Governance, Ethics and Sustainability

The purpose of this report is to identify the risks that an organization might face during their growing years, assess them and score them based on severity. The aim of the exercise is to determine the position of an organization in risk scale. The companies that lie below 20 are considered low risk, 20-35 moderately risky and 36-50 as highly risky. The company Property Millionaire has been evaluated here. The report finds that the company faces risk in all spheres of their activity. The score shows that they lie in the high-risk zone. The report concludes that creating plans and strategies for the mitigation of risks is necessary.

Running head: GOVERNANCE, ETHICS AND SUSTAINABILITY
Governance, Ethics and Sustainability
Name of the Student:
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1GOVERNANCE, ETHICS AND SUSTAINABILITY
Executive Summery
The purpose of this report is to identify the risks that an organization might face during their
growing years, assess them and score them based on severity. The aim of the exercise is to
determine the position of an organization in risk scale. The Risk Exposure Calculator has
been used for this purpose. The companies that lie below 20 are considered low risk, 20-35
moderately risky and 36-50 as highly risky. The company Property Millionaire has been
evaluated here. The company has seen sudden growth in the recent years. The culture is
competitive and commission based. There is autonomy in the organization. the employees are
intensely competitive. The company has receives much complaints from the clients recently
that their post-sale experience is not satisfactory. The report finds that the company faces risk
in all spheres of their activity. The score shows that they lie in the high-risk zone. The report
concludes that creating plans and strategies for the mitigation of risks is necessary.

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Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................3
Property Millionaire...............................................................................................................3
The risks that Property Millionaire face.................................................................................4
Risks points due to growth.................................................................................................4
Risks points due to culture.................................................................................................6
Pressure Points Due to Information Management.............................................................8
Results of the assessment.......................................................................................................9
Conclusion................................................................................................................................10
References................................................................................................................................11
Appendix..................................................................................................................................13

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Introduction
Risk management is a necessary activity that every organization must perform in
order to maintain the stability of the organization (Lebedeva et al. 2016). Risk assessment
and management includes the identification of the potential risks that the organization might
have, assess the impact that they might have and create a plan that will minimize those risks.
The most vulnerable situation of any company is during its growth years. It is easy for the
executives to overlook the underlying threats for the organization during this time. Thus, the
managers and the upper authority should be extra attentive towards the risks that might
emerge during the high performance time of the organization (Hoskisson et al. 2017). In this
regard, there is a tool that is particularly useful. The tool is known as Risk Exposure
calculator that was introduced by Robert Simon in his article in Harvard Business Review.
This tool enables the user to calculate the risk methodically so that the position of an
organization in terms of risk can be calculated (Simons 1999). In this report, the situation of
Property Millionaire is taken as an example and the risks that the organization is facing has
been analyzed. Based on the analysis, scores has been given in the Risk Exposure Calculator
and the result has been deciphered.
Discussion
Property Millionaire
Property Millionaire is a real estate organization. They have unique marketing
technique. They hold free seminars for their target customers. Their vision states that it is
possible for anybody to become a property millionaire if they receive proper education and
assistance. George Kirzner established the company and since last year, the company has
seen much growth. There are more than 100 employees working in the different cities like

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Melbourne, Sydney and Adelaide. The sudden growth spurt has pleased the CEO though it is
seen as a problem for the regional and other top managers. Due to the rapid expansion, the
necessity of new employees has increased. In order to fill the gap, the management has hired
multiple new employees, which has led to the lowering of recruitment standards. The
employees are not given salary. They earn their salary through commission from the
successful sales. The employees are given autonomy of how they sell their product. Neither
the regional managers nor the top management interferes in that matter. The slae sof the
company is increasing but recently, customer complaints are becoming frequent about the
after sale service. The regional managers feel that the company might see a plunge in recent
years.
The risks that Property Millionaire face
As per (Park et al. 2013), performing regular risk assessment keeps the management
prepared for any negative situation. In Property Millionaire, the sudden increase in business
poses certain risks that need to be evaluated. These are:
 Risks points due to growth
 Risks points due to culture, and
 Risks points due to information management
Risks points due to growth
Growing organizations have highly competitive targets. The higher the sale the better
for the organization and the employee. In order to keep up with the pace, the employees often
reduce their service quality or they might adopt unfair means to increase their sales (Haddow,
Bullock and Coppola 2017). The sudden growth also leads to a high requirement of human
resource. In this situation management many times appoint incompetent individuals. The
risks that Property Millionaire face due to growth are:

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 Risk due to pressure for performance
 Risk due to rate of expansion
 Risk due to the inexperience of the key employees.
Risks due to pressure of Performance
Property Millionaire is a highly competitive organization. The sales made by the
employees are considered valuable. Their salary also comes from the incentive that they earn
from the successful sales. Thus, the employees compete against each other to secure more
customers. The highly competitive nature of the work has forced the employees to adopt
unethical practices to ensure sale of the product. Their performance, incentives and rewards
are all based on their individual sales figure. This poses high risk for the organization and
thus, it scores 5 in this section (Appendix 1).
Risk due to rate of expansion
Due to the sudden increase in the seminars and customers, the company needed more
sales executives that could hold more seminars. Thus, the company had to recruit more
employees. This led to the decrease in the employment screening and filtering that is
generally applied before they choose any employee. The new employees that joined were not
competent enough and lacked the necessary skills and experience. They did not maintain
relationship with the customers and ignored their phone calls after sale. This kind of practice
affects the company image negatively with time (Chang and Lin 2015). The score in this
regard is 4 (Appendix 1).
Risk due to the inexperience of the key employees
In the view of (Scolobig et al. 2015), the individuals that are experienced in sales
have the knowledge that after sales support is necessary for customer satisfaction. The new
employees lacked that expertise and ignored the phone calls. The increase in the customer

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complaints means that the services that they are receiving are not satisfactory. This will make
it difficult for the organization to keep long-term relationship with the customers. Slowly, the
value of the company will wane and so will the profit and thus scores 4 in this apsect
(Appendix 1).
Risks points due to culture
Organizational culture is the most important pillar that ensures the future of the
organization. Practicing healthy culture is necessary for the stability of the organization
(Fragouli and Ourolidis 2013). The culture of Property Millionaire is not healthy. There is too
much competition. It is completely performance oriented which leads to many complications.
The employees are not held accountable for their actions, they take much risk for the purpose
of sale. The risks that appear due to culture are :
 Risk due to rewards for entrepreneurial risk taking
 Risk due to executive resistance to bad news
 Risk due to level of internal competition
Risks Due to Rewards for Entrepreneurial Risk Taking (100)
In high performance organizations, only the employees that perform well are given
importance (Aven 2016). They are celebrated and treated royally. This creates resentment
among the other employees. They also increase their performance which initially increases
company turnover. Later though, this creates unhealthy competition and immoral behavior
inside the organization. Property Millionaire faces the similar situation. The employees try to
make as many sale as possible which leads to intense competition and sabotaging. Thus, in
this aspect the company receives 5 in the Risk Exposure Calculator(Appendix 1).

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Risks due to Executive Resistance to Bad News
The main role and responsibility of the managements and executives are to handle any
adverse situation (Zio 2016). in sales organizations, it is natural that there will be certain sale
attempt that will not be successful. The executives to device new strategy to turn those cases
around generally use these sales reports. The executive team in Property Millionaire, that also
includes the CEO George, does not actually work as a team, create their plans separately, and
assemble them later. This leads to ineffective solution. Thus, the company receives 3
(Appendix 1).
Risks Due to Level of Internal Competition
As per (Lam 2014), internal competition is healthy if practiced in a controlled
manner. It is the responsible of the managers and leaders to supervise that. In the company,
Property Millionaire, the employees enjoy autonomy over their work thus there is a lack of
supervision. The practice of considering only the individual performance has made the
employees highly competitive. There is an increase in corruption, unethical practices and
sabotaging among the employees. Moreover, the employees lack any form of intangible
motivation. Thus, the company receives 4 in this section (Appendix 1).
Pressure Points Due to Information Management
The information management and communication system is also important for any
organization (Soomro, Shah and Ahmed 2016). This ensures that the client data are protected,
the higher rung of the organization are aware of the failed cases. the three issues related to
information management for Property Millionaire are:
 Risk due to transaction complexity and velocity
 Risk due to gaps in diagnostic performance
 Risk due to degree of decentralized decision making

8GOVERNANCE, ETHICS AND SUSTAINABILITY
Risk due to transactional Complexity and Velocity
The success of any organization leads them to improve their products continuously so
that they are able to provide better satisfy the customers. This increases the complexity in the
transaction with the clients. The employees will have to be always updated. The sudden
increase in sales also means that the information systems might become overloaded. This
poses great risk as these aspects are difficult to detect and many times slips the notice of the
executives. The increase in Property Millionaire’s sales means that they face this risk as well.
The company receives 4 in this section (Appendix 1).
Gaps in Diagnostic Performance
Due to immense success, the reporting and communication system in the
organizations might face some difficulty (Eckles, Hoyt and Miller 2014). In Property
Millionaire, the regional managers are responsible for reporting to the executive team. They
lack in thus duty and many times fail to report timely. They do not take interest in the
workings of the consultants saying that they do not understand the sales language. The
company receives 5 in this section (Appendix 1).
Degree of Decentralized Decision Making
The companies that experience rapid growth face the problem. Due to expansion, the
managers as well as the employees are given a large berth of autonomy (Haimes 2015). This
is also the acse in Property Millionaire. The consultants are free to choose their own method
to make sale, the regional managers do not take interest in their work. Thus, the cases that fail
are not reported to the executives, thus it receives 4 as score (Appendix 1).
Results of the assessment
The above discussion culminates to a total score of 38, which is the final score of
Property Millionaire in Risk Exposure Calculator. It indicates that the company is in high-risk

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zone and is likely to face sudden downfall in near future. The management and the executives
need to create immediate plan that will help them prepare and mitigate any disaster (Olson
and Wu 2015).
Conclusion
From the above discussion, it can be inferred that in every organization risk
management is an indisputable part. The Risk Exposure Calculator is an effective tool in
determining the chances of risk, the position of the company, the aspects that the company is
facing risk. Thus, the managers can use this tool not only for assessments of risk but also to
create strategy to mitigate risk. Keeping regular checks on the risk aspects and enforcing
mitigation plan might become costly initially, but it is likely that the outcome will be positive
in future.

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References
Aven, T., 2016. Risk assessment and risk management: Review of recent advances on their
foundation. European Journal of Operational Research, 253(1), pp.1-13.
Chang, C.L.H. and Lin, T.C., 2015. The role of organizational culture in the knowledge
management process. Journal of Knowledge management, 19(3), pp.433-455.
Eckles, D.L., Hoyt, R.E. and Miller, S.M., 2014. Reprint of: The impact of enterprise risk
management on the marginal cost of reducing risk: Evidence from the insurance
industry. Journal of Banking & Finance, 49, pp.409-423.
Fragouli, E. and Ourolidis, G., 2013. The effect of culture in risk perception and its
contribution to the failure of strategic alliances. International Journal, 4(6).
Haddow, G.D., Bullock, J.A. and Coppola, D.P., 2017. Introduction to emergency
management. Butterworth-Heinemann.
Haimes, Y.Y., 2015. Risk modeling, assessment, and management. John Wiley & Sons.
Hoskisson, R.E., Chirico, F., Zyung, J. and Gambeta, E., 2017. Managerial risk taking: A
multitheoretical review and future research agenda. Journal of Management, 43(1), pp.137-
169.
Lam, J., 2014. Enterprise risk management: from incentives to controls. John Wiley & Sons.
Lebedeva, T.E., Akhmetshin, E.M., Dzagoyeva, M.R., Kobersy, I.S. and Ikoev, S.K., 2016.
Corporate governance issues and control in conditions of unstable capital risk. International
Journal of Economics and Financial Issues, 6(1S), pp.25-32.

11GOVERNANCE, ETHICS AND SUSTAINABILITY
Olson, D.L. and Wu, D.D., 2015. Enterprise risk management (Vol. 3). World Scientific
Publishing Company.
Park, J., Seager, T.P., Rao, P.S.C., Convertino, M. and Linkov, I., 2013. Integrating risk and
resilience approaches to catastrophe management in engineering systems. Risk
Analysis, 33(3), pp.356-367.
Scolobig, A., Prior, T., Schröter, D., Jörin, J. and Patt, A., 2015. Towards people-centred
approaches for effective disaster risk management: Balancing rhetoric with
reality. International Journal of Disaster Risk Reduction, 12, pp.202-212.
Simons, R., 1999. How Risky Is Your Company?. [online] Harvard Business Review.
Available at: https://hbr.org/1999/05/how-risky-is-your-company [Accessed 14 Sep. 2019].
Soomro, Z.A., Shah, M.H. and Ahmed, J., 2016. Information security management needs
more holistic approach: A literature review. International Journal of Information
Management, 36(2), pp.215-225.
Zio, E., 2016. Challenges in the vulnerability and risk analysis of critical
infrastructures. Reliability Engineering & System Safety, 152, pp.137-150.

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Appendix
The Risk Exposure Calculation for Property Millionaire is given below:
Image 1: Risk Exposure Calculator
Source: Created by the author