Risk Management Assignment Critically Examining The Link Between Threats And Business Strategies
Critically examine the relationship between risk and strategy and explain how adaptation can enable
an organisation to achieve its strategic objectives despite the risks it may face. Justify your answer
with research and provide real examples.
- Demonstrate understanding of relevant course content, readings and evidence of your research
- Demonstrate analytical, evidence based and critical thinking
- Demonstrate academic research, writing and presentation skills
- Reference to the appropriate standard using Harvard or APA systems
- Submit the paper as a word file with an Individual Coversheet as the front page
Critically examine the relationship between risk and strategy and explain how adaptation can enable an organisation to achieve its strategic objectives despite the risks it may face. Justify your answer with research and provide real examples. diversifiable.
Relationship between risk and strategy explored in risk management assignment
Before understanding the relationship between risks and strategies, it is important to understand what a risk is. Risks are the situations created or possible to create in the business that may cause loss to the firm (Rampini et al., 2019). As mentioned in the introduction, risk is unavoidable part of business. Da Silva Etges and Cortimiglia (2019) stated that a business cannot be initiated without taking any risk. The firm may be small or medium or large, it needs to undertake certain level of risks while operating business in the market. According to Berry?Stölzle, and Xu (2018), risks of the businesses vary based on the situations in which the companies are operating business. For example, if an organization is operating business in an economy, where the political environment is unstable, the level of risk of the business will be much high. On the other hand, if the organization is operating in such an environment that is supportive from different angles, the organization will face comparatively lower level of risk. However, it can be stated that there will be no risk to the business. From the broader perspective, it must be stated that there are two types of risks that the businesses face - systematic risks and unsystematic risks. Systematic risks are market risks, which are undiversifiable; on the other hand, unsystematic risks are industry risks which are
Strategies are adopted by the firms for mitigating or managing the risks in a better way. In this context, Giambona et al., (2018) mentioned that the main target of the firms for developing risk mitigation strategy is to keep the risk at the lower level. In the other words, it can be stated in risk management assignment that firms develop strategies so that they can safeguard the business properly or efficiently when any risk will arise. It is indicating a close relationship between risks and the strategies that the firms undertake for managing the risks. The relationship between the two can be considered as negative because if the firms adopt better risks management strategies, the level of risks can be reduced and vice-versa. At the same time, it can also be stated that strategies are developed because there are risks in the business (Lundqvist and Vilhelmsson, 2018). For example, Woolworths Limited has introduced safety pack for its employees, so that the safety risks to the employees can be managed efficiently at the workplace. If this particular strategy of safety pack adopted by Woolworths Limited is considered, it can be stated that the company has adopted this strategy because it has realised safety risks to the employees at the workplace. It indicates the fact that strategies for risk management depend on the level of risks that the companies are facing (Ali et al., 2018).
On the other hand, if the focus is made on another firm like Australia and New Zealand Bank, it can be noticed in this risk management assignment that the entire banking system of the bank is supported by the digital technology. This is one of the risk management strategies that the firm has adopted. This particular risk management strategy has been adopted by the firm because there the firm has assessed higher level of risk that may be generated to the firm in terms of inaccuracy in manual data management. At this point, Grima and Bezzina (2018) mentioned that in the modern era of business, companies adopt different strategies not only after measuring the level of specific risk, but the companies adopt strategies also for avoiding the risk to certain level. For example, the companies develop financial plan in every financial year. These plans are not developed after assessing the financial risks, rather, these plans are developed as an essential activity of the business in the beginning of each accounting period (Maruhun et al., 2018). For example, companies develop better cost control plan or strategy, so that they do not face low profitability in the market. It does not indicate that the company has risk of low profit, but it means that if the cost control strategy is not adopted, the company may face risk. However, it does not mean that the firms do not measure the financial risks.
Therefore, the above mentioned arguments in risk management assignment are indicating that strategies are developed first so that the possible risks can be avoided. However, the arguments are clearly stating the adverse relationship between strategies and risks in the business. This adverse relationship between the two are very important for the growth and sustainability of the business. If at any point the relationship between the two factors become positive, the survival of the business will be difficult because the positive relationship indicates ineffectiveness or inefficiency of the strategies adopted by the company. At the present time, every organization is focused on the relationship between risk and strategy. However, it is a fact that this relationship does not exists or may change if the risk is generated due to the condition in the market. For example, if the market is highly volatile in nature, the organizations cannot avoid the risks adopting stronger strategies. In the volatile market the market risk is always high for the businesses.
Risk management assignment explaining how adaptation can enable an organisation to achieve its strategic objectives despite the risks it may face
Adaptation is a very important term in the modern world of business, where the level of risks is very high to every firm. Adaptation indicates the steps that the firms undertake for adopting or adjusting with the changes in the business environment and dealing with the risks in a better way. Martincevic and Kozina (2018) believed that adaption is very important for the achievement of strategic objectives of the business. If the business of any agricultural firm is considered, it can be notice that the firms survive in the market through adaptation only. It is because the level of changes in the climate is always present and the agriculture related businesses are dependent mostly on the climate. In this context, only through adaptation the businesses survive. For example, in the modern era, the agricultural firms have adopted the technology to increase resillence (Pinkse and Gasbarro, 2019). This is one of the modern techniques in which the farmers can conduct animal housing and through that the farmers or the agricultural firms can protect the animals from weather changes.
On the other hand, if the focus is made on the other types of businesses like Toyota Motors, it can be noticed the company has managed the internal and external risks by adaption of new technologies and methods. The company introduced the methods like six sigma, which is one of the most effective operations management methods in the modern era of business. Trough the adaption of six sigma method, the company has dealt with the waste management in a better way. At this point, it is very important to be mentioned that higher level of waste in the business can cause higher level of risks in the business (Cozzolino et al., 2018). Due to higher level of waste, the company may face the risks like shortage of resources and shortage of funds. However, adaptation of six sigma strategy or technique the company has managed the risks in a better way. Hence, in this context, it can be understood that adaptation has safeguarded the business efficiently.
In the context of adaptation, it must be stated in this risk management assignment that the importance or the value of adaptation can be realised only when the firm is capable of adopting the new strategy or technique in an efficient manner (Artcer et al., 2018). At this point, the example of Nokia can be considered. The company was one of the most popular mobile handsets manufacturing companies in the world. However, the company was not capable of adaptation in an efficient manner. The changes in the Smartphone or mobile handset industry required more advancement in the products. However, Nokia was failed to adapt the advancement in its products and as a result the company lost its business in the market.
Canevari-Luzardo et al., (2018) believed that adaption depends on the internal factors of the company. If the company has strong workforce, advanced technological and managerial infrastructure, it is possible to adapt new changes and manage the risks of the business in a better way. At this point, the example of Apple Inc can be considered. Apple is the biggest player in the Smartphone industry in the recent era. The company has adapted changes in the business through its strong workforce and advanced technological and managerial infrastructure inside the workplace. The company has incorporated innovation through adaption and in that way, the company has strengthen its position in the market (Tallman et al., 2018). At the same time, the company has also achieved its strategic objectives properly in the marketplace.
If the discussion is made on the way through which adaptation can safeguard the businesses, it must be stated that adaptation influences the businesses creating the scope to adjust with the changes. The companies, which have safeguarded their businesses through adaptation are efficient enough to take risks in the business. In the other words, it must be stated in this risk management assignment that through adaptation, the companies bring changes in the business (Cozzolino et al., 2018). Changes in the business means taking risks in the business. If the example of Toyota Motors is considered, it must be stated that when Toyota first adopted the six sigma strategy, the company had no prior experience or the company had no guarantee that the strategy will be a successful one in the coming years. It means adaption motivates the companies adjusting with the changes in the business by taking certain level of risks.
According to Martincevic and Kozina (2018), adaption is not possible without risks, but adaption is essential for reducing risks. The large companies, which are highly successful in the international market face low risks because through adaption sometimes they achieve economies of scale in the business. However, it is also a fact that adaptation is essential for the businesses especially at the time when the business is at the growing stage. If the company fails to adapt the changes it can face higher level of risks. At this point, the example of Tesco Plc can be considered (Canevari?Luzardo et al., 2018). The company failed to make the business successful in the market of South Korea because it failed to adapt the changes in the business culture in the market of South Korea. Due to the failure in adapting the new culture in the new market, the company faced higher level of risks in terms of survival or sustainability in the market of south Korea and at last the company lost its market in South Korea. At the same time, it can also be stated that the company failed to meet its strategic objectives with respect to the business in South Korea.
Therefore, the discussion above in risk management assignment is indicating the fact that adaptation can help the organizations in achieving the business objectives in an efficient manner. From the real life examples, it can be understood that adaptation consists of higher level of risks because with the help of adaptation the companies bring new changes in the business. However, the successful adaptation can reduce the risks level of the business to the higher extent in the long run. Considering the scenario in the modern business world, it must be stated that adaptation is essential for meeting their strategic objectives. Adaptation creates new ways of achieving business objectives. In the modern business world the internal and external situations for the business change frequently and in these changing situations, the companies can be successful only if they can adjust with the changes. Hence, adaptation can be considered as important element for modern businesses.
Therefore, from the overall discussion and evaluation, it can be stated that risks, strategies and adaptation are the three factors or elements of business which are related to each other. Risks are created in the business through normal business activities and the changes in the internal and external environments in the business. On the other hand, strategies are the keys that provide the guidelines to the business regarding the ways of mitigating the risks and adaptation is the process through which risks in the business can be reduced. Hence, for operating a business successfully the organizations or the managers must adjust these three elements properly in the business.
According to this particular study of risk management assignment, risks are common factors in the business. Companies face different types of risks at the time of operating business in the market. The study has mentioned that risks can be market risk, control risks, business risks, but from broader perspectives there are only two types of risks - systematic risks and unsystematic risks. The findings in this study have indicated the fact that risks and strategies are adversely related to each other. If the companies become successful in adopting standard or efficient strategies for risk management, the level of risks in the business gets reduced. However, adoption of right strategy requires proper understanding of the risks by the management of the company. On the other hand, the study has also indicated that adaptation is important for the companies for making their businesses successful in the market. With the help of different real life examples, the study has mentioned that adaptation can help the companies ensuring long term sustainability. Though there are higher levels of risks associated with adaptation, if the companies have strong internal capabilities, they can achieve success through adaptation.
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