Risk Management Planning for Business - LRH Financial - Essay Example

Introduction Risk management is a valuable tool that enables firms to determine possible stressors that can affect project outcomes. Indeed, the uncertainties surrounding the environment can change the perspectives of organizations over conduct of certain projects (Stulz, 2003). Some risks are damaging and can alter the foundation that a project asserts to establish. Aside from the existence of risk, the complexity emboldened in it adds to the problems that companies encounter as the project cycle evolves. Logically, these unpredictable conditions contribute to the development and risk management as fundamental necessity. Practitioners have developed several approaches in resolving the adverse effects punctuated by risks. Through the years, systematic methods were devised to arrive at the best results and prevent the risks from recurring. Moreover, risk management has become part of the entire strategic planning and other similar corporate endeavors (Leland, 1998). In a more specific view, project development processes have included identification of risks as well as the provision of action plans to combat the risks. These improvements in the perception of project risks have provided leverage for organizations. The process of implementing risk management is procedural and requires intricate schemes. Ideal risk management suggests that the risk with the will create more loss and likely to happen is prioritized. Risks with low-key effects and with less probability are shelved for later actions. Based on this model, it is evident that it is difficult to create strategies to mitigate risks. It will be a challenge for firms to balance the risks and determine their impact and probability. Situational Assessment LRH Financial is global investment management company that serves as financial intermediary. The marketing group headed by Alana Shapiro has been contemplating on creating projects that will become the marketing initiative of the company. Initially, the company has targeted the media as the most viable avenue to promote the company. The specific project was designed to make the company a primary sponsor in golf and basketball events. It is expected that such exposure will make the company highly recognizable. In addition, the company will become a commodity among households and sports aficionados. Since golf and basketball are emerging sports, television viewers are highly interested in watching such games. Despite of this expected success, the project team has realized the tendency of risks to occur. Essentially, this will provide a better picture on the manner in which the project will perform. The team will be tasked to identify the different risks according to the nature in which the risks exist. The process will be rigorous as it will require time before the team finally arrives at project plans. It is, however, advantageous for the company to explore the possibilities of barriers to the project. For the project to succeed, the project team has to properly identify the risks and determine the level of prioritization. Although risks are difficult to quantify, the team has the capacity to determine the likely impact of these risks to the company. Precision and accuracy are important in this process. It is imperative for the project to create a viable action plan that will handle the risks and anticipate the occurrence of unknown risks. Risk Identification Because the project is dynamic, it is expected that risks will exist and eventually affect its efficacy. Before identifying the risks, it is important to discuss the nature of the project. The project concerns sporting events particularly golf and basketball to be sponsored by LRH Financial. Interestingly, the budget for the project is perceived to be adequate and the support from high-ranking officials is ample. Primarily, the name of the company will be exposed in the basketball and golf games. These will be done orally through the commentators and by print using banners and video graphics. Given the nature of the project, the team can identify several risks. Specifically, the team will highlight fifteen (15) risks that exist in different nature and occurs in varied probabilities. The identification of risks can be achieved through source and problem analysis. Basically, the former determines the internal and external nature of risks and the latter pertains to the threats that can stall the success of the project (Thomsett, 2002). Particular concepts discussed in risk identification are the economic, the political, the environmental, the social, and the logistic issues surrounding the project. To further specify the risks, the team has identified risks that are likely to occur. In the golf events for instance, the participation of crowd drawing players will be a risk. Moreover, other sporting events not sponsored by the company will likely compete with the audience expected to tune in to the company sponsored games. Budgetary concerns will become a major detriment because top-notch golf players tend to participate when the financial stakes are high. The uncertain preference of viewers is a concern because golf and basketball are not in the level with football and baseball. Another likely risk is the tendency of sports commentators to lack the communication power to effectively promote the company. When the event is not televised live, the time of broadcast will become a major problem since there are periods when the viewers of the program are not at all interested with the company and its services. In addition, it is important for the project team to consider the weather conditions that can affect golf games and the attendance in basketball arenas. The ability of the organizers of the events to attract fans to attend the events will be critical to the success of the project. The process of contracts forged by the company with the sports events organizers is a possible risk. Certain stipulations in contracts have to be clearly defined and implemented. Moreover, risks on events selection are vital for the project. Ultimately the project team needs to properly select the teams that will likely draw crowds when the games are scheduled. Miscellaneous expenses arise in the project and the project team has to be ready to avoid future problems. The manner in which the venues are selected will affect the project. Injuries and accidents suffered by players are less likely but sources of risks. In particular, the inability of players identified as star attractions will affect the viewers opinion on watching the events sponsored by the company. Quality broadcast is usually observed in games, but possible technical problems will be detrimental to the project. Finally, events that lead to the cancellation of games are highly unlikely but can happen given the unpredictable environment. Impact of Risks The assessment of the risks is crucial and requires several actions from the project team. The information provided by the assessment part will allow the project team to determine priorities and courses of strategies. Previously, the risks identified were weighed based on probability. In this section, the impact of each risk will be analyzed. It is expected that the risks will have contrasting effects. In addition, this section will determine the overlapping risks, which is also vital information for the project team. The non-participation of prospected players and teams in the sporting events will provide the most damage. Since the idea is motivated by the marketing principles, the presence of these players is critical. It has to be noted that teams and players have fan bases that regularly watch events played by these players and teams. When a particular player fails to show up, it is possible that several prospected viewers will be discouraged from viewing the events. That can potentially reduce the number of individuals oriented with the company. Losing a player because of several circumstances will make the project as useless cause since the target audience is not met. The cancellation of the events is another major detriment. Usually, viewers lose their patience and turn to other sport shows to satisfy their needs. Another possible outcome is that the company will spend more when the tournament is resumed. Both results are unwarranted and the excess expense is unnecessary. The company has selected media because of its cost-effectiveness and requires less work. Losing that resources and getting less is definitely a failure. Competition is an important aspect and an eternal risk for the project. For the event to meet its goals, a certain percentage of viewers have to be controlled. Unfortunately, basketball and golf are not the only sports played. More famous sports such as baseball and football command higher market base. Fans are more incline to watch the Super Bowl and World Series than the NBA Finals and Major Golf tournaments. It is possible that basketball games sponsored by the company are played while a football game is also played. Once the fans and viewers become more traditional and stick to football, the advertisements posted by the marketing group will become useless. Finally, contract disputes with events organizers and players affect the company, but only in the long-term. The impact of contract problems in the short run can be seen in the misplacements of company banners and the lack of enthusiasm showed by sports commentators when the company is being introduced as a sponsor. Evidently, the organizers will determine the success of the project with its capacity to attract players and select good games. Even without the contract, the company has to assert its own role in the process because it will invest and not simply spend. As observed, the effects of the risks were generalized. This was done to show overlapping risks that provide similar results. Lack of quality players and low purses for winners can affect attendance. Weather problems and emergency events can lead to the cancellation of the project. Moreover, the selection of broadcast times and events will make competition a stressor. Finally, the quality of individuals advertising the company and contract details can be problematic. Risk Management Plan In creating the plan, it is imperative for the project team to make the instrument specific, measurable, actionable, realistic, and time phased (Waart, 2006). The process in which the risks are addressed pertains to several key methods. Dorfman (1997) suggested that it is possible for the project team to tolerate, treat, terminate, and transfer the risks. Although a perfect approach is not available for the project team, it is possible that each risk will be determined according to priorities. This will be ascertained according to the probability of the risks and the impending effects of these risks. To improve the participation of players, the project team needs to identify better game formats and ideas that will motivate the players to attend the events. The idea of inviting the top 30 players in golf will inspire players to compete because of the prestige. Also, the project team can expand the budget to provide high paydays for winners and make the tournaments more rewarding. The issue of weather problems especially in golf is unpredictable. It is best for the project team to select a period when rain and other weather disturbances rarely occur. This will prevent delays and cancellation of the event. The company can directly communicate with the organizers of sporting events to set the needs of the project. First, the team needs to identify specific events that are crowd drawers and will not be competing against traditionally powerful sporting events. Second, the time allotted for the games to be broadcasted and the allocation of exposure of the company has to be mutually agreed considering the possible viewers at the specified time of broadcast. In addition, the project team has to identify specific individuals who are equipped with the skills and intangibles to deliver the aims of the company. This is related with the decision of the project team to be particular with live events and replays of the games. Viewers' preference is determined by the ideas discussed earlier like putting together the best players of golf in one tournament. It is also possible for the team select a basketball event that will pit the teams with storied rivalry. In this process, the risks are prevented to happen and affect the project. Initial actions involving risk prevention is crucial to minimize the occurrence of other risks in the future. Contracts are important because it is the legal guide of the partnership of the company and the events organizers. The items have to be clearly determined before the agreements are done. The project team has to ensure that the contracts are favorable for both parties. In the event that emergency situations take place, the company needs to provide other options. Location is important because it will allow the team to move the resources from the cancelled event to another company-sponsored sports event. These are valuable measures that will determine the success of the project in controlling risks. After the plan has been completed, the implementation stage has to be closely monitored by the project team. Information of the measures used and risks have to be documented. The evaluation part is important because it will enable the team to develop better approaches to risk prevention, mitigation, and elimination. Most important, it will allow the team to explore on other risks that have been overlooked in the previous stages. References Dorfman, M. (1997). Introduction to Risk Management and Insurance. New Jersey: Prentice-Hall. Leland, H.E. (1998). Journal of Finance. "Agency cost, risk management, and capital structure." Miller, K.D. (1992). Journal of International Business Studies. ":A framework for integrated risk management in international business." Stulz, R.M. (2003). Risk Management and Derivatives. Mason, OH: Thomson South-Western. Thomsett, R. (2002). Radical Project Management. Upper Saddle, NJ: Prentice- Hall. Waart, D. (2006). Supply Chain Management Review. "Getting SMART about risk management." Read More