a) Risk identification is the process of listing potential project risks and their characteristics. Risk identification plays a key role in the success of managing risk. Failure in the identification of risks can cause inadequacy in the whole process of risk management which then leads to non-achievement of organizational objectives. Tools and techniques facilitate the process of identification, and need to be adopted on the basis of firms’ characteristics.
Assume you have just been recruited as a financial risk manager at your dream company and one of your task on the first day of reporting at work is to perform risk identification and assessment activities and filter inessential or false threats and focusing on company/project-related risks in order to make the project/company less risky. Identify a company of your choice and conduct a risk identification process using at least 3 tools of risk identification. The risks should be unique to the company of your choice. In addition you should explain the merits and demerits of the risk identification tools you shall use. (50 Marks)
Allianz has always been my dream company. It is one of the biggest financial companies in the United States. I was recruited in this company recently as a financial manager. Currently, I have been asked to perform risk identification for the company. Tools for the risk identification that will be used are; Delhi technique, SWOT analysis, and checklist analysis. For the Delphi technique, a group of experts is anonymously consulted. A list of information required is sent to the experts and responses are compiled. Thereafter, results are sent to them for further review until a consensus is reached. For the SWOT analysis, strengths, weaknesses, opportunities, and threats are risks are determined. Finally, the checklist analysis is used to identify more risks for a project in accompany. The financial risk identified about the company are liquidity risk, funding risk, and commodity price risks. Merits of Delphi include its versatility. It can be widely used in many environments, e.g. industry and business predictions and government planning. It has the disadvantage of being difficult for researchers in designing and effective study. Swot analysis has the merits of simplicity and cost-effectiveness. Its’s disadvantages include ambiguity; also, it has no weighing factors. The advantages of checklist analysis incorporate motivation since it motives us to start action and finish tasks. Also, it is productive because one can complete repetitive tasks efficiently and promptly. However, it has some advantages that include lack of explanation and the fact that no appraisal method is perfect.