The SWOT Analysis of the Risk Management - Assignment Example

Name: Course: Tutor: Date: Part 1 The SWOT analysis of the current risk management is necessary as it is used to show the full analysis of the long term risk measures that have been taken in the company. Savills (VIC) Pty Ltd has employed risk assessment techniques to help carry out an effective risk management approach. This is an approach that has created a clear understanding of how the matters of risk need to be considered in this organization. The existing risk management plan can be analyzed using SWOT analysis in order to have a good way of evaluating the potential risks of the company. The risks are very many in this organization. SWOT analysis will provide a clear analysis of the Strength, Weakness, Opportunities and Threats of the risk management plant that is used in this organization (Crouhy, 33). On the strength side of this risk management plan is that it has given us a detailed explanation of the various technological factors that can create a good touch with management. The plan is easy to understand and one can easily compute the figures that are given. The plan is also intended to have a positive contribution in the way people coordinate the techniques of measuring risk. The main weakness of the risk management plan in Savills (VIC) Pty Ltd is that it makes vague assumptions in measuring risk. It ignores the traditional risk assessment techniques and hence creates a gap in the area of risk analysis. The opportunity provided by the risk management plan of Savills (VIC) Pty Ltd is creation of the right databases. These opportunities are evident since the management does not need to make all the computation based on the original threat. The main threat is the introduction of other techniques that are necessary at increasing the final analysis of the paper. The threats are also evident in the way the people have conducted the activities in order to get the real value of the risk in the organization. Risk assessment is also conducted to assist in creating a good portfolio for the people in the long run. These are the main activities that can help conduct a detailed SWOT analysis of the current risk management plan in the company. These are the key aspects as they analyze the positive sides and also negative side of the current plan. The plans are hence determined to assist the people in creating a good scenario in the long run. Part B In this part, I will analyze all the techniques that have been developed in order to generate lists of risks in the organization. The organization in this case is supposed to derive the best approaches that will ensure it is successful. These are the approaches that are meant to create a good and clear analysis of risk in the organization. These needs are supposed to be created in order to have a good model in the long run of managing the risks. This is standard measure as these techniques are developed by the auditor who will come up with the strategy under each step. These are facts that can create a good managerial effect if the right approaches are undertaken (Crouhy, 33). These positive measures are designed to help the managers come up with the right technique of measuring risk. Risk analysis is seen as the major aspect that is required in order to maximize on the return. The return is hence designed to give a positive venture and also help in coming up with the right technique. Given that there are different types of risks that are available, it is important to consider these techniques as well. The techniques are supposed to increase the overall gains in order to have a better organization in the long run. These techniques can however be concentrated in the area of risk development and analysis. In order to understand the various techniques of identifying these risks, it is important to have a direct intervention in the various principles of risk management. Risk management is a key area that Savills (VIC) Pty Ltd needs to fully understand despite the main attributes of risks that are involved. The area of risk management has created a good way that can help in understanding the individual needs of the people. The needs are designed to achieve the role of risk assessment in Savills (VIC) Pty Ltd. The techniques are designed to create an overall assessment in the risk of this company (Crouhy 44). Given that there are different techniques that can be used to assess the degree of risks. These techniques will actually differ depending with the risk that is being assessed. The risks are assessed by the people with an aim of analyzing the major elements of costs. A risk can be defined a business occurrence that is likely to lead to a loss if it occurs. A business will experience these risks despite the efforts of eliminating them. These risks are supposed to be controlled by the business but at times they are uncontrollable. The more the risky a business is, the more the techniques that they will employ. In Savills (VIC) Pty Ltd, the business risks can be measured using standard deviation. The measure of standard deviation is a technique that measures risk in any business activity. This is measure of dispersion of a given set of data that is obtained from the overall mean. The mean is obtained in order to get the real figure of standard deviation and also create a good approach of evaluating the operating risks in this organization. The degree of risk in the business can be evaluated in order to know how the business activities will be coordinated. The business activities are hence evaluated in order to know the real value of business. Standard deviation has been used measure and evaluates the degree of financial risk that Savills (VIC) Pty Ltd is currently exposed to. The standard deviation is seen as the key factor of evaluating the financial risks in Savills (VIC) Pty Ltd since it gives an accurate value as the figures are easy to compute and evaluate. The business activities are assessed depending with the specific attributes of degree of leverage in terms of risk. The risk is seen to create a good way of measuring the success or failure in the business activities. The more the risky a certain business is, the more the investments it will have. In Savills (VIC) Pty Ltd, investors who are optimistic are likely to invest more of their money as they think that they will earn more dividends in the future. This is an approach that is only attained only if the right technique of measuring the operating risk of Savills (VIC) Pty Ltd. The environment risk also needs to be evaluated and assessed. The degree of risk in Savills (VIC) Pty Ltd is a key factor that must be fully considered in order to measure and evaluate the overall plans of the business. The environment in which the business operates also exposes this business to some risk. The risk in the environment is very hard to minimize since we have less control over some hazards in the environment (Hester, 44). Savills (VIC) Pty Ltd operates in an environment that is hard to predict what is likely to happen in the future. These are areas that create a good way of measuring risk with an aim of creating a better understanding. This risk can only be assessed and evaluated based on the contributions of Savills (VIC) Pty Ltd. The business operations are hence the key determinant that can create an accurate understanding of these features in the business. The business activities of Savills (VIC) Pty Ltd can hence be measured if the environment risk is also identified. The required rate of return (Ri) is the minimum rate of return that a project must generate if it has to receive funds. It’s therefore the opportunity cost of capital or returns expected from the second best alternative. In general, Required Rate of Return = Risk-free rate + Risk premium Risk free rate is compensation for time and is made up of the real rate of return (Rr) and the inflation premium (IRp). The risk premium is compensation for risk of financial actions reflecting: The riskiness of the securities caused by term to maturity The security marketability or liquidity The effect of exchange rate fluctuations on the security, etc. The required rate of return can therefore be expressed as follows: Rj = Rr +IRp +DRp +MRp + LRp + ERp + SRp + ORp. Where: Rr is the real rate of return that compensate investors for giving up the use of their funds in an inflation free and risk free market. IRp is the Inflation Risk Premium which compensates the investor for the decrease in purchasing power of money caused by inflation. DRp is the Default Risk Premium which compensates the investor for the possibility that users of funds would be unable to repay the debts. MRp is the Maturity Risk Premium which compensates for the term to maturity. LRp is the Liquidity Risk Premium which compensates the investor for the possibility that the securities given are not easily marketable (or convertible to cash). ERp is the Exchange Risk Premium which compensates the investors for the fluctuation in exchange rate. This is mainly important if the funds are denominated in foreign currencies. SRp is the Sovereign Risk Premium which compensates the investors for the possibility of political instability in the country in which the funds have been provided. ORp is the Other Risk Premium e.g. the type of product, the type of market, etc. Using the above formula to assess the risks in this business, it is evident that the business risks are conducted well in order to achieve more results. Savills (VIC) Pty Ltd is faced with many risks that can create a good way of evaluating the degree of risk in the business. These measures of risk are easy to attain and they play positive roles in measuring the risks of the business. The analysis is conducted to assist in creating diversified criteria of measuring the degree of risk in the business. The Savills (VIC) Pty Ltd has insurance risks that area contained in the report. The risk is best described as the occurrence of something not expected in the business in and hence an insurance company is required to assist in to determine the overall benefits in the organization. These activities are created in order to influence the decisions of the insurance to cover the risks of Savills (VIC) Pty Ltd. The business organization has already been exposed to some risks and hence this will make it possible for the insurance company to involve the measurement of risks in a better way (Holmes, 33). Following all these risks that Savills (VIC) Pty Ltd is exposed to, it is clear that they need to evaluate and measure the real value of the organization. The various techniques used in this measurement of risks can also include variance. This can be used to identify the degree of risk in the unique model of accurate participation in the business. The variance is also a component of standard deviation and also the mean. If all these three techniques are combined together, then we can easily get the various risks as contained in the report. The report is necessary since risk assessment of Savills (VIC) Pty Ltd will also help in decision making by the managers. Based on these techniques, the managers can be able to decide on the investment activities to undertake and also meet the needs of the shareholders (Goss, 33). These are key aspects as they control the decisions of many other parties in Savills (VIC) Pty Ltd. The shareholders also rely on these techniques in evaluating whether their needs are fully met by the managers. The investors have also relied on these techniques to make investments in the company. Work cited Crouhy, Michel, Dan Galai, and Robert Mark. Risk Management. New York: McGraw Hill, 2000. Internet resource. Goss, James. Risk Assessment. London: BBC Books, 2009. Print. Hester, R E, and Roy M. Harrison. Risk Assessment and Risk Management. Cambridge, UK: Royal Society of Chemistry, 1998. Internet resource. Holmes, Andrew. Risk Management. Oxford, U.K: Capstone Pub, 2002. Internet resource. Issues in Risk Assessment. Washington, DC: National Academy Press, 1993. Internet resource. Read More