Question

The development of a risk management policy requires an understanding of the organization’s risk profile. Explain some of the firm’s attributes that influence risk profile of an organisation

Answer 1

ATTRIBUTES INFLUENCING RISK PROFILE

1.Attributes within the organisation or Internal Attributes

It includes TECHNOLOGICALaspects. Changes in technology will affect every organisation the outdated technology is a ofcourse a risk factor. The cost incurred from a machine will also influence profitability.The ATTITUDE OF EMPLOYEES AND MANAGEMENT is another risk factor the positive healthy attitude of workers and management only help in reduce risk.

2.Attributes outside the organisation or External Attributes

NATURAL FACTORS

It includes the natural disasters like tsunami,flood,earthquake that will increase the risk of business. There should be a mitigation plan for every organization to face such situations

POLITICAL FACTORS

The decisions taken by governement varies according to their politics.So there may changes occur as the government changes in their term. The favourable decision from previous government may become changed when new government passes order. And also the terrorism like factors will spoil business so one have to take decision of setting up a business by analysing politics of the country.

ECONOMIC FACTORS

Economic factors include interest rates inflation/prices,demand for products etc. If all of these factors are not favourable then it will be riskier for business to overcome. Inflation reduces the value of money unless interest rates are higher than inflation.

ATTITUDE OF COMPETITORS CUSTOMERS SUPPLIERS etc

Competition is ofcourse a risk attribute that drastically harm small businesses through various costs. Changes in the tastes and preference of customers will affect profitability of a firm..they are forced to change features of their product.

POLICIES OF GOVERNMENTS & LAWS OF THE COUNTRY AND STATE

Changes in government policies will affect the operation of business they have to make changes. Government policy can influence interest rates. Rise in interest rate causes cost of borrowing. Taxation policy is one of the government policies that affect business directly. Tax is calculated on the money earned by business.