RISK MANAGEMENT

Risk Management

Risk Management

Introduction

Risk management is one area with which businesses can lower their losses from point-of-sale. Risk management provides a broad range of technical tools and methods, including Cost-Benefit Analysis, Frequency Matrices, Estimation and Probability. This paper provides the use of two these tools and methods using two business problems.

Assume that someone has been breaking into a vending machine in your workplace at least twice a month. They normally would not get more than $15 to $20 at a time.

Decision matrix is a technique, which generalizes the notion of operations on matrices by means of mathematical matrix table of the elements. In this table, there are m rows and n columns.

The general form of a decision matrix is formed by the following:

Strategies are formed by the controlled variables that are the alternatives or options to choose from.

States of nature are uncontrolled variables represent the situations or events they cannot influence and that influence the decision taken (Axelrod, 2008).

Odds are the chances of occurrence of each state of the nature.

Results or outcomes are the expected results in each of the strategies, given a particular state of the nature.

Decision Matrix

 

ALTERNATIVES

Decision Model

Installing Camera System

Not Installing Camera System

Criterion

Weight

Rating

Score

Rating

Score

Camera System

1

2

2

1

1

Score = Rating * Weight

Cost Benefit Analysis

Cost

Amount $

Benefit

Amount $

Camera system

1200

Vending machine breakout (20x24)

480

For 3 years

1440

 

1200

 

1440

To conduct a cost-benefit analysis, we should identify the project activities assign values ??to the consequences of such activities. This analysis is useful when scientific results can be reflected in cost-benefit values, which ??can be expressed in price and monetary value with reasonable accuracy. An analysis of this type involves significant limitations because it does not consider the decisions made ??subjectively, the social uncertainty and irreversible losses (Boardman, 2006). Likewise, the political or legal concerns are not considered in the cost-benefit analysis.

All aspects of the project, positive and negative, must be expressed in terms of common unit. There must be a bottom line. The most convenient common unit is money. This means that all benefits and costs of a project should be measured in terms of their equivalent value of money. A program can provide benefits that are not directly expressed in terms of dollars but there is a certain amount of money that the recipients of significant benefit receive as the benefits of the project.

• Discuss how you would sell your security program to management.

On the basis of above technique and analysis, I would highlight the issue to management to plan the security program on the vending machine, so that the break out of monthly around $ 40 will be stopped and avoided in future.

• Be sure to provide an explanation of the reasoning behind your plan.

The reason to go ahead with the security program and to install the camera system is to avoid the loss through the theft from the vending machine, which is done twice in a month with the amount of $ 15 to $ 20 at every ...