Risk Assessment of Trading.com

Introduction
Trading.com is a financial service firm based out of Australia that deals in selling financial
literacy and investment related courses. The main objective of the company is to help their
customers get maximum out of their investments. The business is witnessing a great success and
the courses are increasingly becoming popular which makes the business prone to certain risk
factors. The present report deals with the risk assessment of Trading.com
Purpose of risk assessment
As trading.com is experiencing the growth in its business, it is the right time to reflect on the
risks that are starting to appear in the organization. From the problems in work culture to the lack
of information system in the organization, the company has started showing signs of few major
risks that might create problems for it in the future. The present report tries to analyze the risk
profile of the company in order to help stakeholders take preventive and corrective measures.
Method
The risk assessment would be conducted using the risk exposure calculator developed by Simons
which acts as a qualitative measure of risks being phased by a business. The REC calculates risks
on company’s pressure points in terms of growth, culture and information system. Each category
has further sub category, which is scored from 1-5, 5 being the most risky (Simons 1999). On
the basis of total score, the firm is divided into three zones, safety, cautious and danger zone as
per the risk exposure of the business.
Risks due to growth
All businesses intend to grow but with growth come a lot of risks which need to be identified at
early stage. With growth in the business, new competition comes in the market thereby
increasing the pressure to outperform (info Entrepreneur 2009). Growing companies often
have high part of variable compensation in their sales teams which often lead to employees
taking risky decisions and compromising on quality for earning more (Simons 1999) (Slutsky
& Olsen 2012).Also with growth comes the increase in the requirement of resources, both
manual and financial which often compels the firms to take compromising measures in terms of
risk and quality (Business Queensland 2019). These quality issues often lead to increase in

dissatisfaction of consumers and stress among the workforce ultimately leading to high
workforce turnover.
The first element is the pressure of expectations. As per the case, the consultants were facing a
high degree of performance pressure. The compensation of the consultants is highly variable in
nature if not entirely commission based as earlier; they were working on targets set for them by
the senior management without their inputs. This resulted in bad after sales services and the
rising consumer complaints about the same. Also the company had an atmosphere where rivalry
was promoted leading to increase in the pressure of performance for the consultants. Considering
these facts given in the case, the segment of performance pressure is given the score of 4.
The second part of the growth risk is the pace of growth. In the case, the business has grown
rapidly in the last year itself, which has put pressure on the team to expand. Expansion has lead
to many risks in terms of hiring of consultants, arranging finances as well as development of new
courses to keep up with the pace of expansion. However, the pace of expansion is still not
uncontrollable and business is still a medium sized organization, where things can be controlled.
As a result, the score in this segment will be 3.
The last part of growth risk is the risk caused by inexperienced new recruits. This risk is very
high in trading.com as company has hired lot of new consultants, many of which do not have
prior experience in sales. As a result, there is increasing number of customer complaints due to
faulty after sales services and lack of networking by them. Since these people are quickly put on
board, there is no time to train them about the products and culture of company, thereby leading
to further problems and risks. Due to these risks, the score in this segment comes out to be 4.
Pressure points due to culture
The next category of risks relate to risks due to company culture. While the company is growing,
it becomes important for the entrepreneurs to take moderate risks to grow, however such risks do
not generally generate the rewards in the hope of which they are undertaken (Veskovic 2014).
Also the entrepreneurs sometimes tend to take excessive risks considering initial risks paid off
which sometimes lead to faulty products, issues in quality services, excessive range of product
internal competition failures etc. Another issue with the culture of growing business is the lack of
feedback towards bad news. The top management often blocks the news which they think is bad

and refuse to acknowledge the risk. The feedback is also interrupted because top management
keeps only those people around who don’t supply bad information (Schwartz 2018). Another
element of risk in this category is the intensity of internal competition. Internal competition is
often promoted as a short tem means of improving performance, but it is not effective in long run
(Hoskisson et al. 2017). Internal competition is often preferred by the companies as it leads to
the removal of non performing employees on its own. However, it leads to focus on competition
among the employees instead of focusing on the organizational objectives (DUBOIS 2012). The
culture of the organization should focus on collaboration and innovation instead of internal
competition (Saiz-Álvarez et al. 2019).
As per the case, many of the newly launched products have been failing in case of trading.com.
Also the success of business is left in the hands of mostly new recruits who are not properly
trained in their work and customer service. The product development is also not done as a team
after taking into consideration the requirements of customers and promoters just wish to develop
something innovative. As a result, the risk score in this segment comes out to be 4.
The second part of the cultural risks includes the resistance to bad news. It can be clearly seen in
the case that management has kept a team of yes men around and hence are not really aware of
the grown realities being faced by the consultants. Similarly, the CEO is happy in hiring new
employees without having any idea about the feelings of his middle management regarding their
fear of risks associated with fast growth. As a result, the score in this category would be 4.
The last pressure point of the cultural risk factor is the internal competition. The culture of
trading.com is “up or out” where performers are rewarded and compensation is deeply linked
with the performance. This has created a lot of rivalry among the staff. Although the CEO has
tried to reduce the variable component of the compensation, yet the top management has npto
done to promote collaboration in the culture. The culture in the senior team is not of
collaboration but each one tries to launch its own successful course without much information
sharing. The score in this segment will also be 4 out of 5.