Risk Assessment Report for Trading.com

This report provides a risk assessment for Trading.com, an online course provider for investment and business decision making. It covers the types of risk factors involved in small and medium scale organizations, stages of business with potential risks, and a risk exposure calculator. The report concludes with recommendations for Trading.com to mitigate risks.

Running Head: Risk Assessment Report for Trading.com
Risk Assessment Report for Trading.com

Risk Assessment Report for Trading.com
Table of Contents
Introduction......................................................................................................................................3
Types of risk factors involved in a small and medium scale organization......................................3
Stages of business with potential possibility of risks...................................................................4
Risk exposure Calculator for Trading.com......................................................................................5
A. Pressure points due to growth...............................................................................................6
B. Pressure points due to culture...............................................................................................6
C. Pressure points due to information management..................................................................7
Conclusion.......................................................................................................................................8
References........................................................................................................................................9
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Risk Assessment Report for Trading.com
Introduction
Every business in the world has to face a tremendous amount of computation according to the
present scenario which results into numerous risk factors that the organisation has to witness. It
is very important to identify and calculate the risk factors so that adequate measures can be taken
in order to reduce or mitigate the risks related consequences associated with the company. The
medium scale and small scale businessmen and entrepreneurs often tend to forget about the risk
factors in the growth stage of their business because of the optimism factor they are surrounded
with due to the growth shown in their newly started business.
The following study has considered a case scenario of a fictitious organisation that deals with
providing courses to aspiring investors regarding methods of intelligent and smart Investments
and business decision making. The company has been considered to be founded by an
experienced investor who provides courses to understand the different aspects related to business
investments like stock exchange and share market details. Since there has been a significant
increase in the growth rate of the company due to which the organisation became a medium scale
company within 3 years of its Inception employing over 100 staff members with its officers in
four major cities in Australia. However, the growth of expansion for this company is not in
proper balance with the capacity of the organisation to hire more staff for delivering the courses.
Hence, the following study has explicitly described the various risk factors that the company is
likely to face due to its ongoing scenario in the upcoming few months or years.
Types of risk factors involved in a small and medium scale organization
There are various types of risk factors involved in the small and medium scale industry or
company due to which the company has to formulate from effective strategy so that it can reduce
the possibility of any unfavourable consequence due to the risk. The risk factors for any
organisation vary depending on the stage of performance the company is going through (He,
Kelly & Manela, 2017). It is important that the possibility of negative consequences is not
ignored even if the existing performance of the company is more than the desired level that by
the senior level executives of the organisation. Following are the different stages of business that
are affected by different levels of risk factors during its operations.
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Risk Assessment Report for Trading.com
Stages of business with potential possibility of risks
Any small or medium scale organisation has to go through four different stages or cycles of
business name start, grow, maturity, and decline. The overall risk factors involved in all these
four stages are different for different sector companies depending on the competitive level and
the demands or products provided by the company (Miller, 2018).
Startup: During the startup stage, the company introduces new methods of doing business which
is quite rare in the existing business scenario and therefore there are high chances that it will
grow at a significant rate. However, since the people are not aware of the newly started business,
the chances of growth might also be low which needs to be enhanced by proper advertising and
promotion (Niepmann & Schmidt-Eisenlohr, 2017). The target population is likely to get
attracted towards the company because they are likely to trying new things available in the
market that can serve their necessary purposes. The risk is moderate at the startup stage because
the people are not aware of the company and the executives of the organisation need to reach out
to maximum people by following proper methods of advertisement.
Growth: The 2nd stage is the growth stage of any business cycle and includes the actual growth
which takes place due to creating of awareness among the target population and also due to the
performance given by the company. This stage is crucial because it provides an opportunity into
the owners of the company to maximize their profit margin due to the presence of low level
competition in the market in the same industry. The possibility of any consequence due to the
risk factors is quite low in this stage.
Maturity: The maturity stage is the third stage of the business cycle of any company where the
company is likely to face some call or declination in the rate of growth. This happens because of
the increase of competition and emergence of new companies within the similar domain
(Degl’Innocenti et al. 2018). The organisation still earns profit but not as a rate as good as it was
earning in the growth stage. The risk is at a high level at this stage to the company.
Declination: The final stage or 4th stage of the business cycle of an organisation consists of its
declination phase. The most primary reason for the declaration of the company is the same
reason due to which the company started. The people are likely to trying new things and switch
to other companies that have introduced a new product as a Startup initiative in the market. The
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Risk Assessment Report for Trading.com
chances of the company getting into loss significantly increases and the organisation stops
earning profit and the growth rate declines to a negative value in the last stage (Baklanova,
Dalton & Tompaidis, 2017). The risk factors are at maximum value at this stage and therefore
the company must come up with a new strategy to regain it growth rate with a new cycle in the
market. The introduction of a new strategy or product in the market that can provide necessary
goes to the company is known as the rebirth of the company.
Risk exposure Calculator for Trading.com
The risk exposure calculator is an effective tool which is used to measure the degree of risk that a
company might have to face in the upcoming time. There must be a balance between all the
aspects of the operations involved in an organisation. Maintaining a proper balance between
every aspect involved in operating an organisation is very helpful for long term benefits (Baker,
Cummings & Jagtiani, 2017). In case of the Trading.com Company, the factor that has worked in
favour of the organisation is the Rapid growth in a shorter duration. This has happened because
there has been delivery of quality courses by the founder of the organisation regarding
knowledge associated with investment and share market. Moreover, the desired level of outcome
provided by the well experienced teaching staff of the company has played a significant role in
the rapid expansion of the organisation in just 3 years by increasing the total amount of stuff to
over 100 making the company a medium scale organisation.
However, a very crucial factor that has gone against the long term benefits and growth of the
company is the mismatch between the capability of the organisation to expand itself and fire
experienced and quality staff to provide lectures for the courses. An organisation must expand
itself considering every parameter especially highlighting the capability of its Human Resource
Management to hire adequate faculty members and determine if the company will be able to
retain its quality or not (Kuzmina & Kuznetsova, 2018). The Trading.com is facing a tremendous
risk for its survival because it is likely that the overall quality of program and courses delivery
will be compromised because the company has expanded more than its capacity in a very short
duration. One of the most effective reason for this is the lack of experienced staff who can
provide the courses. The company has been able to provide a high quality of lectures at the
earliest stages due to which the expansion rate has grown tremendously high. Hence, the
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Risk Assessment Report for Trading.com
organisation is currently struggling to find experienced people who have adequate knowledge
about the stock market and investment facts.
A. Pressure points due to growth
i. Pressure for performance: The pressure for performance is known as the degree
of necessity for an organisation to show better performance. The Trading.com
Company has shown a high level of performance in the initial stage but is
struggling currently to show the similar performance level. Hence, the score has
to be at moderate level that is 3 points.
ii. Rate of expansion: The rate of expansion is the rate at which the company is
expanding and reaching out to more people in the market. The rate of expansion
for Trading.com is significantly high causing a low risk due to this parameter.
Hence, the point obtained by the company on this parameter is 1.
iii. Inexperience of key employees: The employees who are currently working in
the company are well experienced and have adequate knowledge regarding the
subjects that are taught during the courses. However, the new employees that are
to be hired need to be equally experienced which the company is unable to get
very easily. Therefore, the company has hired some inexperienced employees
causing a considerable risk factor of 3 points to its growth.
B. Pressure points due to culture
i. Rewards for entrepreneurial risk taking: The rewards provided for
entrepreneurial is taking are an important parameter for the growth of an
organisation because better rewards will promote and encourage better innovation
in entrepreneurship. The Trading.com company pressure because the work culture
does not promotes innovation as per requirement reducing the rewards for
entrepreneurial Risk taking. Hence, the points and in this parameter are 4.
ii. Executive resistance to bad news: The executive members of Trading.com have
experienced a very high growth in a very short duration after its establishment and
therefore the senior executives are very confident and optimistic about the future.
However, the possibility of bad news is ignored causing a potential danger to the
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Risk Assessment Report for Trading.com
company in the future and hence the company has scored 4 scored points on this
parameter.
iii. Level of internal competition: The internal competition level has been created
very high by fixing a specific target for the consultants and regional managers. As
a result of this, the internals competition level has gone very high which is likely
to work in favour of the company. Hence, the overall pressure point due to this
factor can be considered at 2.
C. Pressure points due to information management
i. Transaction complexity and velocity: The Company has performed extremely
well during its initial phase but has failed to maintain the same rate of growth and
performance in the consecutive time. The transaction complexity and velocity
could have been maintained in a better way by the company because the founder
of the company Jose Drake observed some factors that were leading to financial
loss to the company due to which a fixed salary was decided for the consultant
instead of commission based income. Hence, the points scored in this parameter
are 4.
ii. Gaps in diagnostic performance: The overall performance of the company who
was not diagnosed properly on every parameter. Therefore, the company did not
expand its business in proportion to its capabilities in hiring the employees that
have optimum level of experience. This has increased the risk factors due to gaps
in Diagnostic performance resulting into a score of 4 on this parameter.
iii. Degree of decentralized decision making: The decision making of the company
who was decentralized appropriately so that the regional managers and
consultants could make their own decisions and populate their own strategies. The
senior most level executive management however was able to monitor every
progress and introduced some new strategy regarding the financial transactions
and salary structure of the workers. Therefore, the respective is considerably low
on the parameter of decentralized decision making earning the company 2 points.
Parameter Score Total Score
A Pressure points due to growth
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Risk Assessment Report for Trading.com
i Pressure for performance 3 7
ii Rate of expansion 1
iii Inexperience of key employees 3
B Pressure points due to culture
i Rewards for entrepreneurial risk taking 4 10
ii Executive resistance to bad news 4
iii Level of internal competition 2
C Pressure points due to information management
i Transaction complexity and velocity 4 10
ii Gaps in diagnostic performance 4
iii Degree of decentralized decision making 2
Total Score 27
Table 1: Risk Exposure Calculator
(Source: Created by the learner)
Conclusion
It can be seen that the overall score of Trading.com is 27 which makes the company fall into the
caution zone. Therefore, the company needs to take adequate measures in order to rectify is
business procedures and must provide a proper environment to the Regional managers and
consultants to hire more experienced workers that can provide better quality lectures to the
people who are seeking for some classes and advise on investments related domain. The
organisation also needs to slow down its expansion rate and increase its capability to hire more
experienced professionals.
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Risk Assessment Report for Trading.com
References
Baker, C., Cummings, C., & Jagtiani, J. (2017). The impacts of financial regulations: solvency
and liquidity in the post-crisis period. Journal of Financial Regulation and
Compliance, 25(3), 253-270.
Baklanova, V., Dalton, O., & Tompaidis, S. (2017). Benefits and risks of central clearing in the
repo market. Office of Financial Research Brief Series, (17-04).
Degl’Innocenti, M., Fiordelisi, F., Girardone, C., & Radić, N. (2018). Competition and risk-
taking in investment banking.
He, Z., Kelly, B., & Manela, A. (2017). Intermediary asset pricing: New evidence from many
asset classes. Journal of Financial Economics, 126(1), 1-35.
Kuzmina, O., & Kuznetsova, O. (2018). Operational and financial hedging: Evidence from
export and import behavior. Journal of Corporate Finance, 48, 109-121.
Miller, D. (2018). Perfect Hedge: Adding Precision to the Proposed SEC Rule on Investment
Company Use of Derivatives with a Hedging Exception. Boston College Law
Review, 59(4), 1471.
Niepmann, F., & Schmidt-Eisenlohr, T. (2017). International trade, risk and the role of
banks. Journal of International Economics, 107, 111-126.
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