Analysis of Risk Factors in Trading.com's Business Operations

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MBA402 GOVERNANCE, ETHICS,
AND SUSTAINABILITY

Contents
Introduction................................................................................................................................3
(A) Pressure points due to growth..........................................................................................4
(B). Pressure points due to culture.........................................................................................6
(C) Pressure points in information management....................................................................8
Risk exposure calculator findings on Trading.com....................................................................9
Recommendations......................................................................................................................9
Conclusion................................................................................................................................11
References:...............................................................................................................................12

Introduction:
A risk assessment is identification and consequent evaluation of factors, events and situations
which can have a potential negative impact on any particular situation. This particular
situation can be for an individual, a business, an activity, an association or an asset base. The
assessment also defines the tolerability of the risk, i.e. to what extent the risk need not cause
any major dents in the present scenario or going forward. This is known as risk evaluation.
The risk assessment can be expressed in qualitative or quantitative terms depending upon the
area and the expectation of evaluation (Li, 2014).

(A) Pressure points due to growth
1. The pressure to perform – There seems to be high pressure to perform on the
consultant team who are ultimately responsible for closing the deals by signing up
deals with customers for the share investment course. This is a hardcore sales job, and
there is no chance of a repeat deal happening with any customer. Every time a new
customer is signed, the consultant has to start his or her search for a new customer
immediately. In the initial phase, all the consultants were paid on a commission basis.
This would create result oriented sales focus on an aggressive and go-getter type of
sales consultant since they know that earnings are only through proven performance.
However, it has also can lead people to negative pressure since they know,
irrespective of effort and hard work, they will not be paid anything if a customer does
not come on board. At the same, it seems the regional managers are not under very
high pressure to perform at least compared to consultants. The overall score can be
taken as 4 in this case (Mbat & Eyo, 2013).
2. Rate of expansion – About a year back, trading.com showed good potential through
its increase in course sales. But then onwards, the thinking of the senior management
was that expansion could not be compromised in any scenario since the market for
this particular segment has the desired potential. The operations are expanding fast,
but the ability of the company to recruit and hire is not reaching the same stage. The
regional managers were not in favour of an unrealistic expansion, and they were often
complaining about the quality of consultants hired. Many of these new consultants
were without much experience and not capable of producing the desired sales results.
But the senior management, including the CEO Jospe Drake, is very clear that the rate
of expansion will not slow down. This is creating two different thinking perspectives
in Tradind.com. The score, in this case, is at 5 (Ojha, 2013).
3. The inexperience of Key employees – The Company has certainly given a good
performance in its initial 2 years. The growth has been good, and it has a staff of
almost 100th in its various offices. These are spread over multiple cities like Brisbane,
Sydney, Adelaide, and Melbourne. This success was possible only due to the quality
experience if the staff recruited who were capable of giving the desired results. As the
company grew more than expected, the quality suffered because the desired profile
with the right type of experience was not available in the job market. Hence
inexperienced staff was selected. But there is still a pool of experienced staff who can

balance things to a good extent. A score of 3 is desirable for this criterion (Farndale %
Kelliher, 2013). The total score on the growth factor is 12

(B). Pressure points due to culture
1. Rewards for risk-taking – The senior management of the company will appreciate the
employees, whether it is consultants or the regional staff who are aggressive and
result oriented in their sales performance. The consultants carry the burden of
frontline sales on their shoulders (Lazonick & Mazzucato 2013). The high performing
consultants are ranked by the regional managers, and the senior management rewards
them with bonuses like expensive gifts and luxury trips. It is over and above the
regular commission. This is recognition of their entrepreneur spirit wherein they work
without fixed salaries and are confident of earning for themselves based on their sales
skills. The sales ability to convince someone to invest $ 10,000 in a share trading
course is also a risky venture from the side of the customer. This is possible to
convince only when the person across is himself an entrepreneur by thought. The
company thereby has an inherent risk-reward culture. A score of 4 is ideal in this case
(Kuratk, et. al., 2014).
2. Resistance to bad news – This clearly is a sore point in the culture of Trading.com.
The sales functionality is handled by the regional managers who are spread across
various cities. Each regional manager handles multiple consultants and is responsible
for sales achievement and equally for their non-performance. The company growth is
totally dependent on sales from the consultants, which means they again count upon
the regional managers to play the key role in the growth. But in many cases, the
regional managers want to present a perfect picture to the top management and are nor
really keen to understand the practical difficulties on the ground faced by the
consultant. They seem to be happy with the rosy pictures given to them by consultants
or other staff, and they portray the same to senior management in order to create a
good image. This shows a very high lack of resistance to the intake of bad news. The
score of 5 would be perfect here (Hon, et. al., 2014)
3. Level of internal competition - The Company Trading.com has fostered a good
culture of internal competition. The consultants are required to give the best of the
performances, in order to get benefits and bonuses which are over and above the
commission. These benefits, as mentioned earlier, are very tempting, like luxury trips
etc. The imbalance in performance between consultants will create a feeling of being
left from these rewards and bonuses. This will lead to better performances and more
sales closure by bringing in new customers who will sign up for the share investment

courses. This obviously will lead to the fast growth of the company. If two consultants
in the same city are personally good friends and one is frequently is getting the bonus,
and the other is not, then the second consultant will certainly give additional effort
(Sutherland & Naidoo, 2016). The drawback is that this competition has led to bitter
rivalries and can sometimes spoil the corporate atmosphere. The score here is 4
because of this sole factor of ruthless competition. Else it deserves a 5. The total score
for the section is 14.

(C) Pressure points in information management
1. Transaction complexity – The transactions within the company are mainly pertaining
to the reports sent by the regional managers to the senior management on the
performance analysis of the consultants. The second level of transaction seems to the
share trading learning courses which are prepared by the CEO and other members of
the senior management. This needs to be exchanged to come on the final course
conclusion. Going by the information exchange, it is not very complex transactions as
far as sales reports of regional managers are concerned. It is more pertaining to sales
numbers of consultants and performance yardsticks on a monthly or quarterly basis.
The curse module sharing, on the other hand, is a little more complex as it has
different technical parameters which may be devised differently by the various
management members. The score of 3 is okay for this criterion (Eisenhardt and
Bhatia, 2017).
2. Diagnosis of performance –.Proper performance diagnosis of the consultants,
including their performance over the period, is not done. The reports are just mailed
showing the numbers. Each regional manager needs to know why a particular
consultant is performing and why some are not. There are several other things which
go into sales success like lead building from the webinars, a number of meetings with
the webinar customers and ability to convince them, the reason for a particular
prospect saying no and how the resistance can be overcome. There may also be
differences in the potential leads that each consultant in handling, which is not
analysed. Many customers are complaining of consultant indifference once they sign
up for a course and make a payment. This also does not seem to be taken into account.
The score of 5 is applicable (Braun, et. al., 2013).
3. Decentralized decision making – There is a high degree of decentralized decision
making at the senior management level. The courseware, which is the heart and soul
of the company, needs to be prepared with regular checks and rechecks at every stage.
This calls for the joint meeting if required multiple in a day. But this does not seem to
be the case. Each senior management member works on their own and comes back to
discuss only when there is something of substantial value to be said. This way of
working is not questioned by the CEO and seems to be the norm. This has led to an
increasing frequency in the failure of new courses. At the regional manager level, they

are not aware of the complex language in the consults process to convince the
customer. The score is 5 (Janićijević, 2013). The total score in this section is 13.
Risk exposure calculator findings on Trading.com:
[Source: Suter II, 2016]
A total score of all three factors namely growth, culture and Information management
between 9 and 20 puts any organization in a very safe zone, but it means they are very
cautious in their approach and willing to take risks or make use of opportunities. A score of
between 21 and 34 is the most ideal for all organizations. However, each factor if it scores
above 12 means, it stands the risk of being exposed soon. A score between 35 and 45
indicates a danger zone, and the organization has to take corrective action immediately.
Recommendations:

The overall score of Trading.com is 36, which place them in a danger zone. This means that
the company has to start addressing the areas of high risk. The section wise score is 12 for
growth, for the culture, it is 14, and for information management, it is 13. This shows that
both culture and information management stand the risk of being exposed, and there is a need
to reduce the same. The company has a system of good bonuses, but it needs to check the
quality of terms and agreements. This is especially in the light that many consultants avoid
customers after signing. Hence the "Lone Ranger" tendency should be reduced if it is there. If
fixed salaries are given, then high incentives should be brought down (Harper 2015). .
Internal competition has tipped over to ruthlessness. This means consultants may resort to
business assets, credit losses and company reputation in order for short term gains. The
indications point to the consultants resorting to same. This needs to become down to a 2
score. In information management, the second point, managers need to do a calculation on
the complexity, velocity and volume factors of sales. There has to be a comparison of
previous quarters and current. There is absolutely no such system which is very risky. This
score has to come down to 1, showing no gaps.
Freedom to think and perform is good but if decentralized organizations do not have
information channels to share information upwards or even sideways, then it is a big problem.
This needs to come down to a bare minimum in Tradings.com.

Conclusion
A risk assessment is a comprehensive analysis of what is going wrong, the possibility of the
same happening in future and what extent it can be tolerated. In today's business scenario,
risk assessment assumes a very high level of importance. It has been established that
company which has already attained a certain level of market recognition has attained
effective client base. Using certain scores on a particular scale, the various factors in its
internal functioning are graded. Then accordingly, based on the final score, the total risk
vulnerability to Trading.com is evaluated using a standard risk calculator.

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