There are numerous types of risks that any organizations face, but this paper will only focus on four of them. Strategic risk involves threats that an organization might face when they fail to meet the client’s demands and expectations. Financial risk, on the other hand, centers on threats that are related to finances such as an increase in interest rates from a loan the organization is servicing (Sadgrove, 2016). Another risk is the operational risk that could be brought about by an internal factor that could lead to delayed or increased cost of production. Lastly is the compliance risk that is brought about by rules and regulations that the organization has to meet to comply with international, state, federal or municipal authority’s specifications.
A strategic risk could be disastrous to an organization that fails to adapt in good time and lead to its collapse. Consequently, a business that adapts to changes in its strategic plan has the excellent potential of thriving beyond competitors’ expectations (Harris, 2017). An example of an organization that did not change its strategic plan is Kodak. The company was unable to adopt digital camera in time, and this brought the dominant photography company down to its knees. Alternatively, Xerox embraced new technology and adopted laser printing, a move that has generated billions of dollars in revenue for the company.
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Just like in strategic risk, financial risk can have both positive and negative impact on an organization’s performance. Under this threat, there are several risks such as credit, liquidity, foreign exchange, and contingent risks associated with it and that have equal repercussions on a firm’s performance hence should never be undermined (Renz, 2016). Threats such as credit risk can impact on the ability of the organization to borrow or lend while foreign exchange could lead to unpredictable losses. Furthermore, financial uncertainty has tremendous consequences on an organization’s performance. It could affect the operations concerning the acquisition of assets and safeguarding of current assets.
Operational risk comes with similar challenges as strategic and financial risks. For instance, many companies take it for granted that the money allocated for operational activities is well spent. Operational risk comes into play if such funds are either embezzled, misused in such acts as having a team building session, used in paying company fines or dedicated to projects that are wrongly prioritized (Bromiley et al., 2015). Such deeds could lead the company to incur unnecessary losses and impact on its long term market value. In-line with the effects of such acts, the company might experience loss to shareholders and plummeting of share prices.
Companies are required to adhere to industry-related codes of ethics, laws, and regulations, and best practices. Therefore, for start-ups and businesses that are undergoing expansion to new markets, compliance risk could pose a challenge as some of these rules are voluminous and complex. These laws could be unexpected and as a result, complying with them lead to unforeseen costs for the business (Bromiley et al., 2015). As much as the laws are set to protect the consumer or other organizations, they translate to additional costs in staff training. To cushion against fines slammed for non-compliance, companies need to have clearly outlined and well-documented guidelines and practices.
The primary risk faced by my business is the strategic risk that comes in the form of technological variations. The company is an online business hence faces marketing challenges as the strategies that previously drove clients in flocks to the site no longer work. The company had adopted social engine optimization as the primary marketing strategy, but with Google’s algorithm updates, the method is less effective (Harris, 2017). Most of the company’s clients can be reached through an online presence hence this poses a more significant challenge as the traffic to the site is insufficient, and conversions have declined.
Google algorithms are a complicated system used to recover data from its search directory and provide the most accurate feedback spontaneously for a query. For its functionality, Google updates its site thousands of times each year, and some of the changes are major hence interfere with how social engines operate (Harris, 2017). Some changes like the one rolled out on September 8, 2017, impact on traffic and searched visibility while others like the Google quality update of August 19, 2017, has volatility on other sites. All in all, Google algorithm has a high impact on my website which uses aggressive marketing campaigns.
The threat is prevalent as it involves a direct reduction in the revenue of the business. With reduced income, the company is bound to fail in meeting its set goals and objectives (Renz, 2016). Similarly, the growth and development of the company have significantly decreased due to the lack of funds to finance some items in the budget. In short, the company is facing a likelihood of being bankrupt if the threat is not resolved in due time.
The issue can be resolved by finding keywords for the homepage and product pages of the company. The right keyword will help to increase the e-commerce's search visibility and traffic. Furthermore, performing research on the competitor and analyzing the keywords that they are targeting will also be helpful in my marketing team following suit (Sadgrove, 2016). For diversification purposes, the company shall market its products through social media platforms in both paid and organic approaches. With a new and improved marketing strategy, the company will be consistent in the quest to increase its market share.
For the success of a business, the management needs to constantly research to find out whether the company is operating in the right direction toward the achievement of its goals and objectives. This research will help the management to continually update on changes that need to be adopted or eliminated from the organization. With this kind of an approach, the company will be in a position to avoid unnecessary risks that might be costly.
References
Bromiley, P., McShane, M., Nair, A., & Rustambekov, E. (2015). Enterprise risk management: Review, critique, and research directions. Long range planning , 48 (4), 265-276.
Harris, E. (2017). Strategic project risk appraisal and management . Routledge.
Renz, D. O. (2016). The Jossey-Bass handbook of nonprofit leadership and management . John Wiley & Sons.
Sadgrove, K. (2016). The complete guide to business risk management . Routledge.
