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MBA402 Risk Management of the Trading. Com Company Assessment Answer

Assessment Information

Subject Code:MBA402
Subject Name:Governance, Ethics, and Sustainability
Assessment Title:Risk Assessment
Weighting:30%


Assessment Description

You are required to read the following journal article article:

1. How Risky is Your Company? HBR. May-June 1999 https://hbr.org/1999/05/how-risky-is-your-company

Ensure you click on the ‘Read More’ link to view the Risk Exposure Calculator.

You are also required to read the case study below about fictional company  Trading.com 

You must then prepare a risk assessment report on  Trading.com  using the Risk Exposure Calculator and specifically address:

  1. Pressure points due to growth
    1. pressure for performance
    2. rate of expansion
    3. inexperience of key employees
  2. Pressure points due to culture
    1. rewards for entrepreneurial risk taking
    2. executive resistance to bad news
    3. level of internal competition
  3. Pressure points due to information management
    1. transaction complexity and velocity
    2. gaps in diagnostic performance
    3. degree of decentralised decision making

You will be required to include a minimum of 15 references in your Risk Assessment Report at least 5 of which must come from academic journals or textbooks.

Assessment 2 Case Study – Trading.com 

Background

 Trading.com is a company that offers ordinary people share investment courses and ongoing mentoring services. The philosophy at Trading.com is that anybody can become a successful share investor if they have the right mind set, education, and support.

The company was established three years ago by successful share trader Jospe Drake. He has grown Trading.com into a medium sized business employing over 100 staff with offices in Sydney, Melbourne, Brisbane, and Adelaide. One year ago the company’s course sales increased dramatically and now its operations are expanding faster than the company’s capacity to hire and induct new staff. Jospe considers this to be a great problem to have and continues to hold the staff accountable for delivering strong financial performance.

But the company’s regional managers are not as thrilled as Jospe with the organisation’s surge in growth. The rapidly increasing need for more consultants has forced the company to lower their employment standards, hiring many new people with little to no previous experience in sales.

Business Model

 Trading.com generates leads by advertising free introductory webinars that explain how share investment can be used as a vehicle for achieving an early retirement. Webinar attendees are contacted after the introductory webinar by a consultant who invites them to a free face-to-face consultation. At this meeting the consultant attempts to sell the potential new client a share investment course priced at $10,000.

The consultants are managed by regional managers in each city. The regional managers report to a senior management team that includes Jospe as the company CEO.

Consultants

Consultants are given aggressive sales targets that are set by the senior management team with little or no input from either the consultants themselves or the regional managers. Until recently, the consultants were paid solely on a commission basis, that is, they earned a percentage of the

$10,000 course fee for each client that they signed up. Jospe recognised this remuneration structure was placing financial pressure on many consultants and so implemented a base salary of $30,000 per annum.

Each month the consultants are ranked by the regional managers according to their sales performance. The highest performing consultants receive special bonuses such as expensive gifts and luxury holidays. Because the consultants are pitted against each other like this, the company culture is highly competitive to the point of ruthlessness.

Regional Managers

Regional managers act without a sense of the larger corporate strategy. There are no well-defined information channels for sharing information either between themselves or with senior management.

The regional managers have also surrounded themselves with “yes” men and women, and do not hear much, if any, bad news. They tend to leave the consultants alone because they do not understand the sometimes complex language of the consultation process. Managers have limited access to performance data and spend much of their time trying to resolve flare ups or unanticipated emergencies. From the information they can access they tend to focus solely on course sales figures and their monthly performance reports to senior management are often late or not submitted at all.

Senior Management Team

A high percentage of Trading.com’s business is based on new courses.

The courses are developed by Jospe and the senior management team: a creative, risk taking group of share investors. In this regard they do not act like a team but are given a great deal of autonomy and so develop course content independently of each other, only returning to the group once they have created something of substantial value.

There is an increasing frequency in the failure of new courses.

Client Satisfaction

Client complaints are on the rise. Clients say they feel well respected and serviced by their consultants until they sign up for a course. At this point their consultant seems to lose interest in them and often fails to return their phone calls.

Risk Exposure Calculator

Be sure to include the Risk Exposure Calculator in your assessment answer.

Answer

                                                                                                                Assessment Title: RISK ASSESSMENT

Introduction 

This assessment presents the efficient risk management of the Trading. Com Company where a complete outline of the organization is distinctly provided to identify any anticipated risk, upcoming complicated situations or actions with the capacity to make a disturbance and inflict the working sphere by affecting the people engaged in work in a specific business unit. Post recognition, an in-depth analysis of the intensity of the risk is done, pursued by a few appropriate measures are capable of solving the matter. It searches and lists of the risk associated with an organization. It presents suitable techniques to overcome such danger. This process involves the identification of the problems via analysis.

Case overview

Trading. Com is an Australian company which was established by the share trader Jospe Drake. The company offers people to allocate investment round linked with good guiding practices. The growth of sale has resulted in the extension of the company beyond its limits. Though the company's profit has increased still, it is notable enough to sustain more employees. The dissatisfaction of the managers of the company has resulted in a decrease in the employment level by hiring workers with no experience of sale. This has prevailed in the organization in spite of the great success of the company. 

Pressure point (Growth)

The able senior high ranking authorities and the senior effective risk management of the company are always ready to confront the risks and also are too alert of the heading risks. In the case of Trading. Com setting the planning of the inner part of the organization is perfect against the outer origin likable competitors is important; the clue to the companies risen profits and income creation (Gulledge Jr, & Sommer, 2002). To follow good policies that can lay stress on growth and development. Proper management can lead to good sales, and financial interest objectives are considered quite aspiring in the business cycle. The event can be gained if it is delivered without organizational resistance. The pressure to perform is contrary to corporate victory.

Performance pressure

The manager’s sets sales targets, and the employees meet that target. These targets are quite assertive. The employees are ordered from the superior authority to achieve objectives without being given with any guidance. This creates fear of threat in their professional position and the fear to recompense for not meeting the sales target. This might affect their performance (Leonidou et al., 2017). They are judged monthly according to their work. For performing well in their work, they earn gifts from the business organization. These gifts might include luscious prizes or any new holiday packages.

Moreover, the good performance of the co-workers and their received reward of spot incentives and bonuses and other facilities can fuel the competition (Begenau, 2018). It exerts pressure over them to rank good at the cost of their morals and also of companies' policies. The notion of hitting sales overpowers their mind, and they set themselves forward to achieve the target set by the business organization. 

Expansion rate

There remains a proper allocation of services at the start of a business. As referred earlier, the given company sales have increased since last year, which has gone beyond the limit of the company to hire a capable employee. This has come as a serious matter, and it is the responsibility to give an excellent performance. There is no data of effective management in aiding such situation so quick expansion rate can result in an extension of poor quality of services. This can instill the control of the company to check and calculate the percentage of the spread of the business realm than their capacity in hiring more people and charge in them. 

The inexperience of key employees

In the given company the organizational course sales very rapidly took a steady increment thereby making it is business realm disperse and disseminate very quickly that had gone beyond the limit of the business organization to hire new staff. The initiative of spreading of company's kingdom beyond the capacity to hire experienced employees created some problems as the staff employed is ineffective. If many people involve themselves in the same work, then it gets a challenge to work. Unskilled workers can lead to high risks in a company (Picken, 2017). Being new, they take more time to imbibe companies’ mission and vision. When it comes to the senior managers, most of their functions depend on new strategies or methods which bear the risk of success or failure. So it is needed to create proper policies that will have the least probability of loss (Meier, Favero, & Zhu, 2015). And employees need to their efforts to turn the risk to a victory. More specifically, the insufficient information source that aids to change the knowledge and data’s with the management or more definitely are with them.


                       Figure 1: risk exposure calculation - Pressure grades due to development

                                                                    (Source: self-developed) 

Pressure points (Culture)

Intermittently, people in a conciliator business like the given company incur money in the perilous journey and assertive sales target without any expectations. This might involve the risk of product failure, and the scale of such uncertainty is increasing in present days. The easiest way to assassinate the pressure points relating to a company culture on the innovation of the products by hiring risk loving people (Su, Baird, & Schoch, 2015). Every part of the management goes through these, as noted in the profundity of literature.

Entrepreneurial risk-taking rewards

Profitability has the unique capacity to provide excellent business frequency. Without the risk of innovation in business, the vitalizing boldness in business never thrives. The given companies extend gifts and rewards to the staffs who meet the sale targets properly. This is done to incite the energy of the teams to work more dedicatedly to increase companies' sales (Bromiley, 1991).  Good sales would lead to a good profit from the company. In the given company, the commercial structure was improvised by the CEO since the staffs have received their wages as commissions. This had exerted high financial pressure on the company.

Executive resistance to bad news

The regional managers of the given company are always surrounded them with yes employees and rarely listen much about any lousy press because of their great incapability to pioneer the employees properly. There is an absence of understanding of the complications inherent in them (Spira, & Page, 2003). They lack proper access when it comes in the performance of information and records. In the given company, there lay some essential factors, which permits the executives to create resistance about bad news. The management committee is not endowed with proper data’s about any significant change that could exist in the environmental sphere of competition. 

Level of internal competition

 In this company, the persons who are involved in the complicated managerial job are under heavy pressure on high inner performance.  Frequently its bets with the specific line of business that consists of assets and also their company image of growing their total production.  Risk and reward which lie beneath the probability of victory sometimes are failed to be recognized when allocated evenly (Noe et al., 2017). The managers rank the workers according to their gross productivity in the schedule of working hours. The competitive environment is present in every field though it intrudes specific policies and excessive sternness. It is the general duty of the managers to perform efficiently and make ranks of workers according to their products keeping in mind to deduce the emotional competence.

Risk exposure calculation- Culture resulting in pressure points

Figure 2: Risk exposure calculation- Culture resulting in pressure points

(Source: Self-developed)

Pressure points (information management)

The flow of steady and regular information constitutes the most critical determinant in any business organization, irrespective of their non- external managerial force, the resemblance of which is more when their data channel is not sufficient.

Transaction complexity and velocity

With the effort to counter this pressure point, the managers of the given company must ask themselves whether they are capable of achieving a regular understanding of the severe contraries corresponding to the burdened corporate deals. When the innovative product leads the company success, this also increases the velocity and intricacy of the company (Reason, 2016). This situation can make the people anticipate the kind of related risks along with the factors which arise from the complex transactions. Therefore the management must evolve ways to maintain the regular flow of business. They must keep regularity in the industry. The managers in the given company have limited scopes to speculate the transaction due to lack of proper data (Pearlson, Saunders, & Galletta, 2016). Progress in the production can also result in the increment of the total transactions velocities. As a result, the management information system is troubled to a high level. In correspondence to the research, the regional, as well as the superior authorities, very frequently fail to express the right language in respect of the complicated language in the conversational or consultation process.

Diagnostic performance gaps

Performance gaps in any intermediary business allow the superior panels to examine the individual business operations distinctly. The thought of victory creates stresses in the reporting module of the business organization with the capacity to effectively measure the distinguished performance shifting. About this, all the necessary data's are collected either by transmitting calls by phone and talking or just by walking here and there. Both of these methods involve a significant amount of time in getting a divided task done, which is controlled individually by the regional managers (Liu, 2015). In the given company, the keenest and the most important loopholes in the performance are genuinely evident because the workers are always left lonely by the members of the management. They are left alone because of their personal incapability's and not sufficient knowledge or wisdom about the conversational processes. Moreover, these are featured by the restricted access to the report of the performance and lay more stress on the time to solve the imminent or anticipated threats. They have set their focus more attentively on the sales data and the corresponding opportunities also.

Degree of decentralized decision making

 The given company with their decision-making team, which has the full autonomy to make any decisions sometimes lead to decentralize the members of the regional management body, which sometimes does not hold proper active business organizational policies (McNeil, Frey, & Embrechts, 2015). They mediate their courses with full autonomy because of the insufficient and unavailability of not enough data channel or routes.  Further the faith on the high percentage of new directions in the quest to search astonishing autonomic deal, enabling them to mediate their courses whimsically. There is no existence of uniformity due to the continuous carrying away from such practices. This is also written in many pieces of literature.

Risk exposure calculation- Grades of pressure due to information management

   Figure 3: Risk exposure calculation- Grades of pressure due to information management

                                                 (Source: Self-developed)  

Risk exposure calculator

Many business organizations make use of genuine or original propositions to formulate the resemblance of the business sector to become aware of any not anticipated or predicted disturbances that could put the company into a threat. It can threaten the company franchise and smooth regular running.  This is commonly referred to as risk exposure calculation (Ansoff et al., 2018). This sort of calculation is presented well presented in the companies' free use in many branches of studies. The use of it involves each pressure point with one as the lowest and five as the highest. The following is the result of the given business organization. It is presented with the possible elucidation in a business organization.  

Overall score of risk exposure calculation of trading

                  Figure 4: Overall score of risk exposure calculation of trading.

     (Source: Self-developed) 

Total score: 34

Caution zone is the zone where the given business organization falls. It is this place or area where the management requires being alert about the impending or upcoming risk.

Conclusion

The out comings of the risk exposed calculator very clearly and show the grading and location of the business organization in correspondence with the various grades owning to development, culture and information management associated with the unknown risk factor.  Being a CEO of the company, Drake must recognize the presented pertinent risk that has the probability to get amid the steady business dynamics, thereby reflecting their net revenue creation.

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