Costs of Business Risks CASE-3

Costs of Business Risks CASE-3

Question # 1: To what extent should risk be identified, managed, and measured in business organizations?

Answer:

Risk management is the understanding of business risk as well as the particular categories of risk, a business faces that based on its goals, Industry, activities and strategies.The risk of investing in financial gadgets can generally enumerate, mostly if the issuing business has a track record. The quantity of assets at risk is generally restricted to its replacement value. Some risks can be difficult to compute, but they can be examined, calculated, and administered. (Crockford, 1986)

Risk management tools

Through the following, risk could be measured.

Discovering the risks the business faces

Review the extent and possibility of those risks

Establish a culture in which everybody feels accountable for risk management (Crockford, 1986)

Having the right risk-management tools and the skills required to affect them

Question # 2: What tools are available to assist in this task? Why should this be the domain of management accounting?

Answer:

Risk is identified by reviewing the business's strategies and all business activities, and by considering the following questions: What types of failures or events could negatively affect this strategy, initiative, activity, or product. What can go wrong?

Measuring of Risk

Determining the size of a risk means assessing the possible consequence on business. This can include undeviating monetary fatalities due to assets and from the special effects on your suppliers, customers, employees, and additional stakeholders (which might not be insurable). (Rejda, 2008)

In order to measure the risk you have to go through the following questions:

In hurricane scenario or a terrorist attack in which one or two of our positions were partly ruined, what would be the time for renovate and the potential costs of repairs and lost company?

What if one of our largest purchasers shutdown its operation? What ...