Course of Business Activity Risks
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1. Clearly map out all the possible risks that the company can face in the course of its business activity. To map out the possible risks, identify the factors that are specific to your selected company. Some examples of factors are:
- The types of business it does.
- Characteristics of its customer base.
- Characteristics of its suppliers of resources such as raw materials or funds.
- Existence of any international trade or transaction.
- Geographic location prone to natural disaster.
Factors such as terrorism or war are general risks, so these should not be considered for the purpose of this project.
2. Explain, with clear justification, why you think the company faces the risks you have identified.
3. Develop, with clear justification, a probability distribution of the loss that the company may face from the identified risks. Then estimate the expected value and standard deviation of loss for each risk.
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Solution Summary
The characteristics of a customer base for a specific type of business is determined.
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At their core, every organization exists to provide value for stakeholders. Determining who those stakeholders are and determining how much risk the organization is willing to accept as it "strives to create value" is an important part of enterprise risk management (Flaherty, Maki, et. al., 2004).
Enterprise risk management is a concept used by managers within organizations to identify, assess, and manage risk. Developing a framework to gauge and improve risk management systems is an important task and in response to the cross-industry need for such a framework, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) released a comprehensive Executive Summary on the topic in 2004.
You can apply the framework of the COSO study to Kroger.
Every organization faces uncertainty, that uncertainty comes in many forms, some present challenges to the organization and other uncertainties present opportunities. Risk management systems allow organizations "to effectively deal with uncertainty and associated risk and opportunity, enhancing the capacity to build value" (Flaherty, Maki, et. al., 2004).
Changes in technology, federal and state regulations, and economic uncertainties all affect the risks organizations must take to remain competitive and to offer maximized value (Jensen, 1993). While risk taking is inevitable, an organization's value is made greater when it sets forth a sound strategy to find the optimal balance between growth and resource-use in aim of the organization's objectives. Federal laws such as the Sarbanes-Oxley Act of 2002 were designed to enable firms to find ...
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