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Description of Risk and Mitigation of Current Risks

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Identify and research at least three current risks facing organizations engaged in international finance activities. Based on your research, prepare a paper in which you describe the identified risks and the tools that organizations could use to mitigate these risks.

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Risk Analysis is a formal framework that is used to evaluate the risks that organizations can face. A good risk analysis affords the organization the opportunity to decide what actions to take to minimize disruptions or decide whether the suggested strategies can be used to control risk and are cost-effective.

Multinational firms must constantly assess the business environments of the countries they are already operating in as well as the ones they are considering investing in. One of the most important international risks, which an organization faces, is exchange rate risk.

Exchange Rate Risk
Organization which invest internationally in today's increasingly global investment arena face the prospect of uncertainty in the returns after they convert the foreign gains back to their own currency. Unlike the past when most U.S. investors ignored international investing alternatives, investors today must recognize and understand exchange rate risk, which can be defined as the variability in returns on securities caused by currency fluctuations. Exchange rate risk is sometimes called currency risk.

Moreover firms must constantly assess the business environments of the countries they are already operating in as well as the ones they are considering investing in.

It involves country risk analysis, the assessment of the potential risks and rewards associated with making investments and doing business in a country. This is the subject matter of political economy?the interaction of politics and economics. Such interactions occur on a continuous basis and affect not just monetary and fiscal (tax and spending) policies but also a host of other policies that affect the business environment, such as currency or trade controls, changes in labor laws, regulatory restrictions, and requirements for additional local production.

By extension, the international economic environment is heavily dependent on the policies that individual nations pursue. Given the close linkage between a country's economic policies and the degree of exchange risk, inflation risk, and interest rate risk that multinational companies and investors face, it is vital in studying and attempting to forecast those risks to understand their causes.

There can be various Country-Specific Risks.

It affects both domestic and foreign firms that reside in a host country. These risks, which arise from the actions of the host government, apply more to the multinational corporation whose cash flows are impacted. Examples include exchange controls, currency inconvertibility, and blockage of funds.

Exchange Controls
A common policy of host governments facing balance-of-payments difficulties is to impose exchange controls that block the transfer of funds to nonresidents.

Currency Inconvertibility
Some governments will not ...

Solution Summary

This solution discusses the international financing activity risks and how to mitigate three current risks in 1570 words.

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Risk Management

You work for a major defense contractor. Your company prepared and submitted a bid for a recent Department of Defense RFP, entitled Automated Mobile Defense System (AMDS). You have been assigned to lead Project X, which will design, develop, test, demonstrate and deploy 10 AMDS units to a location to be determined by the DoD assuming a successful demonstration. This project is expected to take at least 5 years to complete at a cost of $1.5 billion. If you are successful and deliver a quality product on time and within budget, the DoD will order 150 more AMDS units at a price of $10 million per unit. The goal of Project X is to develop a defense system to protect major and strategic cities within the US in the event of a missile attack from a hostile nation. It is to be a redundant system; the last in a series of defensive weapons to be used only in the event that all other defensive systems have failed; when enemy ABMs are approaching the US and only AMDS is left to take them down.

The conceptual design for the AMDS that your company submitted in response to the RFP consists of a mobile housing unit (MHU) containing 20 anti-ballistic missiles (ABMs) based on a radically new design; an anti-missile control computer (AMCC) used to automatically target and deploy the ABMs; and a retrofitted detection device (code name: SKYEYE) built on proven, patented radar technology which your company owns. All of these devices: the ABMs, the AMCC and SKYEYE will be completely housed in the MHU, which is planned to be an enhanced18-wheel tractor-trailer. A self-contained power source (for the ABMs) and solar charged batteries for the AMCC and SKYEYE make the entire AMDS portable and completely automatic (no personnel are required to operate any of the systems). However, military personnel on a regular basis will perform routine system monitoring and maintenance, preferably from a remote site. On-site maintenance should only be needed on rare occasions expected to arise from unforeseen events such as earthquake, tornados, ice storms, etc. Should it become necessary, military personnel will move the AMDS to a location known only to them. While it was not included in the design accepted by the DoD, your company would like to be able to provide additional capability with the system: they would like the AMDS to be able to operate while it is being moved.

You are the project manager and oversee the efforts of over a dozen nuclear scientists, engineers, and technology professionals. Many of them are acquainted with the rudiments of project management, but very few know much about project risk management. You'll need to do some education along with managing schedule, budget and scope.

Task

The stakeholders want to see your completed Risk Management Plan. They expect the Project Manager to manage all areas of risk, and to maintain the Plan over the life of the project. You have a contingency reserve of 20%.

Group Portion:

Call upon the members of your Small Group. Using the Small Group Discussion Board, discuss possible risk responses for the risks in this template. Decide as a group whether each risk requires avoidance, mitigation or acceptance. Include as a group how the contingency plans will be executed and, if there are associated costs, how much each contingency will cost as a percent of your contingency reserve.

Individual Portion:

Divide the risks among the members of your group. Individually, develop a risk management plan for each risk, detailed which approach to use and actions to take. Identify how any investment associated with risk management will benefit the Project.

Group Portion:

As a group, come to a consensus on bullet points for an introduction and a summary. The group leader should assemble the entire risk management plan from individual portions and the agreed-upon introductory and summary slides. Please list participating group members on the cover slide.
Submit the presentation to the Small Group Drop Box.

This is a group project in which I am involved however I do not understand how to determine contingency reserves or formulate a risk management plan/deliverabes. I have been assigned the internal risks which I was told have nothing to do with Budget, Schedule, Resource or Quality. They are included on the attached spreadsheet. I am to determine or decide whether each risk requires avoidance, mitigation or acceptance. The spreadsheet contains the combined efforts of the groups' previous risk templates with columns to "Vote" on the three categories and guess as to the percentage of the contingency reserve that will be spent to counter the risk. If I understand this correctly, we can basically go 20% in added cost to get this job done. Now I also understand that this 20% is calculated into the budget, so if we hit the mark, we can still make money.

Then a form needs to be filled out (which is also included) on each risk. I have unfortunately very little understanding on this topic and am VERY LOST and CONFUSED so any guidance would be greatly appreciated! I have put this at the maximum credit points alloted. I determined what I thought would be what would be necessary for the risks (avoidance/mitigation, etc.) however unsure if they are correct and unsure of what the contingency reserves should be.

So what I am needing assistance with is the information on contingency reserves and explanation on completion of the form for each risk.

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