Risk Assessment Report On Risk Exposure Calculator For Property Millionaires

Risk Assessment approach: Pressure Points

Risk management is essential for every business to be successful and maintain that success in future in a sustainable manner. The business provides returns to the stakeholders but that return is coupled with an element of risk (Spedding and Rose, 2008). The management of an organization takes responsibility to balance the risk in such a manner that the return to the stakeholders is optimized. For this purpose, a standardized approach is required to be followed by the management which is known as risk management. As part of the risk management approach, the management is required to make continual efforts to identify and assess the risk factors and find out proper resolution to bring the risk within risk appetite of the entity (Anderson, 2013). In this context, a report has been prepared here that presents findings of risk assessment in regards to Property Millionaires which is a company engaged in providing services of real estate investment seminars.

Risk Assessment approach: Pressure Points

In order to assess the risk, the management can use a risk assessment matrix or risk assessment calculator. For the purpose of assessing the risk of Property Millionaires, a risk assessment calculator has been used which covers the assessment of risk based on three main parameters such as pressure point due to growth, pressure point due to culture, and pressure point due to information management (Simons, 1999).

Pressure Point due to Growth

The pressure point due to growth relates to the risk caused due to intense pressure on the management to achieve the stretched targets. The top management often sets ambitious targets for sales and profits in a fast growing business (Hope, Bunce, and Roosli, 2011). The management desires to grow the business substantially in a quick succession. This desire of top management is the one pressure point arising due to growth that leads to pressure on the employees to performance in the best manner. If it is managed tactically, the results would favorable for the business but if the top managed lacks in managing, the business could fail (Hope, Bunce, and Roosli, 2011).

Another pressure point arising due to growth is the rate of expansion. The top management when sees opportunity in the business tends to expand at rapid pace. In order to achieve this, the top management may go for merger and acquisitions at the early stage of business (Hope, Bunce, and Roosli, 2011). The strategy to go for merger and acquisitions at the early stage could be highly risky. There are many firms which failed due to their merger and acquisitions strategies at the early stage of business being adopted. Further, one more pressure point due to growth is the hiring of inexperience employees to fulfill the demand of growing business. The strategy to hire inexperience employees could lead to cost savings but it would be highly risky for the business in the long run (Hope, Bunce, and Roosli, 2011).

Pressure Point due to Growth

Pressure Point Due to Culture

The crucial reason for pressure point due to culture is the misalignment in the employee incentives and rewards for performance. It is often observed that the employees may cross the lines and take excessive risk to earn high incentives (Barton, Shenkir, and Walker, 2002). The employee may opt for unethical practices to earn high incentives which ultimately will be risky for the business to survive in the long run. Another point for consideration here is the resistance to the bad news. In an organization having centralized system of management, the lower level staff would try to conceal the problems from the top management. The practice of concealing the problems and not disclosing them to the top management on a timely basis would be risky for the company (Barton, Shenkir, and Walker, 2002).

Pressure Point Due to Information Management

The availability of accurate information on a timely basis to the top management is crucial for every business. The top management would not be able to make right decisions at the right time if the accurate information is not available at the time when needed (Graham and Kaye, 2015). Thus, the timeliness and accuracy is the primary risk factors in relation to information management. Further, transparency of information is also one of the crucial factors that count while measuring risk due to information management. Apart from these considerations, the management also needs to take into consideration the level of decentralization. The grater the level of decentralization more will be need for integrated information system to be in place (Graham and Kaye, 2015).                      

Considering the above three parameters such as pressure point due to growth, pressure point due to culture and pressure point due to information management, the risk measurement for Property Millionaires is presented below:

The pressure points due to growth have been rated high because company’s rate of expansion is very high. The high rate of expansion is leading pressure on employees to exceed the performance targets. The consultants are given aggressive sales targets. Further, the company has lowered their employment standards which lead to hiring of inexperience employees. The consultants are given high incentives linked to the sales, which gives rise to the risk of compromising with the quality of services. Further, resistance of the management to the bad news is very low. There is intense competition within the internal staff of the company. These all factors signify a high level of risk created due to cultural considerations.         

Pressure Point Due to Culture

Further, it has been observed that the level of decentralization is not too high, thus, it has been scored at 3 out of 5. The complexity of transactions is also low hence the same has been scored at 2 out of 5. However, the gaps in performance measurement could be very high due to insufficient information being available to the regional managers. Therefore, it has been scored at 5 out of 5. Based on all the parameters, the risk calculator gives a total risk of 76% which implies that the company is growing with high risk.  

The results of risk analysis depicts that the company is bearing more than the average risk. Thus, it is essential that the top management takes immediate steps to mitigate the risk. In order to mitigate the risk, it is advisable to the top management to formulate the growth strategies which are sustainable (Kato, Handwerker, and Bath, 2016). The rate of expansion should be set keeping in mind the resources available with the management. Further, the consultants and the regional managers should be given targets that are attainable with normal efforts so that they are not pushed to adopt unethical practices (Kato, Handwerker, and Bath, 2016).

The top management needs to consider the importance of experience personnel and it should be endeavored to retain them. The top management must strive to strike out a proper balance between the experienced and inexperienced staff (Kato, Handwerker, and Bath, 2016). The incentives and reward scheme must be properly aligned with the efforts of the individuals. Further, the performance measurement got to be transparent and unbiased. The authorities who are responsible to measure performance should be provided adequate information so that unbiased and accurate performance measurement could be made (Kato, Handwerker, and Bath, 2016).  

However, the complexity of transactions is low and the level of decentralization is also not too high but still there is a need for integrated information system to be in place. Therefore, it is recommended that the management replaces the old information system with the new and innovative integrated information system (Gibson, 2014). The information system should be capable of providing accurate and timely information to the management. Further, the internal competitiveness should not be too excessive. The staff should be motivated to perform as a team rather than in individual capacity. Currently, the designing of new seminars is done by individual regional managers, however, it should be endeavored that this task is done through the team work.                

Conclusion

This report presents risk analysis of in relation to a company namely Property Millionaires which provides services in the real estate property sector. Form the discussion, it could be concluded that the risk management is essential for the long run survival. The companies should use adequate risk assessment tools to analyze the risk. This report puts light on the risk measurement covering three broad parameters such as pressure due to growth, pressure due to culture and pressure due to information management. The consideration of all the three parameters is crucial in measurement of the risk of business. Based on these three parameters, the risk of Property Millionaires has been assessed at 76% which is more than the average risk.  

References

Anderson, E.J. 2013. Business Risk Management: Models and Analysis. John Wiley & Sons.

Barton, T.L., Shenkir, W.G., and Walker, P.L. 2002. Making Enterprise Risk Management Pay Off. FT Press.

Gibson, D. 2014. Managing Risk in Information Systems. Jones & Bartlett Publishers.

Graham, J. and Kaye, D. 2015. A Risk Management Approach to Business Continuity: Aligning Business Continuity and Corporate Governance. Rothstein Publishing.

Hope, J. Bunce, P., and Roosli, F. 2011. The Leader’s Dilemma: How to Build an Empowered and Adaptive Organization Without Losing Control. John Wiley & Sons.

Kato, T., Handwerker, C.A., and Bath, J. 2016. Mitigating Tin Whisker Risks: Theory and Practice. John Wiley & Sons.

Simons, R. 1999. How Risky is your Company? [Online]. Available at: https://hbr.org/1999/05/how-risky-is-your-company [Accessed on: 01 June 2017].

Spedding, L.S. and Rose, A. 2008. Business Risk Management Handbook: A Sustainable Approach. Elsevier.

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