Challenging Perceptions Of Risk In A Complex World, Essay.

Topic: Drawing on independent research and critical analysis of the concept of risk identify and justify an academic model for the understanding and communication of a particular type of risk and critically evaluate the impact people in an organisation can have on risk management in a complex, networked and dynamic world_ Use any case studies of your choice to support your argument

Assessment Requirements:

- Demonstrate understanding of relevant course content, readings and evidence of your further research

- Demonstrate analytical, evidence based and critical thinking

- Demonstrate academic research_ writing and presentation skills

- Submit the paper as a word file via the Submission Link 'Ion Blackboard with an Individual Coversheet as the front page

Critical Analysis of the Concept of Risk

With the increasing complexity and ramified economic changes, each and every organization needs to manage their business activities effectively to avoid the possible problems and issues in the business functioning of organization. Risk in the business could be defined as uncertain event which may happen or may not happen. It is analysed that if proper risk management analysis is undertaken then company could easily mitigate the possible issues and risk of the business in effective manner. Risk management is the term given for the collective activities pertaining to risk which includes planning, avoiding, reducing and controlling risk and improving the strategies to strengthen the undertaken business functioning program.  In the ramified complex world, organization might face issues to mitigating the challenging business conditions and risk associated with the same. In this report, case study and organization facing different risk in its business process have been analysed. It will not only divulge the proper risk management process but also reflect the perception of risk strategies adopted by company in this ramified economic development.

Risk management is important aspect of the decision making process. It allows company to avoid the potential loss from the undertaken business and strengthen the overall outcomes undetermined approach. Risk could be defined in simple word as chance of adverse event depending on the given circumstances. Owning to the ramified business changes, risk management has become foundation to save corporation from the potential big losses throughout the time (Karim, & Arif-Uz-Zaman, 2013).

Risk is accompanied with the uncertain events or situation where organization finds itself in exposure to danger or if the particular situation is not undertaken effectively then it might result to high loss to the business functioning of organization. However, organizations may face several risks in their business such as financial risk, business risk and economic risk and technological risk.  In this research, GE capital and other big organization such as Wesfarmers, Woolworth, Morrison and BHP Billiton company have been analysed and the assessment have been on the risk which they have been facing in their business (Johnston, and Bate, 2013). The GE capital is running its business on international level and faced the technological and financial risk in their business throughout the time. The technological risk arises due to the advancement of the technologies in the market. However, GE capital totally avoided the technological risk in its business by adopting the cyber computing enterprises resources planning in its business process. It has shown the risk avoidance model which assist company to avoid the risk in best effective manner. In addition to this, Woolworths has also been facing the financial risk in its business which was avoided by company by accepting the financial risk model. In this risk model, company focused on lower down its financial leverage risk. This model suggested company to lower down the debt portion from its capital structure to lower down the financial leverage. However, the major risk in this section was related to increasing cost of capital of organization.  The financial risk of company reflects the demerits of company to sustain its business in long run and lower down the sustainability of the business. It is analysed that company used the financial risk model to mitigate its financial risk. However, in order to measure the financial risk, company could use following tools such as ratio analysis, top down analysis, bottom up analysis du pont analysis (Williams, and Hardison, 2013).

Risk Management and Its Practical Implication

Due to changes in economic condition, many organizations are inclined towards accepting the risk in their business process with a view to grasp the project opportunities in the business. It will not only increase the overall outcomes but also assist organization to grow on further level. In earlier time, companies used to avoid the possible risk to mitigate the possible issues and business. Now with the advancement in the technologies and business factors, organization is inclined towards confronting challenges and grasping the potential opportunities even if these opportunities are accompanied with the certain risk. It has reflected that organization has changed the perception of taking risk in the business process system of Organization (Fernandes, Ferreira, & Moura, 2016).  In the recent case study of Morrison, it was analysed that Company made investment to acquire new venture even if it was uncertain with a fact that whether company could be able to create value on the investment or not. It invested more than AUD $ 330 million amount of investment in particular company to diversify its business. However, in order to manage the risk company adopted certain measures and system process which were used to mitigate the direct risk of the business. This type of business decision reflects that all the organizations are ready to take risk in their business with a view to create value in their business and left the nature to complete avoidance of risk (Watson, Fleming,  & Zizzo, 2015).  It might be hard to determine the probability of the occurrence and non-occurrence of the event in the business process. There are several methods which have been used by organization to mitigate their possible risk such as focusing on the past trend analysis model, risk aversion method, risk avoidance method. Risk transfer method and risk reduction method. These are the some of the methods which are used by organization after assessment of the risk. In the end, company uses risk evaluation step as its last recourse to identify the mistakes and issues for the future business output. After analysing all these facts, the major step which company needs to undertake in their risk management process is related to preparing the check list program. Risk management is important aspect of the decision making process and if it is not taken into consideration in effective manner then it might result to high loss to organization (Wei, Samiee, & Lee, 2014). The prepared check list program assists organization to determine all the short coming and drawbacks of the undertaken project. It will assist company to strengthen the efficiency of the risk management program. This check list program assist organization to arrange resources, hiring risk management team and developing proper risk management training and development method. It has not only assisted in creating value on the investment but also increased the business outcomes in effective manner.

Risk Faced by Company in the Scenario

Perception of the risk management starts with the risk identification in the particular business functioning. BHP Billiton took its Brazil project for the oil and gas program. However, the main risk at the time of undertaking the project, it found was related to the oil spill cases. Company adopted several risk mitigating methods such as installing safety guards, developing eco support system.  Nonetheless, due to the procedural mistake company had to face the oil spill case in Brazil which not only impacted the business of the organization but also malign the brand image of company on international level. Risk management is very effective process which assists organization to identify the level at which risk could be tolerated in the business process. It also reflects the risk which needs to be avoided completely (Boshyk, 2016). The employees and other stakeholders may get negatively impacted if they could pave up with the changed busienss models and adopted advance technologies in the business system of the organization.

After analysing all the factors related to risk management, it could be inferred that company should also adopt the proper risk communication method to the concerned person so that the particular identified risk could be minimized in effective manner.  The risk management could be defined as process system to avoid, mitigate, reduce, and transfer the risk in certain situation. If organization could use the risk management process effectively then it could easily mitigate the risk in effective manner. However, risk management model could be adopted by organization to manage these risk in business. It is analysed that risk management model could be used by organization to set up the risk management process which could save company from the possible losses and issues in the business process system of organization. For instance, in the case of GE capital when company faced the risk of increased employee turnover due to adaption towards the advance technologies process and new system it had to face high production loss. GE capital followed the risk management process to avoid the risk. In the risk management process of GE capital, the management started with the risk perception. In this step, managers identify the level of risk and its possible impact on the organization. After that risk identification was done to analysis the negative impact of the risk i.e. high employee turnover arise due to adoption of advance technologies in the business process (Mohd, Idris, & Momani, 2013). Afterward, GE capital used the risk assessment process to assess the impact of risk on the business of the organization. GE capital hired new risk management employees to assess the risk. In this process, it was considered that if company faces high employee turnover risk in its business process then it will have to install new technologies and system process in its business process system with the proper employee training and development program. Another step which is considered in the risk management process is related to use of risk management tool. Company arranged proper training and development program for its employees. This training program was arranged with a view to make employees more adaptable towards the ramified business environment.  After that, risk evaluation process is implemented to determine whether the risk is avoided or managed to the certain level or not. This process not only make organization more adaptable towards the change but also lower down the risk of high employee turnover. Afterward, the ending step in the risk management process is related to follow up of the risk management program which will assist organization to understand the cost benefit analysis of the implemented risk management program. In the end, follow up program will be implemented to determine how well the implemented risk management program assists organization to mitigate the risk and associated losses.  This risk management process have reflected that there should be cost and benefit analysis before implementing the risk management to mitigate the risk (West, Ford, & Ibrahim, 2015). However, business sustainability of company is highly dependent upon the risk management strategy of company. If company follows proper risk management strategy then it would assist organization to avoid the possible business risk and strengthening the business outcomes in efficient manner.

Conclusion

After analysing all the detail about the risk perception in context with the changing business conditions, it could be inferred that company adoption of the risk management model depends upon the nature of the business and associated business risk. It is analysed that risk management strategy has cost associated with it and the cost of implementing the risk management process should be less than cost of potential loss. The risk management policies and process system should be reviewed and changed time to time by the senior risk managers with a view to strengthen the overall outcomes in the business functioning of organization.  Now in the end, it could be inferred that there are several other risks which are inherent in the particular project which cannot be mitigated, reduced, avoided and transferred by organization. This risk have to be borne by organization by strengthen the overall internal control system.

References

Boshyk, Y. ed., 2016. Business driven action learning: Global best practices. Springer.

Fernandes, C., Ferreira, M. and Moura, F., 2016. PPPs—True Financial Costs and Hidden Returns. Transport Reviews, 36(2), pp.207-227.

Johnston, R.E. and Bate, J.D., 2013. The power of strategy innovation: a new way of linking creativity and strategic planning to discover great business opportunities. AMACOM Div American Mgmt Assn66(2), pp.27-47.

Karim, A., and Arif-Uz-Zaman, K. 2013. A methodology for effective implementation of lean strategies and its performance evaluation in manufacturing organizations. Business Process Management Journal, 19(1), 169-196.

Mohd, W., Idris, S. and Momani, R.A., 2013. Impact of environmental dynamism on marketing strategy comprehensiveness and organizational performance. International Journal of Business and Management, 8(9), p.40.

Watson, S., Fleming, P., and Zizzo, D. 2015. Perceptions of legal risk do not predict behaviour in unlawful file sharing: an empirical analysis. European Policy for Intellectual Property.76(2), pp.57-77.

Wei, Y.S., Samiee, S. and Lee, R.P., 2014. The influence of organic organizational cultures, market responsiveness, and product strategy on firm performance in an emerging market. Journal of the Academy of Marketing Science, 42(1), pp.49-70.

West, D.C., Ford, J. and Ibrahim, E., 2015. Strategic marketing: creating competitive advantage. Oxford University Press, USA. 36(1), pp.1-8

Williams, T., and Hardison, P. 2013. Culture, law, risk and governance: contexts of traditional knowledge in climate change adaptation. Climatic Change, 120(3), 531-544.