RISK MANAGEMENT

Risk Management

Assignment One

Introduction

Risk is something that every business has to bare, may it be a start up business or business that has reached its stability. There are some events that may become a consequence or opportunities for success. However, mostly risk is taken as the probability of events that are considered to be undesirable. Risk assessment and Risk management has gained importance in the businesses around the globe. Every business would want to reduce the risk.

A start up business should undergo the risk management process which will enable it to assess the risk and handle it accordingly.

Discussion

Risk management is a process which highlights the possible risks, disasters or problems that can probably occur, and developing strategies to minimize the impact of the risk. It is important to identify asses and analyze risks in order to create strategies to control it. Risk management uses various tools and techniques such as insurance that manages the risk to some extent.

It is vital for new business to undergo risk management as this awareness will help the business to be prepared with the risks that might occur and how to deal with them as well. Any kind of consequences will have a dire affect on the start-up business. Losses due to theft, fire, flood, disability, injury and liability will affect the daily operations of the business, lower the profits and may cause financial bankruptcy.

Risk affecting different business functions

There are different business functions that might be affected by the risks. Some of them are discussed below

Risk in Finance

Finance is the crucial department in every organization. A start-up business has to be very careful in terms of cash flows as any wrong decision or major risk might affect the new business more than the business that has been established. An established business may handle financial discrepancies by taking loans from the bank where as the start-up has already taken investment which they can't afford to lose. There are many factors that can affect the intensity of the of risk such as interest rates, exchange rate, stock market and many more.

Manufacturing Risk

This risk involves the product to be manufactured properly and in an appropriate volume. The business should estimate the volume and the quality it wants to deliver. If the machinery wears off or doesn't work properly, the product will not be of the quality that is required or the estimated amount of products may not be manufactured, thus manufacturing risk will increase.

Marketing Risk

This is the risk that is associated with the marketing function of the business. If the marketing is not done appropriately, the product might not sell effectively. This will reduce the sales and will have an adverse affect on the business. This is ultimately going to affect the profit. It is important for the business to assess the markets potential before tapping the segment. Effective marketing, which clearly communicates the products functionality and usefulness, will help in reducing this risk.

Growth risk

A business has to grow and the growth is a risky step for every ...