Week 3 Tasks Rules: Mitigation Strategy – assignmentcollections.com
Business Finance Assignment Collections – assignmentcollections.com
Please answer in apa format and use scholarly sources. The required total word count is 2500 words and the required total sources 4. Please cite sources and make sure work is original. Plagiarism scan will be ran. The organization is Wal-mart – assignment from week 3 which is provided and as well as the needed reading material.
1.Using the organization you selected from Week 3, develop a mitigation strategy for each of the identified risk exposures.
2.Apply loss control methods to each of the exposures and identify what groups are accountable and give at least one intended outcomes and one unintended outcome of these methods.
Week 3 Assignment
The retail business is arguably one of the riskiest fields in the current organizational landscapes. It is awash with a broad spectrum of challenges and drawbacks that make it impossible for the management teams of the firms operating in these fields to remain competitive unless they understand they keep on innovating (Krämer & Kalka, 2017). However, the process of innovation itself may not always be smooth as expected, thanks to unpredictable and unexpected situations that often present themselves before them—whenever they want to. As such, conducting a risk identification procedure is an indispensable approach toward understanding the risk condition within any organizational setting. Wal-Mart is among the largest retail firms in the US, and it also faces a wide array of risks during its normal delivery of services. The risk associated with any entity should first be explored and categorized accordingly before further decisions can be made (Shortreed, Chapter 7, p. 106). The current paper will perform a risk identification on Wal-Mart using two key tools: risk universe matrix (risk breakdown matrix) and risk scale. From the risks that will be identified by these two key tools, the paper will go on and discuss how the risks that will have been identified have the potential to affect the performance and outcomes of Wal-Mart.
The risk universe matrix aims at exploring the risks that an organization faces by placing them into various categories. At Wal-Mart, the risk universe was constituted of four main categories. The first category entails the strategic risks that face the organization. These are those that have the highest level of impact of the overall strategic direction of the company, and most of these are quite critical and usual demand close attention of the management because they can have a devastating implication on the future. The next risks are operational risks. These are also important because they incorporate the daily operations and thus are capable of curtailing progress in the event that no action is taken to curb them. Next, there are compliance risks. Wal-Mart, like any other corporate, is expected to comply with all laws and regulations that control the conduct of business in the jurisdictions in which it operates. It is therefore important for such risks to be identified so that the firm may know how to avoid them and remain within the confines of the law. There is no such a thing as being safe from the law, but additional precaution is important as it shields organizations from incurring unnecessary costs following on up litigation processes that could have been avoided with proper risk management (Thomas, 2013). Lastly, the risk universe matrix will feature financial risks. The stockholders of this big retail firm are mostly interested in understanding the financial risks that the company faces since it is the category of risks that has the greatest potential of affecting their earnings from the investment they have in there.
After placing the risks into respective categories, the next most important thing is usually to determine the impacts and likelihood that each one of them has on the overall performance of the organization. There is no doubt that various risks have different levels of impact on the flow of activities in the organization. Therefore, establish the extent to which each of them influences operational continuity is an important aspect of this risk identification facet. This will be made possible through depicting the risks through using a risk scale, the second tool of risk assessment.
Table 1: Risk Universe Matrix for Wal-Mart
|
Strategic |
Operational |
Compliance |
Finance |
|
Tough competition in the retail industry |
Huge inventory risk |
Labor policies and laws |
Unstable revenues |
|
The rapid development of technologies that directly affect the retail industry |
Outsourcing of the outlier operations, and the logistical complications that arise |
Regulation of online retail platforms |
Huge and risky capital investment |
|
Management of global expansion operations and logistics |
Product introduction and expansion of the operational scope |
Unfavorable outcomes of legal cases |
Volatile prices of the stocks |
|
Regional changes in economics and politics |
Product quality and packaging problems |
||
|
Increasing R&D development sophistication |
Third-party software vendors and website management professionals |
||
|
The increasingly rapid shift from physical to the online retail business model |
Leaves of important personnel |
||
|
Intellectual property |
This table provides a simplifies but concrete analysis of the current risks that face the firm. It simplifies the categories of each of the risks. Since all these risks cannot be analyzed individually, and their relevance evaluated, the most impactful ones were selected and discussed in depth. They included tough competition, rapid changes of technology, huge inventory risks, global economic and political contexts, outsourcing and logistical management, and unavailability of important personnel due to leaves.
The retail business is currently booming, and this means that it is highly attractive to a broad range of players who want to take advantage of this favorable climate. However, only a few firms have been able to perfect their retail art, and these are the ones giving Wal-Mart headache. While Wal-Mart’s performance is not bad compared to its key competitors like Amazon and Target, the strategic directions that these competitors have taken may become so popular that Wal-Mart may be forced to embrace them in the very near future. For example, Amazon has been broadening its scope aggressively. It has now ventured into almost every industry, and in the process, it has been achieving tremendous success in many aspects. Amazon may soon rule the world of selling—selling everything to every part of the world. Given its financial muscle, there is no doubt that Jeff Bezos’s retail juggernaut is indeed a threat to Wal-Mart’s existence (Chen & Chen, 2017). Its ability to provide low-cost products, and with effective delivery means that Amazon could easily win the hearts of every customer that Wal-Mart has been relying on for survival. This is a real risk, and the management of Wal-Mart must be quite careful to avoid this becoming a reality sooner than they expect.
Wal-Mart is a firm that had been criticized in the past for attempting to stick to the traditional models of operation. Arguably, this is one of the reasons why such a firm as Amazon has been able to steal so many customers from Wal-Mart due to its innovative and technologically-savvy operation model. Wal-Mart can only manage to forge considerable weapons of competing with other retailers by embracing the timely and effective implementation of technology. Every new service, product, or technology that the firm will choose to implement should be founded on tested and workable strategy. There should be no room for guesswork at all, because this can pave the way for the flawed implementation of technological systems whose overall implication on the future performance of the firm can be far-reaching. Any innovative systems adopted by Wal-Mart’s management will have a permanent impact on the course on the organization. It will substantially affect how customers view the firm, especially if such an improvement is made on the online facet of the business (Krämer & Kalka, 2017). Right now, competitors like Amazon, Costco, and Target are already working hard to ensure that their innovative games are up, and that is why Wal-Mart should be careful not to be left behind as everyone else transitions into the virtual world of unlimited possibilities.
Any firm that has a supply chain to manage will definitely face some risks when it comes to outsourcing some of those functions to other parties, or when dealing with the logistical issues that arise in the process of sourcing the raw materials or shipping the products of the customers. Outsourcing and logistical operations sometimes do mean that the company’s control over its products and services is somewhat limited. Luckily, considering the high buying power of Wal-Mart, these risks are not as high as they would have been for a small company because the firm has the potential to shape most of the policies through which it interacts with other players along the supply chain. However, the unpredictability of logistical risks makes it difficult for the company to ignore the fact that some of these risks are inevitable.
Wal-Mart deals with the provision of goods to customers, and this means that they are always forced to have a forecast and prediction of how the demand and supply will play out in the market. This is because they must have an inventory that can serve their customers on a real-time basis. As a result, there is a very high risk of making the wrong predictions and ending up with shortages or excesses in inventory. Considering that some of the products are highly perishable, the risk of losing substantial amounts of money is inevitable. Incorrect forecasts can create a trend of inventory depreciation and pave the way for more losses.
The risks of uncertainties that face the global and regional political and economic landscape can have a huge impact on the business of Wal-Mart. Some of the factors that may limit the customers’ spending patterns include high unemployment, tight credit, government austerity, low-speed economic environment, and financial market volatility. Negative financial news can also play a pivotal role in shaping this go-slow when it comes to the buying trends of the consumers. Since these are economic conditions that the company cannot control, there is no doubt that they pose a great external risk to Wal-Mart and its performance.
The risk identification matrix determined that the company also faces the risk of having many members of the managerial team taking up their leaves, thus creating a vacuum of execution of key roles in the organization. The future success of a business as critical as retail relies heavily on the availability of the management team. In the event that these people are constantly taking on leaves and focusing on their own personal affairs, the organization continues losing a lot of its potential and may actually fail to grow past the normal thresholds of performance. Its performance may start dwindling or even dropping. Experience personnel in this field are in high demand since they can determine whether a firm will succeed or not, and therefore it is important for any organization to ensure that the risk of key personnel leaves is mitigated effectively.
Identification using Risk Scale
|
Impact |
Likelihood |
Gross Risk: Likelihood*Impact |
|
|
Major Risks |
9 |
0.95 |
8.55 |
|
Rapid changes in the domain of technology |
8 |
0.9 |
0.72 |
|
Tough competition |
7.5 |
0.8 |
6 |
|
Economic and political contexts in the region and globe |
8 |
0.7 |
0.56 |
|
Key personnel leaves |
8 |
0.8 |
0.64 |
|
Huge inventory risk |
8 |
0.9 |
0.72 |
|
Logistics/Outsourcing |
9 |
0.7 |
0.63 |
|
Minor Risks |
|||
|
Issues in product quality |
7 |
0.4 |
2.8 |
|
The underperformance of actors in the supply chain |
6 |
0.3 |
1.8 |
|
International operational challenges |
5 |
0.5 |
2.5 |
|
Stock price uncertainties |
4 |
0.6 |
2.4 |
|
Lac enough capital for investments |
3 |
0.8 |
2.4 |
|
Lack of third-party developers |
2 |
0.5 |
1.0 |
|
Revenue instabilities |
4 |
0.8 |
3.2 |
|
Break down of information technology systems |
3 |
0.9 |
2.7 |
|
Transition slow down |
2 |
0.5 |
1.0 |
The figure above seeks to define the specific extents to which each of the identified risks has an impact on Wal-Mart. The scale has been divided into two main factions: the major and minor risks. From the scales accorded to each of the risks, it is clear that the major risks have the greatest gross risk, meaning that they have the greatest negative implication on the organization in the event that they arise. As such, Wal-Mart should be careful when dealing with these high-risk factors and should embrace all strategies and resources at their disposal to try as much as possible to prevent these risks from occurring.
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