MBA402 Risk Assessment and Probable Hazards of Trading.com Assessment Answer
Governance, Ethics, and Sustainability
Assessment Title: RISK ASSESSMENT
This study provides the well-constructed risk assessment of the company Trading.com where a complete overview of the organisation is minutely provided to carefully identify any probable risk, intricate upcoming situations or events with the overall potentiality to create severe disruption and harm the workplace affecting the people working in that particular business unit. Post identification, a detailed analysis of the severity of the risk is done, followed by a few relevant measures effective enough to help mitigate such issues in the best probable way. Pertaining to the same, the very concept of Risk Assessment critically identifies and lists certain risks and potential hazards that can disrupt the organisation (Bromiley 2015). Furthermore, an organisation establishes a procedure which includes effective risk analysis to impeccably determine each relevant factor or determinant pertaining to the probable hazards (Formentini and Taticchi 2016). By these ways, any small sector also can assess suitable ways by which the hazards can be controlled or eradicated.
2. Case overview
Trading.com is a moderately sized business unit extended in multiple Australian countries. It was established by a renowned share trader Jospe Drake. The company delivers common people to share investment courses connected with effective mentoring practices. The course sale of Trading.com has experienced dramatic increment which has made its functionalities undergo remarkable expansion more than the capacity of the company to recruit new candidates; which the founder has considered as quite a serious issue. Despite receiving enormous success over the last year, some of the company’s regional managers are dissatisfied that has led to the lowering of the employment standards by recruitment of people without adequate sales experience.
3. Pressure point (Growth)
For Trading.com, the prospective higher authorities, as well as the senior management, are always solicited to be prepared every time and remain extra aware whenever it actually comes to feeling any alarming sign of an upcoming risk or danger (Boatright 2017). Especially in the case of Trading.com setting the architecture of the internal organisation accurate against external sources like potential competitors is essentially the key to the company’s increased profit and revenue generation and above all business operations consistency and this attribute has often been critically analysed in different studies (ElGammal, El-Kassar and Canaan Messarra, 2018).To pursue a few most effective strategies that evidently emphasizes growth and future progression, any company's hardcore managerial activities often set sales and profit goals considered to be quite ambitious from the very business perspective. Also, such growth is achievable for people with the capacity to deliver it without any organisational hindrance. With time, the same leads to the pressures for performance and this refer to the paradox of consistency and success of any organisation (Hbr.org 2019).
3.1 Performance pressure:
From the provided study, in the organisation, their respective consultants encounter sales targets which are often quite aggressive. They are directed by the higher panels without providing any relevant input to guide them. This, in turn, creates performance pressure causing them to fear that any inability, particularly from their end in meeting the organisational expectations, could jeopardize their professional status and above all compensation. Also, they are judged monthly as per their functionalities pertaining to sales. The best performers receive undivided bonuses including rewards and luxury vacations. This further facilitates severe competition which is invariably observed in many sectors (Nguyen et al. 2018).This makes them feel burdened to top the competition even at the cost of ethics and morals of the individual as well as company policies.
3.2 Expansion rate
Generally, it is especially when a business blooms, there exist a consistent distribution of fresh services (Leese 2017). Mentioned previously, the given company’s sales area has been facing phenomenal increment specifically over the past year which subsequently went beyond the capacity of the company to recruit potential candidates newly. This fell under serious issues and Drake has been noted to remain the continuity based on the company’s holdings of their liable candidates with the intent of delivering very strong and effective economic performance. Now since any managerial activities have no effective record of aiding them with any necessary input, such rapid expansion rate might infrequently get overload resulting in quality sacrifices of their services. This should provoke the given company’s management to minutely analyse the rapid dissemination of the business domain than their capability in recruiting more people and invest in them.
3.3 Inexperience of key employees
In Trading.com, the organisational course sales drastically took a steep increment thereby making their domain spread and expand very fast that went beyond the capability of the organisation to recruit new staff. This marked the initiation of certain problems since a vast majority were hired without adequate experience in sales and therefore were inefficient and comparatively incompetent than their contemporaries. Such attributes are often noted pertaining to general organisations and maintenance of governance (De Graaf and Paanakker 2015). In general, if many people converge to any specific domain together, it gets troublesome to go for a proper background check and relevant qualifications. This results in hiring people without sufficient skills to respond to certain allocated tasks (Hbr.org 2019). Inexperience and extreme naivety gradually bring the probabilities of huge additional risks, in any company, Trading.com.in this case. Naive people take more time to gather complete information about the company’s internal values. When it comes to the senior managers in Trading.com; most of their operations rely on new courses which invariably have an enhancing frequency of failure. For example, the company's consultants are generally given a tough sales target as set by the management without adequate input from either of them (Soltani and Maupetit 2015).Their regional managers conduct organisational commitments without any proper corporate strategic sense. Again, there are unclear information channel that helps to exchange knowledge and valuable data with the prospective management or more specifically within them.
In Risk Exposure Calculator, there are five degrees of risk, 1 shows low risk and 5 means high-risk chances. It is needed to grade the risk in terms of 1 to 5 degree and it is also important to add up the risk degrees. Lastly, three types of pressure points, growth and culture and information management are added up to understand the risk likelihood and occurrence within the organisation.
Figure 1: RISK EXPOSURE CALCULATION-Pressure points due to growth
(Source: Self Developed)
4. Pressure points (culture)
Frequently, people in intermediary businesses like Trading.com generally invest hugely in risky ventures and aggressive sales target without any expectations. In this regard, a gradual ascending trend in the frequency of the new product failure or highly unsuccessful deals is a tentative yet alarming sign that risk-exposure has been rising (Hbr.org 2019). The most likely way to assess pressure points corresponding to a company culture attributes to the accurate percentage based on product innovation efficiently by recruiting risk-taking people. In general, every management sector encounters these as noted in a plethora of literature (Hussain, Rigoni and Orij, 2018).
4.1 Entrepreneurial risk-taking rewards
As known, generally, prosperity has the exclusive potentiality to fortify a business consistency (Brettel, Chomik and Flatten 2015). Without entrepreneurial risks resulting in innovation, business dynamics cannot survive. Because of Trading.com’s consultants undergoing aggressive sales targets, they reward and potentially try to honour, the best performances via rewards. The rewards include exclusive bonuses that include luxury holidays and costly gifts as well. But this also corresponds to the fact that as the prospective rewards with respect to entrepreneurial activities increase, so does the risk exposures as well (Hbr.org 2019). Also, the annual financial structure was modified by the CEO as their consultants used to obtain remuneration as commissions which were imposing a high economic burden on them.
4.2 Executive resistance to bad news
Trading.com’s regional managers invariably surround them with “yes” employees and hardly hear much about any bad news because of their extreme inability to effectively guide them. They lack an adequate understanding of the complex language. Also, they lack adequate access when it comes to performance data and archives. In the given sector, there exist a few primary factors, which allow the executives of any moderate company to develop a shield or resistance corresponding to bad news. Again, their senior and regional management are devoid of essential inputs that provide information about any critical change that might exist in such competitive environments.
4.3 Level of internal competition
In Trading.com, people under intricate managerial activities feel tremendous pressure pertaining to heavy internal performance. Very often it wagers with particular business dimensions including assets and also their brand image to enhance their overall performance. Specifically, both underlying risks and rewards fail to be categorised into even distribution in the said company. The managers assess the consultants monthly and rank those according to their course performance of sales. They reward the highest performers with special bonuses which include expensive gifts along with luxury holidays. This naturally crops up a strong internal competition wherein Trading.com’s culture plays a magnificent role. Such competitive surroundings are significant even if it leads to aggressive strategies and ruthlessness. In general, any prospective senior management is expected to consider certain ways and valuable assessments dealing with how accurately performance and operation management are being conducted (Ledin and Machin 2016).Every candidate is to be ranked as per individual merits to reduce the prospective chances of severe internal competition which is progressively evident in the said company due to special bonuses and other expensive rewards system.
Figure 2: RISK EXPOSURE CALCULATION-Pressure points due to culture
(Source: Self Developed)
5. Pressure points (information management)
In any organisation, irrespective of their internal managerial dynamics, steady information flow constitutes the most significant determinant (Yigitbasioglu 2015) the likelihood of which is more when their information channel is insufficient.
5.1 Transaction complexity and velocity
With an initiative to calculate this pressure point, the managers of Trading.com must question themselves if they are able to gain a thorough understanding of the intricate complexities pertaining to the heavy corporate deals. Generally, the complexity and related velocity of any organisation automatically increase when product innovation mediates organisational success(Eisenhardt and Bhatia2017).Such situations enable people to be fully capable to comprehend the exact nature of underlying risks along with its determinants that arise from such complex transactions(Lawton et al. 2016).Thereby, the management chalks out common ways, to keep a steady control over them with the sole intent of keeping the business flow intact. But as per the study, the regional managers, as well as the higher authorities, very often fail to comprehend the complex language with respect to the consultation process. Furthermore, In Trading.com, the managers have very nominal opportunities to minutely inspect all the transactions due to inadequate information and limited access to business data. Business prosperity might also correspond to a fine enhancement of the overall dimension and transaction velocities. This, in turn, burdens the management information systems to a great extent.
5.2 Diagnostic performance gaps
For any intermediary business, performance gaps allow the higher panels to carefully scrutinise individual business operations (Meier, Favero and Zhu 2015).Success pressurises the reporting system of the organisation with the potentiality to measure significant performance variables. Pertaining to this, all key information is acquired either via telephonic conversation or just by walking around (Tseng 2016). In any process, a considerable time is invested in getting an allocated task done which is regulated solely by the regional managers. In the provided company the profound and most prominent gaps in the performance are evident because the subordinates are invariably left alone by the management due to their personal in capabilities and insufficient knowledge about the consultation methodologies. Furthermore, these are characterised by limited access to performance reports and emphasise more time to mitigate unforeseen emergencies with no immediate utility. They focus all their attention on sales data and prospective figures. Also, their monthly performance records have reports of frequent late submission or remain unattended completely.
5.3 Degree of decentralised decision making
Trading.com, with their autonomous decision making, leads to decentralisation was in the regional managers lack effective corporate strategies. Inadequate information channel, the reliance on a high percentage of new courses explore remarkable autonomic deal enabling them to mediate their courses autonomously. No uniformity exists due to such practices and often noted in many pieces of literature (Zhang et al. 2017).
Figure 3: RISK EXPOSURE CALCULATION-Pressure points due to information management
(Source: Self Developed)
6. Risk exposure calculator
Most organisations make use of authentic approaches to modulate the likelihood of the sector to be conscious of any unforeseen disruptions that might threaten the company's franchise and smooth operations (Safford et al. 2015). This is commonly called risk exposure calculation evidently exhibited their rampant use in many studies (Khameneh, Taheri and Ershadi 2016).Its use comprises of each pressure point with 1 as the lowest and 5 as the highest. For the given organisation, the following is the result and its most probable interpretation.
Figure 4: Overall score of Risk Exposure Calculation of Trading.com
Total score: 34
Trading.com falls into the Caution Zone where the management needs to be added conscious about upcoming risks.
The findings of the Risk Exposure Calculator clearly show the ratings and position of the company pertaining to differential pressure points owing to growth, culture and information management associated with underlying associated risks. Drake must identify these prospective risks that have the potentiality to come in between the steady business dynamics thereby impacting their net revenue generation.