. Availability of time and budget, and the need for qualitative or quantitative statements about risk and impacts, will determine which method(s) to use on any particular project. Quantitative Risk Analysis should be repeated after Risk Response Planning, as well as part of Risk Monitoring and Control, to determine if the overall project risk has been satisfactorily decreased. Trends can indicate the need for more or less risk management action. (PMI, 2004)             In the general view, the output that we can get from Quantitative Risk Analysis is that it can potentially determine the cost that will have to incur in cases of these risks, given that it can be handled by the Construction Organization. Furthermore, having a Quantitative Risk Analysis also include having a Cost/Benefit Analysis in which it handles quantifiable risks that qualitative analysis cannot handle. Furthermore, having introduced Quantitative Risk Analysis, it would not only offer value for money but it would efficiently budget the cost that would be incurred by the risks. Determining the probability of the risk would mean the definite cost of each risk, given that it is a controllable risk. Using the analysis in the Construction Industry would be perfect because the Construction Industry handles mostly risks pertaining to costs within the laborers and costs from defective equipments or procedures.

Risk Management in the Construction Industry

Risk Management in Construction Risk is very common not only for organizations but to individuals as well, there a lot...

Top