Risk Management: Types, Control Methods, and Mitigation Strategies

This report covers an introduction to risk management and crisis management, followed by a risk summary table. It then delves into the three types of risks - political, economic, and technological - and their control methods, time frames, stakeholder responsibilities, risk mitigation, future action, and plan of action. The report concludes with the business impact of these risks.

Risk Management 0
Title: Risk Management
Assignment Name:
Student Name:
Professor:
Date:

Risk Management 1
Executive Summary
This report summarizes an introduction risk management and crisis management. Risk Summary
Table has been provided. The three risks have been identified with relevance to methods of
controlling the risk, time frame, the responsibility of stakeholders, risk mitigation, future action
and plan of action. This is followed by a conclusion.

Risk Management 2
Contents
Introduction......................................................................................................................................3
Risk Summary Table.......................................................................................................................3
Types of Risk...................................................................................................................................4
1. Political Risk.....................................................................................................................................4
2. Economic Risk..................................................................................................................................7
3. Technological Risk............................................................................................................................9
Conclusion.....................................................................................................................................11
References......................................................................................................................................13

Risk Management 3
Introduction
Crisis Management is an application of the strategies which is designed for helping the
business organizations to deal with a significant negative event. The crisis will occur as the result
of unpredictable event or unforeseeable outcome of an event which has considered as the
potential risk. Decisions must be made quickly for limiting the amount of damage to the
organization. For this reason, the first action in crisis management defined plan is to identify the
individual and serve as the crisis manager. The risk is a potential activity which can be harmful
for the organization’s reputation, revenues, finance, market position and its capacity of
delivering the services.
Risk Summary Table
Risk
Category
Risk
Type
Stakeholders
Affected
Likeliho
od
Rating
Consequ
ence
Rating
Risk Control Method
Internal Human
Factors
Internal
stakeholders
D D Improvement of the
human capital
management strategies
followed by the
organization.
Internal Technologi
cal Factors
Internal and
External
stakeholders
B B Integration of recent
technologies within the
framework of an
organization so as to

Risk Management 4
improve the business
processes and also the
quality of services offered
to the customers.
Internal Physical
Factors
Internal and
External
stakeholders
C C Establishment of outlets
which are at suitable
business locations.
External Economic
Factors
External
stakeholders
D D Provided discounted offers
to the customers to attract
them towards the food
items sold by the
company.
External Natural
Factors
External
stakeholders
E E Changing the menu
offered by the company
and making it healthy.
External Political
Factors
Internal and
External
stakeholders
E E Forming effective business
relationships with the
national governments.

Risk Management 5
Types of Risk
1. Political Risk
Political risk is a risk where the investment returns suffer majorly due to the result of
instability and political changes happening in a country. Instability will affect the investment
returns could take place from the government charges, foreign policy, legislative bodies. Political
risk is also referred to as the geopolitical risk and becomes the major factor of time horizon of an
investment plan (Kam, 2012).
KFC is one of the well-known food chains and the most significant option was when the
company planned to enter the China. The company had a risky international business strategy.
An expansion into China has been recommended. The market size and potential growth of the
market is in association to the improvised political stability and therefore making the Chinese
market very attractive (Graham, 2012).
Methods of Controlling the Political Risk
1. Avoiding Investment- The best and simplest way of managing the political risk is
avoiding investing in the country which is ranked high on any risks. The investment has
been made; enterprise may get wound up and transferred to any other nation (Fails,
2014).
2. Adaptation-This is another method of managing the political risk. Adaptation implies the
incorporation of risk into the business strategies. MNC can incorporate the risk through
different strategies such as local equity and insurance and providing the development
assistance (Manzo, 2013).
3. Threat-Political risk can be managed by trying to improve the host country which cannot
work without the firm activities. This can be done by the control of raw materials,

Risk Management 6
distribution channels, technologies in the host country. The enterprise can threaten the
host country when the supply of materials, technology is stopped as its functioning gets
disrupted (Fagersten, 2015).
Time Frame- Exposure to political risk, this includes tax and royalty changes, security
concerns, confiscation of any asset this will have the direct impact on the company’s top
management and middle management. The significance of valuation and political risk will vary
between costs and complexity. Depending on the major segment, business models, the costs can
be moved on and have a positive or negative impact over the revenues (Brown & Harman, 2011).
The Responsibility of Stakeholder-Recognition of institutional investors and investment
managers and board of the public companies needs to answer following questions-
1. What is the level of the company’s exposure to political risk?
2. How the risk is monitored and captured?
3. Whether the company’s investment strategy and capital allocation are appropriate given
the emerging and present political dynamics (John & Lawton, 2017).
Risk Mitigation-The leading companies can manage today’s political risk. The functioning
of political risk is underpowered and isolated. Typically, the risk can be realized through the
advanced proceedings of any transaction. Horizontal risk functions like compliance, enterprise
risk management and legal management political risk will be regarded as the price paid for doing
business activities (Fortunato & Turner, 2018).
Future Action and Plan of Action-The research indicates that the future course of action
will result from the composition and the style of the board. The problem lies in ineffective
organizational design which is evident from the leading companies. For investors, political risk
will be acting as an alarm as it suggests companies can succeed in spite of political risks. This

Risk Management 7
makes sense as economic risk has dominated the macro surroundings. The companies must have
the proper structure to cope up with economic risk and political risk. This includes management
of workforce for meeting the demands and launching products which are targeted at the price
sensitive customers during the times of economic recession (Kerner & Lawrence, 2012).
Business Impact-In the risk inverted surroundings, political consequences and actions pose
important concerns rather than economic trends. This implies not having the consideration
towards political risk is likely to affect the decision making. Avoiding new investments and not
increasing the internal risk threshold (Hubscher & Sattler, 2016).
2. Economic Risk
Economic Risk refers to likelihood wherein macroeconomic conditions can affect the
investment or company prospect abroad or domestically. The economic risk can include
fluctuations in exchange rates, government policy shifts, political instability or the introduction
of political and economic sanction. An element of risk is always associated with investing money
into a business. Economic risks are the most difficult to be foreseen. In project financing, this
economic risk has a high likelihood to have an impact on the business output (Beazer & Blake,
2018). KFC has reopened its outlets in Zimbabwe after month longevity of economic closure.
Methods of Controlling the Economic Risk-
1. Entity Insight-This is a cost effective and fast solution for identifying and reducing the
economic risk in vast business operations. This tool monitors global suppliers and local
third party business ventures by leveraging business intelligence and help the businesses
to manage the global supply chain risk. This solution helps the enterprises to capture the

Risk Management 8
in-depth view of regulatory, economic and strategic risk factors. An alignment of internal
company policies and risk based methodology is possible (Triana, 2017).
2. Purchase Insurance-Assessment of liabilities and legal regimes determine which
insurance is required for the business. This can include disability insurance, professional
insurance, operational insurance and life insurance. Purchasing insurance allows the
transference of risk to the insurance companies (Harman, 2011).
3. Implementation of Quality Assurance policy-The good reputation can be imperative,
of searching for the sustainable business. Customer service is regarded as key to success
when any products or services are offered. It is important to conduct the test of products
and services and achieve the highest quality. By analyzing and testing, necessary
adjustments can be made (Simpson, 2007).
Time Frame-Time frame has been associated with the employee training. When selling the
products or services, it is crucial to set goals and responsibilities for the employees. Training the
employees to focus on quality and not quantity, this can avoid the declining sales risk occurring
due to high pressure which customers will not appreciate. Innovation is the key to success and
company needs to constantly rely over next innovation for the purpose of growth.
The Responsibility of Stakeholder-Current employees shall head to form the risk
management team. This will be a wise idea if someone within the team is having experience in
this domain and can act as the leader. The company can also make the payment for the outsider
risk management team that can be a worthy investment. All the risks and threats are based on the
business type and strategies can be made for prevention and mitigation of risks (Denuit &
Eeckhoudt, 2013).

Risk Management 9
Risk Mitigation-The world has been changing quickly. Risks will be emerging and
companies need to deploy the diversification strategies. This can be effective against the
unexpected risks. Provided the shifting economic, social and political factors, it is a time to start
a business with exporters. The major benefits are to export to multiple global markets and
diversification of reducing risks that come with one particular place.
Future Action and Plan of Action-All markets have risks, knowing when it is surmountable
and whether the benefits can outweigh the hazards. These are the defining factors of a venture.
The business executives need to understand how the company can be affected through the
adverse events. Regulatory changes can create the problems like delivery days and civil
disturbances can shut down the whole company. The company needs to be prepared or end up
losing the all business.
Business Impact-The planning of an organization to expand into unchartered and new
territories, which are already having transactions and the business in abroad needs to seek the
tangible cash-flow precariousness. This safeguard needs to understand about risk mitigation
executives and how they control the adverse effect on business.
3. Technological Risk
The modern day business is highly reliant over technology. The prolific use of smart
phones, internet and computers has built themselves as back on technology. With such reliance,
there are certain potential technological risks. The organization faces these technological risks in
its hardware, software or online applications needs to compromise through the equipment fails or
cyber-attack. In the present environment, data breaches are one of the risks that can occur in all
sizes of organizations. Financial information or personal records can be stolen in the black
market through criminals in a few days.

Risk Management 10
KFC has closed its many stores due to the delivery problems and fast food restaurant has
reported the loss of £ 1mn in a day. Another issue is about handling the PR. Large businesses
have an impact over the deliveries, especially when the transition is new.
Methods of Controlling the Technological Risk
1. Identification of key risks and measurement of probability and impact-As soon as
the information is collected, organizations need to identify the concern areas and measure
the occurrence probability. This will assist the organization in the development of
mitigation plans. Most of the organizations need to hire the IT specialists in assisting with
the process.
2. Analyzing security threats-This includes external threats such as cyber-terrorism and
cyber-crime along with internal threats like distribution of the restricted information.
Organizations need to review the security requirements which are in association to
system control and access, data integrity, security tracking. In addition, the exceptional
handling system is required for security controls and also system performance in recovery
conditions.
3. Analyzing hardware and software failure risk-Organizations need to consider what are
the different risks associated with hardware or software failure of the startup venture and
for its overall operations. How stable is the software and equipment in the organization.
What are the potential failure consequences? Analysis of outsourcing risks. The Third
party must be able to handle the network administration, application hosting, and disaster
recovery options and cloud computing.
Time Frame-New technologies have started revolutionizing the ways in which businesses
are conducted. This offers incredible benefits to the organizations. However, reliance on the

Risk Management 11
technology will increase risk exposure. When technology will get fail, business disruption will
result in revenue losses and lost customer confidence. The time frame for creation of an effective
technology is analyzing the risk management strategy and organization’s profitability along with
corporate reputation can be analyzed.
The Responsibility of Stakeholder-Switching suppliers, especially one that provides the
critical service like logistics, identification of risks as they escalate and major problems are
essential for effective sourcing. The procurement team needs to seek reassurance for vulnerable
areas and address the change supplier ensuring risks get mitigated.
Risk Mitigation-The determination of how to effectively manage the technology risk, it is
essential to understand the different types of technology risks. To protect the business from
financial, reputational, regulatory and strategic risk, it is essential to prepare with the
technological risk management. There are a number of cyber security and technology risks. As
the technology advances, hacks are more sophisticated and there are greater risks of technology
disruptions (Burns, Peters & Slovic, 2011).
Future Action and Plan of Action-Automation is incredibly helpful for the enterprises. This
will lead to elimination of technology risks and has a positive publicity. The supply chain will
not suffer with automation. There must be a risk management technology strategy in place for
anticipating the potential problems before it takes place.
Business Impact- Operations staff must be asked for the evaluation of technology as a part
of the enterprise risk effort. Regulators in regulated industries can drive the requirements towards
focusing the technology management. Most of the regulators require programs to be in place.

Risk Management 12
Conclusion
The enterprises face uncertainty. This effect on the organization objective can be referred
to as risk. The challenge is posed in front of management to determine what the acceptable levels
of risks are and how this will be managed to an acceptable level. Risk can be termed as an event
which results in loss or harm. Risk also implies opportunity or chance and includes the
processes, systems, strategies. People must be directed towards the effective management of
potential opportunities and threats. The main goal of the risk management in an enterprise is to
provide the stakeholders with assurance that the roles and responsibilities of the organization will
be achieved.

Risk Management 13
References
Beazer, Q., & Blake, D. (2018). The Conditional Nature of Political Risk: How Home
Institutions Influence the Location of Foreign Direct Investment. American Journal Of
Political Science, 62(2), 470-485.
Brown, G., & Harman, S. (2011). Risk, Perceptions of Risk and Global Health
Governance. Political Studies, 59(4), 773-778.
Burns, W., Peters, E., & Slovic, P. (2011). Risk Perception and the Economic Crisis: A
Longitudinal Study of the Trajectory of Perceived Risk. Risk Analysis, 32(4), 659-677.
Denuit, M., & Eeckhoudt, L. (2013). Risk attitudes and the value of risk
transformations. International Journal Of Economic Theory, 9(3), 245-254.
Fägersten, B. (2015). Political risk and the commercial sector – Aligning theory and
practice. Risk Management, 17(1), 23-39.
Fails, M. (2014). Leader Turnover, Volatility, and Political Risk. Politics & Policy, 42(3), 369-
399.
Fortunato, D., & Turner, I. (2018). Legislative Capacity and Credit Risk. American Journal Of
Political Science, 62(3), 623-636.
Graham, B. (2012). Political Risk and Experience: The Effect of Prior Experience on Firms'
Political Risk Sensitivity. SSRN Electronic Journal.
Harman, S. (2011). Governing Health Risk by Buying Behaviour. Political Studies, 59(4), 867-
883.
HÜBSCHER, E., & SATTLER, T. (2016). Fiscal consolidation under electoral risk. European
Journal Of Political Research, 56(1), 151-168.

Risk Management 14
John, A., & Lawton, T. (2017). International Political Risk Management: Perspectives,
Approaches and Emerging Agendas. International Journal Of Management
Reviews, 20(4), 847-879.
Kam, C. (2012). Risk Attitudes and Political Participation. American Journal Of Political
Science, 56(4), 817-836.
Kerner, A., & Lawrence, J. (2012). What's the Risk? Bilateral Investment Treaties, Political Risk
and Fixed Capital Accumulation. British Journal Of Political Science, 44(01), 107-121.
Manzo, G. (2013). Political Uncertainty, Credit Risk Premium and Default Risk. SSRN
Electronic Journal, 1-3.
Simpson, J. (2007). The Effects of Extreme Political Acts and Political Risk on International
Banking Systems. SSRN Electronic Journal, 1-5.
Triana, P. (2017). Business Schools and Political Risk. SSRN Electronic Journal, 1-4.