Factors Affecting Risk Exposure In Trading And Consulting Company Essay.

You are required to read the following journal article article:

1. How Risky is Your Company? HBR. May-June 1999 https://hbr.org/1999/05/how-risky-is-your-company

Ensure you click on the ‘Read More’ link to view the Risk Exposure Calculator. You are also required to read a fictional case study based on a company that will be provided to you in due course. You must then prepare a risk assessment report on the company using the Risk Exposure Calculator.
 

The financial risks can be defined as the lower earnings and the negative returns on the investments. According to Flammer and Luo (2017), the stock trading companies play one of the important roles in lowering the risks by providing investors with the proper investment advice and training. The advisory firm’s investment advice creates a direct impact on the internal operating factors of the organization. This paper will find out the factors of the internal pressures of the trading and the consulting company like Trading.com, as exposed to the risk exposure calculator.

The risk management process includes methods where the investors minimise the risk factors, that are more prone to create an effect on the business return in a negative manner. According to Trigeorgis and Reuer (2017), the business risk management in the financial market could be defined as the tools for analysing the share market and the advisory services for taking the proper investment decisions for earning more returns from the investments. According to Ragin and Halek (2016), by providing individual investors, the share broking companies earn brokerage on the services. The consultant of the business organization enters into stiffest competition for earning brokerage. This ended up in providing the inappropriate services to different investors. This also makes the organization for maximising the risks of the investors thus, leading to the financial losses to the latter (García-Kuhnert, Marchica and Mura 2015).

This section includes internal pressures that the stock advisory companies face during the operations in the share markets

The stock market in the global business markets deals with various economic problems like the economic downfall in Europe like one of the biggest stock market. These factors create effects on the company’s revenue generation; the organization are unable to pay the satisfactory return rates on the investments made by the investors. The organizations are mostly dependent on the investors for earning more revenues from the advisory services; those are coming under the increasing pressures for earning revenues. Therefore, for acquiring the new investors and for generating the consultancy services charges by forcing them to undergo through the investment courses that are expressed by the internal risk calculators (Flammer and Luo 2017). 

Trading.com faces the competitive risks like the high achieving rate for the business expansions. Trigeorgis and Reuer (2017) showed that the business expansions boost up the business revenue generations of the business organization and it creates immense pressure for the existing resources to cater to the increased customer base. The business management organizations often acquirea various number of labours for expanding the business. The consultants lacked the internal coordination among themselves that affect the business operations and as well the investor’s services provisions. The consultants are unable to acquire the new investors for joining the training courses that are for the ongoing internal conflicts in the organization. Thus, it could be said that the inefficiently managed business expansion can be done instead of boosting revenue generation leads to generation risks.

Pressure during growth

The employee's inexperience would lead to human risks in the business organization and according to Flammer and Luo (2017), this would point out the employee'sperformances in the service providing companies for the advisory companies. The case study also mentioned that the management team would meet the business expansions requirements for compromising the talent acquisition requirements of the company and also hiring the inefficient consultants. This would clearly denote the joining costs for the courses is $ 10000,and the investors also need to take time for taking proper decisions regarding the enrolment in the courses due to the greatnumber of course fees. Thus, it can be concluded that the recruiting of the inefficient consultants would create a reputation risk for Trading.com.

This section will involve the risks faced by business organizations like Trading.com due to the cultures of the organization as expressed by the risk exposure calculator.

The entrepreneurial risks taking’s rewards are considered as the revenue generations and the profits that the entrepreneurs are able to generate from the business market.Kuratko, Hornsby and Covin (2014) showed that the high market returns are able to motivate the entrepreneurs for taking more risksof investing in the business. The entrepreneurs need to face various risks like the lack of economic resources, human resources, threats from the competitors those are already existing and the technological expertises. The case study also did not mention the technological capability of the Trading.com and the entrepreneurial venture by Joseph Drake. However, this would mention that the firm was for three years  and this is also found out from the case study that Mr Drake lacks the entrepreneurial skills. He was unable to tackle the pressure of the business expansions and would end up in compromising the recruitment quality of the organizations. According to Ericson and Whitley (2017), the inappropriate decisions of the entrepreneurs would lead to a direct impact on the business outcomes. The case study also provides properevidence from the improper consultant recruitment that ultimately hits the revenue generation process. Thus it can be said that the inappropriate decisions of the entrepreneurs would lead to the business loses. 

 The executive resistance for the bad news and the challenging decisions would lead to creatingan effect on the business performances of the organization. Flammer and Luo (2017) mentioned that the share market compromises the complex transfers of shares and economic assets. This also meant that the investor training companies would lead to dealings with the different questions from the investors leading to investments. Tradng.com need to train their investors that is by making the targets higher for those consultants who are unable to maintain the proper communications with the investors. The managers of the organization also lead to the countering of the investor’s interrogations and the challenging situations. This would be leading to the poor acquiring of the investors and the generation of revenue of Trading.com.Thus it could be concluded that the executive resistance of the bad news and challenges would lead to organizational performances.

Pressure for performances

The high level of the internal competition would create the performance risks for eth business organizations that are leading to the customer services and the revenue generations. Lovelock and Patterson (2015) mentioned that the collaboration among the employees would result in serving the customers better and also ensuring the great level of customersatisfaction. Ericson and Whitley (2017) also found out that there are trading companies where the employee's salary isdependent upon the business targets achieved by them. The employees are more prone towards earning more salaries,and that ended up in compromising the standards of the services provided with the employees. Thus, it can be concluded that the discussions of the internal competitions would find out ways for the market risks and the reputation risks of the companies.

Transaction complexity and velocity

The information’s risk that the companies those who are working in the business markets like the velocity and the transaction complexity. The online transactions of the financial resources should be kept under the strict vigilance. This is not possible for the single legal system to  control the online transactions in the global business market. The stock market is becoming so huge that the single legal body is unable to control the data theft. This resulted into a high level of money laundering and the data theft. The criminals are more prone towards finding out the various legal systems and the gaps in the laws and policies for carrying out criminal activities. Hutchings and Holt (2017) find out that the transactions made through the internet should be under strict vigilance so that organizations like Trading.com are able to make the secure transactions. 

Part C (ii). Gaps in diagnostic performance:

The stock market is so large that the single body is unable to maintain the transactions and also for diagnosing the negative incidences. Hutchings and Holt (2017) also found out that the organization lacks the feasibility of the vigilance that leaves the scope for the data theft. Lovelock and Patterson (2015) would supports the opinion and could further add the data theft rackets. This would spread globally and it makes possible for the single legal system to try them. The using up of the authenticated data would make the transactions more secure by using biometric data. The central bank and the stock exchanges make policies those have succeeded in diagnosing the share market crime to a great extent. However, this needed to be pointed out as compared to the huge size of the stock market; the existing vigilance is not enough.

Rate of expansions

Degree of decentralized decision making

The stock market is consist of various stakeholders that make the decision s regarding the investments are decentralised. This meant that making decisions related to the investments, which cannot be guarded by the laws and the policies. Manuel and Mathew (2017) also pointed out that the different investors make the investments regarding the perceptions of profit and lacking knowledge regarding the proper share market. This also provides scope for the stock brokers and the agents misinterpreting the facts those force them to invest. The case study also mentioned that Trading.com’s employees are unable to maintain the transparency in front of the investors and also charges $10000 for the share trading courses. These actions of the consultants expressed the act of the misrepresentation and fraud. Hutchings and Holt (2017) mentioned that the high corporate deception level would lead to excessive financial losses for the investments. Jens (2017) suggested that the long term trading business will be affected in the global market. Most of the time it is found that the investors are facing loses due to the fraudulent actions of the corporate bodies that divest the investments. Therefore, it can be concluded that the decentralised nature of the making wrong decisions by the share holders would lead to corporate deceptions.

Conclusion

Therefore from the above discussions it can be concluded that the individual interests should be protected by the business organizations for ensuring the smooth flow of the investments in the global business market. This can be said that the global stock market is large enough that the total control of the particular body is impossible. The excessive network of the trading companies, investors, is available to the public limited companies. But the large network of the financial resources is ridden with various risks like the technological, market risks and the risks due to the fraudulent activities. Trading.com should focus on training the investors instead of making misrepresentations of facts to them. 

Proper recruitment of consultants

The proper recruitment of employees is needed for providing the efficient services to the investors and need to motivate them to invest for the organization. The consultants should also have the proper dealing skills with the investors.

Proper guidance of the investors:

The investors should be properly guided by the consultants as they needs to know every detail before hand. Therefore the consultants should gain the trust of the investors by providing proper guidance.

Aligning managers and consultants

This is recommended that the organization needs to align the mangers for supporting the investors. The trading firm are needed to train their consultant in the effective manner.

References 

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Ericson, C.M. and Whitley, R.S., Bank of America Corp, 2017. Fraudulent transaction detection system for use in identity-based online financial transaction decisioning system. U.S. Patent 9,824,358.

Flammer, C. and Luo, J., 2017. Corporate social responsibility as an employee governance tool: Evidence from a quasi?experiment. Strategic Management Journal, 38(2), pp.163-183.

Franck, T. 2018. US stocks are again headed for new highs while rest of the world's stock market struggles. [online] CNBC. Available at: https://www.cnbc.com/2018/08/17/the-rest-of-the-world-is-feeling-pain-from-tariffs-and-a-strong-dollar.html [Accessed 25 Sep. 2018].

García-Kuhnert, Y., Marchica, M.T. and Mura, R., 2015. Shareholder diversification and bank risk-taking. Journal of Financial Intermediation, 24(4), pp.602-635.

Hbr.org. (2018). How Risky Is Your Company?. [online] Available at: https://hbr.org/1999/05/how-risky-is-your-company [Accessed 25 Sep. 2018].

Hutchings, A. and Holt, T.J., 2017. The online stolen data market: disruption and intervention approaches. Global Crime, 18(1), pp.11-30.

Jens, C.E., 2017. Political uncertainty and investment: Causal evidence from US gubernatorial elections. Journal of Financial Economics, 124(3), pp.563-579.

Kuratko, D.F., Hornsby, J.S. and Covin, J.G., 2014. Diagnosing a firm's internal environment for corporate entrepreneurship. Business Horizons, 57(1), pp.37-47.

Lovelock, C. and Patterson, P., 2015. Services marketing. Pearson Australia.

Manuel, J. and Mathew, G., 2017. Impact of Cognitive Biases in Investment Decisions of Individual Investors in Stock Market. International Journal of Engineering Technology, Management, and Applied Sciences, 5(3), pp.74-77.

Nguyen, T.H. and Shirai, K., 2015. Topic modeling based sentiment analysis on social media for stock market prediction. In Proceedings of the 53rd Annual Meeting of the Association for Computational Linguistics and the 7th International Joint Conference on Natural Language Processing (Volume 1: Long Papers) (Vol. 1, pp. 1354-1364).

Ragin, M.A. and Halek, M., 2016. Market expectations following catastrophes: An examination of insurance broker returns. Journal of Risk and Insurance, 83(4), pp.849-876.

Sec.gov. 2018. SEC.gov | HOME. [online] Available at: https://www.sec.gov/ [Accessed 25 Sep. 2018].

Trigeorgis, L. and Reuer, J.J., 2017. Real options theory in strategic management. Strategic Management Journal, 38(1), pp.42-63.