Risk Analysis as an Essential Concept in an Organization - Coursework Example

Risk Analysis (Name) (Institution) (Date) Introduction Risk analysis is a process which provides an organization with a balance of acquiring its business missions and objectives. It also helps it see the need of protecting its assets in terms of cost effective. With the increase external analysis because of some management decisions that are questionable and legislative repercussions. Therefore, the risk analysis helps provides an organization with ability to demonstrate its diligence and how they meet up their duty. Additionally, the analysis helps the team to develop, and the shareholders to identify their prospective threats. It also helps the stakeholders to prioritize those prospective threats into risks, as well as, coming up with controls that can help reduce the likely risks to acceptable risks. According to Asante (2002), when a management knows about their control requirements, it can help reduce the costs when it begins to work on its projects in development phase. It is therefore, a process which allows an organization to exhibit, having met its obligation because of its diligence before making a decision and moving forward with new projects, investment strategy, and capital expenditure among others. This explains the reasons as to why it is frequently employed by foreign exchange analysts to help in evaluating possible risks in foreign exchange transactions. It examines the factors in determining if a certain project should be approved. For example, in foreign exchange, it addresses those impacts that are intangible like customer support. However, when the risk analysis become complete, it results are presented to a management that will oversee reviewing of some new projects, which will determine if an organization can move forward with foreign exchange or not. When the risk analysis is approved, it is approved and registered, and therefore, the project is scheduled to start in its design phase. Cohrssen (1999) explains that not many organizations know of what risks and threats their business are entitled to, in addition, to their environmental changing’s. This is why the risk analysis is important, because it helps identify their threats, as well as determining the level at which the risks have reached. It is normally based on a certain methodology that specific organization has designed for it self in order to conduct the analysis. However, Risk analysis has got its main objectives in a business. First is to, identify the organizations threats in terms of its mission. This is the most essential role of a risk analysis, since it is able to immediately point out threats associated with its vision and mission. By so doing, it will be helping a company to take cover just incase something unusual happens or seems to happen. Secondly, it then prioritizes the possible threats into risks stages, for example, it comes up with a number of phases, in such a way that they can easily be dealt with ease. Moreover, it identifies how the said threats will be dealt with or safeguarded, and lastly, it comes up with a plan that will help in mitigating controls. This means that it will safeguard those controls that need to be put into practice immediately, because its output has to identify the countermeasures that should be executed. By documenting the risk analysis process, will help an organization show what risks were involved in the business, what was discussed, considered and decisions agreed upon. However, by implementing the analysis, an organization is said to have got essential tools in coming up with informed decisions in business. When it integrates the analysis across the organization, it can take control of its activities from external interferences. An efficient analysis therefore, helps in making sure that only those safeguard and controls that are beneficial to a business are implemented (Modarres, 2006). Risk analysis in foreign exchange is also known as exposure in forex trading or contingent cash flow whose weights is never known at any given time. It magnitude normally depends on the value of exchange rate currency and interest rates. In order, to gauge the impact of foreign exchange rate starts by measuring its exposure in terms of its value, risk and amount. It is therefore, very important to analyze the risk to associated with risks of foreign exchange, since it helps in minimizing the risks. Individuals need to know the significance of exposure analysis in terms of forex so as to minimize those risks associated with foreign exchange trading. For example, Cox (2002) asserts that one needs to focus on several exposures like, economic, accounting, translation, transaction and accounting. The management should consider its cash flow for the purposes of foreign exchange analysis like foreign currency, foreign interest, and cash flows among others. Foreign exchange risk is will always cause its assets denomination to deteriorate in value and their liabilities rise in expense of overseas available branches and loans. The risk analysis measures it by its assets based on it market-to- market value, liability increase, country’s earnings and its exchange rate. Foreign exchange risk therefore, means risks associated with the value of an investment due to exchange rates change in currency. The risk can make an investor close out a short or long position in foreign currency at a remarkably loss due unfavorable movements in foreign exchange rates. Risks associated with foreign exchange risks, affects both businesses involved in import and export. It also affects the investors who decide to invest internationally. For example, that money which must be converted to other currency in order to be of use, the conversion will therefore, make the currency either to lose or add its value. Some of the main objectives of risk analysis are; helping reduce the unnecessary privacy or security fears. Cox (2002) argues that risk assessment does not help organizations to focus on high standards targets; it is said to mislead most of the companies in pursuing irrelevant targets. The main aim of risk analysis is to discourage threats or vulnerabilities that have led to violations in terms of privacy. Organizations can therefore, focus on more possible risks as well as limit and prioritize their security control. Because of the analysis, security violations and privacy become rare making the assessment of their organization probabilities difficult. The agreed procedures must also be accomplished within the shortest time possible. It does not also consume time and is more practical than other analysis. However, regardless of the risk techniques employed in an organization, threats occurring both internally or externally needs to be evaluated. Despite it being hard to determine the nature of possible disasters and their consequences, it is important to perform an assessment that will assess all risks that can possibly occur. Another objective of risk analysis is to prepare incentives against those people who want to break a company system. It prepares against all possibilities risks, leaving an organization less vulnerable to risks. Wahlen (2011) explains that it is hard to plan against those risks which are unknown, regardless of the existing state or proposed approaches that can protect against the unknown. In today’s business, everything we do involves a risk of its own kind. From customer’s factors, new competitors among others may pull a delay in an individual’s project. Risk analysis can help a person or an organization assess these types of risks, in order to decide on what exact actions they should take to reduce such disruption in business plans. Additionally, it also helps them decide if the strategies chosen will work efficiently and cost friendly. Nevertheless, it helps identify an organization threats. For example, it will determine if the threats are human, in terms of employee’s values, death illnesses among others. Secondly, it can help determine if the threats are reputational in accordance with partner loss in business or damage of a company’s reputation. Financial threat is another major risk an organization may encounter. From business failure, unemployment, stock markets and so on. Last but not least is politics where the government changes its public opinion on some of the products taxes, government policy, and opinion of the public among others. However, it is important to look at the analysis of these kinds of threats, since most of the times a business overlooks such risks (World Health Organization, 2009). Conclusion Risk analysis is an essential concept in an organization. This is because it allows a business to examine some of the possible risks that can make its business collapse as well as the risk at individual level. It is normally based on the type of risks associated in the company, following an evaluation of its probability and costs. It also forms a basis in prevention of crisis’s and risk management. Its therefore, emphasizes on cost effectiveness in terms of one’s currency as well as foreign exchange. Risk management therefore, adapts good use of company resources, contingency planning and use of available resources. Moreover, risk analysis is a significant aspect in recovering a business planning. This is because; it is normally hard for organizations to predict disasters in their business. Therefore, organizations should develop a comprehensive and written plan of their business recovery, which will address all the functions and operations of their businesses. In addition, it should test its procedures and document them, which will ensure that critical and continuity of its operations and business are ongoing (Schwalbe, 2010). References Asante-duah, K. (2002). Public health risk assessment for human exposure to chemicals. Dordrecht, Kluwer. Cohrssen, J. J. (1999). Risk analysis: a guide to principles and methods for analyzing health and environmental risks. Cox, L.A. (2002). Risk analysis: foundations, models, and methods. Boston, Kluwer Academic Publishers. Cohrssen, J. J. (1999). Risk analysis: a guide to principles and methods for analyzing health and environmental risks. Diane Pub. Modarres, M. (2006). Risk analysis in engineering: techniques, tools, and trends. Boca Raton: Taylor & Francis. Schwalbe, K. (2010). Information technology Project Management. Boston, MA: Course Technology/ Cengage Learning. Wahlen, J. M, Bradshaw, M, Baginski, .S. P and Stickney, C. P. (2011). Financial reporting, Financial statement analysis and valuation: a strategic perspective. Mason, OH, South-Western Cengage Learning World Health Organization. (2009). Principles for modeling dose-response for the risk assessment of chemicals. Geneva, World Health Organization. Read More