Performance Management Report: Risk and Decision-Making Analysis

This report delves into the critical aspects of performance management, specifically focusing on the impact of risk and uncertainty on organizational decision-making. It begins by defining performance management and its role in achieving company objectives, emphasizing the appraisal of employees, departments, and processes. The report then identifies and categorizes different types of risks, including systematic and unsystematic risks, detailing their origins and effects on decision-making. Furthermore, it explores the capacity of investors to take risks, differentiating between risk-seeking, risk-averse, and risk-neutral approaches. The core of the report examines various approaches used to evaluate risk, such as Maximin, Maximax, Minimax-regret, and Expected-value, highlighting their impact on decision-making processes. The report concludes by summarizing the importance of identifying and managing risks to improve company performance, supported by relevant references.

Performance Management

INTRODUCTION
Performance management is the process of measuring the performance of company to
ensure that objectives of company are effectively and efficiently achieved. It includes the
appraisal of performance of employees, department and the process which are used by company
to build product and services. This helps the company to identification of the risk and
uncertainties which affects the performance and decision making of management of
organisations. Risk and uncertainty includes something unpredictable and uncontrollable
happening in company which affects the value and financial well being of company (Cho and
Lee, 2012).
In this present report explain about, different type of risk persist in organisation and
different approaches used by company and their effect on decision making.
TASK 1
1.1 Effect of risk and uncertainties on decision making of company and evaluation of different
approaches
Risk: It includes the unpredictable and uncontrollable event happened in the company
which affects the value and financial position of company. Risk cab be associated with any
activity of company rather to resources, processes, government regulations etc. which lowers the
profits of company. All these risk reduces the working ability of company and affects there
performances. There is huge impact of the risk and uncertainty is upon the decision making
ability of management of company. There are two type of risk which persist in organisation are:
systematic and unsystematic risk (Kavousi-Fard and Samet, 2013).
Systematic risk: These risks arise in organisation due to the external factors persist in
market. All these factors are called macro factors and they are uncontrollable by management of
company. Organisations are not planned for these risks and they have major impact on decision
making of management. There are three types of systematic risks:
 Interest rate risk
 Market risk
 Inflationary risk
Interest rate risk: This risk arises due to change in interest rate. This will affects the
debt securities of company because they carry fixed rate of interest.

Market risk: It includes the continuous change in trading price of shares and securities.
This affects the shares and stocks of company.
Inflationary risk: This is also called purchasing power risk. High inflation effects the
decision of investors to make investment in the securities of company (Melo, Sarrico and
Radnor, 2010.).
Unsystematic Risk: This risk arises in the organisation due to internal factors. These
risks are controllable by management of company. These risks are controllable and planned by
company. These are of three types:
 Business risk
 Financial risk
 Operational risk
Business risk: The risk associated with the sale and purchase of securities because of
business cycle and technological changes.
Financial risk: It is also called credit risk, arises due to change in capital.
Operational risk: These risks associated with the errors of employees which performing
their functions.
Capacity of investors to take risks
Risk seeking: It is the situation where the investors are like to take more risks. These
persons are also called risk lovers. They take the risks with the intention to gain more profits.
They choose the option on the basic criteria is that higher the risk will give higher return.
Risk averse: It is the situation in which the investor not like to take risks. Their intention
is to choose such alternative where there is least possibility of risk. The percentage of the profit
associated with these option is also very low. This option will provide less return to investors but
the chance of loss in investment is also very low (Mithas, Ramasubbu and Sambamurthy, 2011).
Risk neutral: It includes such person which choose such option where is equal balance
between the risk and profit. These investors are not risk seekers and risk averse. They have the
equal chance to get risk and profit through this option. This helps the person to make the balance
in their investment.
Approaches which are used to evaluation of risk and their impact on decision making

There are many approaches are available to investors which helps to mange the risk and
profit in their investment. All these approaches have huge impact on the decision making
process. The approaches which are available to investors are:
 Maximin
 Maximax
 Minimax-regret
 Expected-value
Maximin: This approach provides the option where there is high profit at least risk. This
approach is suitable for the risk averse investors. This helps the investors to gain the profit in
lowest risk. This includes the process of looking the worst possible outcome at each supply level
and then selects the highest one from those. This decision helps the investor to minimise the loss
with the chosen option. This option lefts the opportunity to making out high profits. The investor
should make the decision and select such alternative where maximum loss is better than the least
loss of all other alternatives (Moutinho, 2011).
Maximax: This approach includes the section of such option which gives higher profit to
investor. This option associated with the high risk. This approach is beneficial for the risk
seekers investors which want to earn more profits by taking high risks. In this decision maker
should select such alternative which provides maximum profit and has better than the gain of all
other alternatives.
Minimax-regret: This approach includes the strategy of minimise the maximum regret.
This approach is beneficial for those persons who are risk neutral in nature. This helps them to
make the appropriate decisions regarding there investments. This approach prevents the investors
to taker the wrong decisions.
Regret means the loss of chance of good investment by making the wrong decision. This
approach helps them to select such alternatives where there is no chance of loss.
Expected-value: It includes anticipated value for a investment made by person. This will
be calculated by multiplying the each possible outcome with the outcome which actually occur
and adding up of all the values. This will helps the investors to select the best alternative which
gives them desired outcome (Yasin and Gomes, 2010).

CONCLUSION
It has been concluded from the above report that, risk and uncertainty in company affects
their performance. It is necessary for the management to identify the risk and adopt the approach
regarding that tom minimise their impact. All these measures helps in improving the
performance of company.
REFERNCES
Books and Journals
Cho, Y. J. and Lee, J. W., 2012. Performance management and trust in supervisors. Review of
Public Personnel Administration, 32(3), pp.236-259.
Kavousi-Fard, A. and Samet, H., 2013. Multi-objective performance management of the
capacitor allocation problem in distributed system based on adaptive modified honey
bee mating optimization evolutionary algorithm. Electric Power Components and
Systems. 41(13). pp.1223-1247.
Melo, A. I., Sarrico, C. S. and Radnor, Z., 2010. The influence of performance management
systems on key actors in universities: the case of an English university. Public
Management Review. 12(2). pp.233-254.
Mithas, S., Ramasubbu, N. and Sambamurthy, V., 2011. How information management
capability influences firm performance. MIS quarterly, pp.237-256.
Moutinho, L. ed., 2011. Strategic management in tourism. Cabi.
Yasin, M. M. and Gomes, C. F., 2010. Performance management in service operational settings:
a selective literature examination. Benchmarking: An International Journal. 17(2).
pp.214-231.
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