Risk Factors And Business Strategy For An Investment Course Provider

Regional managers act without a sense of the larger corporate strategy. There are no well-defined information channels for sharing information either between themselves or with senior management.

The regional managers have also surrounded themselves with “yes” men and women, and do not hear much, if any, bad news. They tend to leave the

consultants alone because they do not understand the sometimes complex language of the consultation process. Managers have limited access to performance data and spend much of their time trying to resolve flare ups or unanticipated emergencies. From the information they can access they tend to focus solely on course sales figures and their monthly performance reports to senior management are often late or not submitted at all.

A high percentage of Trading.com’s business is based on new courses.

The courses are developed by Jospe and the senior management team: acreative, risk taking group of share investors. In this regard they do not act like a team but are given a great deal of autonomy and so develop course content independently of each other, only returning to the group once they have created something of substantial value.

The impacts of financial regulations: solvency and liquidity in the post-crisis period.

Benefits and risks of central clearing in the repo market.

Intermediary asset pricing: New evidence from many asset classes.

Operational and financial hedging: Evidence from export and import behavior. 

Adding Precision to the Proposed SEC Rule on Investment Company Use of Derivatives with a Hedging Exception.

Overview of the Investment Course Provider

Every business in the world has to face a tremendous amount of computation according to the present scenario which results into numerous risk factors that the organisation has to witness. It is very important to identify and calculate the risk factors so that adequate measures can be taken in order to reduce or mitigate the risks related consequences associated with the company. The medium scale and small scale businessmen and entrepreneurs often tend to forget about the risk factors in the growth stage of their business because of the optimism factor they are surrounded with due to the growth shown in their newly started business.

The following study has considered a case scenario of a fictitious organisation that deals with providing courses to aspiring investors regarding methods of intelligent and smart Investments and business decision making. The company has been considered to be founded by an experienced investor who provides courses to understand the different aspects related to business investments like stock exchange and share market details. Since there has been a significant increase in the growth rate of the company due to which the organisation became a medium scale company within 3 years of its Inception employing over 100 staff members with its officers in four major cities in Australia. However, the growth of expansion for this company is not in proper balance with the capacity of the organisation to hire more staff for delivering the courses. Hence, the following study has explicitly described the various risk factors that the company is likely to face due to its ongoing scenario in the upcoming few months or years.

There are various types of risk factors involved in the small and medium scale industry or company due to which the company has to formulate from effective strategy so that it can reduce the possibility of any unfavourable consequence due to the risk. The risk factors for any organisation vary depending on the stage of performance the company is going through (He, Kelly & Manela, 2017). It is important that the possibility of negative consequences is not ignored even if the existing performance of the company is more than the desired level that by the senior level executives of the organisation. Following are the different stages of business that are affected by different levels of risk factors during its operations.

Any small or medium scale organisation has to go through four different stages or cycles of business name start, grow, maturity, and decline. The overall risk factors involved in all these four stages are different for different sector companies depending on the competitive level and the demands or products provided by the company (Miller, 2018).

Risk Factors Involved in the Different Stages of Business

Startup: During the startup stage, the company introduces new methods of doing business which is quite rare in the existing business scenario and therefore there are high chances that it will grow at a significant rate. However, since the people are not aware of the newly started business, the chances of growth might also be low which needs to be enhanced by proper advertising and promotion (Niepmann & Schmidt-Eisenlohr, 2017). The target population is likely to get attracted towards the company because they are likely to trying new things available in the market that can serve their necessary purposes. The risk is moderate at the startup stage because the people are not aware of the company and the executives of the organisation need to reach out to maximum people by following proper methods of advertisement.

Growth: The 2nd stage is the growth stage of any business cycle and includes the actual growth which takes place due to creating of awareness among the target population and also due to the performance given by the company. This stage is crucial because it provides an opportunity into the owners of the company to maximize their profit margin due to the presence of low level competition in the market in the same industry. The possibility of any consequence due to the risk factors is quite low in this stage.

Maturity: The maturity stage is the third stage of the business cycle of any company where the company is likely to face some call or declination in the rate of growth. This happens because of the increase of competition and emergence of new companies within the similar domain (Degl’Innocenti et al. 2018). The organisation still earns profit but not as a rate as good as it was earning in the growth stage. The risk is at a high level at this stage to the company.

Declination: The final stage or 4th stage of the business cycle of an organisation consists of its declination phase. The most primary reason for the declaration of the company is the same reason due to which the company started. The people are likely to trying new things and switch to other companies that have introduced a new product as a Startup initiative in the market. The chances of the company getting into loss significantly increases and the organisation stops earning profit and the growth rate declines to a negative value in the last stage (Baklanova, Dalton & Tompaidis, 2017). The risk factors are at maximum value at this stage and therefore the company must come up with a new strategy to regain it growth rate with a new cycle in the market. The introduction of a new strategy or product in the market that can provide necessary goes to the company is known as the rebirth of the company.

Effective Business Strategies for Mitigating Risk

The risk exposure calculator is an effective tool which is used to measure the degree of risk that a company might have to face in the upcoming time. There must be a balance between all the aspects of the operations involved in an organisation. Maintaining a proper balance between every aspect involved in operating an organisation is very helpful for long term benefits (Baker, Cummings & Jagtiani, 2017). In case of the Trading.com Company, the factor that has worked in favour of the organisation is the Rapid growth in a shorter duration. This has happened because there has been delivery of quality courses by the founder of the organisation regarding knowledge associated with investment and share market. Moreover, the desired level of outcome provided by the well experienced teaching staff of the company has played a significant role in the rapid expansion of the organisation in just 3 years by increasing the total amount of stuff to over 100 making the company a medium scale organisation.

However, a very crucial factor that has gone against the long term benefits and growth of the company is the mismatch between the capability of the organisation to expand itself and fire experienced and quality staff to provide lectures for the courses. An organisation must expand itself considering every parameter especially highlighting the capability of its Human Resource Management to hire adequate faculty members and determine if the company will be able to retain its quality or not (Kuzmina & Kuznetsova, 2018). The Trading.com is facing a tremendous risk for its survival because it is likely that the overall quality of program and courses delivery will be compromised because the company has expanded more than its capacity in a very short duration. One of the most effective reason for this is the lack of experienced staff who can provide the courses. The company has been able to provide a high quality of lectures at the earliest stages due to which the expansion rate has grown tremendously high. Hence, the organisation is currently struggling to find experienced people who have adequate knowledge about the stock market and investment facts.

1. Pressure for performance:The pressure for performance is known as the degree of necessity for an organisation to show better performance. The Trading.com Company has shown a high level of performance in the initial stage but is struggling currently to show the similar performance level. Hence, the score has to be at moderate level that is 3 points.
2. Rate of expansion:The rate of expansion is the rate at which the company is expanding and reaching out to more people in the market. The rate of expansion for Trading.com is significantly high causing a low risk due to this parameter. Hence, the point obtained by the company on this parameter is 1.

• Inexperience of key employees:The employees who are currently working in the company are well experienced and have adequate knowledge regarding the subjects that are taught during the courses. However, the new employees that are to be hired need to be equally experienced which the company is unable to get very easily. Therefore, the company has hired some inexperienced employees causing a considerable risk factor of 3 points to its growth.

4. Rewards for entrepreneurial risk taking:The rewards provided for entrepreneurial is taking are an important parameter for the growth of an organisation because better rewards will promote and encourage better innovation in entrepreneurship. The Trading.com company pressure because the work culture does not promotes innovation as per requirement reducing the rewards for entrepreneurial Risk taking. Hence, the points and in this parameter are 4.
5. Executive resistance to bad news:The executive members of Trading.com have experienced a very high growth in a very short duration after its establishment and therefore the senior executives are very confident and optimistic about the future. However, the possibility of bad news is ignored causing a potential danger to the company in the future and hence the company has scored 4 scored points on this parameter.

• Level of internal competition:The internal competition level has been created very high by fixing a specific target for the consultants and regional managers. As a result of this, the internals competition level has gone very high which is likely to work in favour of the company. Hence, the overall pressure point due to this factor can be considered at 2.

4. Transaction complexity and velocity:The Company has performed extremely well during its initial phase but has failed to maintain the same rate of growth and performance in the consecutive time. The transaction complexity and velocity could have been maintained in a better way by the company because the founder of the company Jose Drake observed some factors that were leading to financial loss to the company due to which a fixed salary was decided for the consultant instead of commission based income. Hence, the points scored in this parameter are 4.
5. Gaps in diagnostic performance:The overall performance of the company who was not diagnosed properly on every parameter. Therefore, the company did not expand its business in proportion to its capabilities in hiring the employees that have optimum level of experience. This has increased the risk factors due to gaps in Diagnostic performance resulting into a score of 4 on this parameter.

• Degree of decentralized decision making: The decision making of the company who was decentralized appropriately so that the regional managers and consultants could make their own decisions and populate their own strategies. The senior most level executive management however was able to monitor every progress and introduced some new strategy regarding the financial transactions and salary structure of the workers. Therefore, the respective is considerably low on the parameter of decentralized decision making earning the company 2 points.

Table 1: Risk Exposure Calculator

(Source: Created by the learner)

Conclusion

It can be seen that the overall score of Trading.com is 27 which makes the company fall into the caution zone. Therefore, the company needs to take adequate measures in order to rectify is business procedures and must provide a proper environment to the Regional managers and consultants to hire more experienced workers that can provide better quality lectures to the people who are seeking for some classes and advise on investments related domain. The organisation also needs to slow down its expansion rate and increase its capability to hire more experienced professionals.

References

Baker, C., Cummings, C., & Jagtiani, J. (2017). The impacts of financial regulations: solvency and liquidity in the post-crisis period. Journal of Financial Regulation and Compliance, 25(3), 253-270.

Baklanova, V., Dalton, O., & Tompaidis, S. (2017). Benefits and risks of central clearing in the repo market. Office of Financial Research Brief Series, (17-04).

Degl’Innocenti, M., Fiordelisi, F., Girardone, C., & Radi?, N. (2018). Competition and risk-taking in investment banking.

He, Z., Kelly, B., & Manela, A. (2017). Intermediary asset pricing: New evidence from many asset classes. Journal of Financial Economics, 126(1), 1-35.

Kuzmina, O., & Kuznetsova, O. (2018). Operational and financial hedging: Evidence from export and import behavior. Journal of Corporate Finance, 48, 109-121.

Miller, D. (2018). Perfect Hedge: Adding Precision to the Proposed SEC Rule on Investment Company Use of Derivatives with a Hedging Exception. Boston College Law Review, 59(4), 1471.

Niepmann, F., & Schmidt-Eisenlohr, T. (2017). International trade, risk and the role of banks. Journal of International Economics, 107, 111-126.