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ASSESSING RISK IN BUSINESSENVIRONMENT
Pankaj Yadav
MBA 1st Sem
Roll No:- 120
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CONTENT
Definition of Business Environment and Risk.
The factors affecting on the functioning of an
Organization.Economical RiskPolitical RiskLegal RiskSocial
FactorTechnological FactorsDemographic Factors
Different methods of assessing risks.
Check list methodExpert based scoring methodEconomical
MethodRating and Ranking System
How to avoid such risks?
Conclusion.
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DEFINITIONS:-
What do you understand by the term Business Environment?
Ans:- Business environment may be defines as the
totalsurrounding which have a direct or indirect affect / impact on
the
functioning of the organization / business.
What is Risk ?
Ans:-
Risk is taking your chances.
Refers to the factors which affect the functioning anddecision
of any organization.
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FACTORSAFFECTINGBUSINESSDECISION/FUNCTIONING
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ECONOMICAL RISK/FACTORS
1. Economic Policies :- All business activities and
operationsare influenced by economic policies framed by
governmentlike industrial policy , fiscal policy , export-import
policyetc.
2. Ex:- Hike in export import duty will affect the rates of
the
item and the impact will be on the demand of the item ,aswe all
know there is inverse relationship between price anddemand.
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POLITICAL RISK
The political risk includes the policies and attitude toward
the business Stability of government also influences the
operations of
business . Example:- As India have n no of political partiesmany
times the ideology of political party also influencesthe operation
and functioning of organization.
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LEGAL ENVIRONMENT
This refers to the set of laws, regulations, which influence
thebusiness organizations & their operations. Everyorganization
has to obey and work within the framework oflaw.
Followings are the examples of few laws.
1. Companies Act 1956
2. Prevention of Food Adulteration Act , 1954
3. Compensation Act , 2002
4. Environment Protection Act
5. Customer Protection Act.
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SOCIAL RISK/FACTORS
Social Environment of business includes social factors
likecustoms , traditions , value , beliefs etc.
Ex:- In India , Indian Flag mean the pride of India , and if
anycompany uses Indian tri color on their packaging , it willhurt
the feeling of all Indian and the ve impact would be
there on the company where as in U.K or USA one can usetheir
flag in whatever manner or way want they to .
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TECHNOLOGICAL RISK
Technology keeps changing , hence the change in technologyand
technology upgradation is must for the companies toremain in the
market. It also includes the technologicaldifference in
countries.
Ex :- In USA and many other countries the electrical
appliances are designed for 110 volt where as when theyare made
for India , they are designed for 220 volt.
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DEMOGRAPHICAL RISK
Risks cause of the geographical presence of the
organization.
Ex:- One cannot open a wine shop in 50 meter radius of atemple ,
nursing home and a school. Because of thedemographical presence of
above said places near by forthe prospective location the
government will never issue
the licence .
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METHODSOFASSESSINGRISKINBUSINESSENVIRONMENT
1. Check List Method :- Checklist is a type ofinformational job
aid .
2. Expert Based Scoring Method :- Questioners are
designed to assess risk and send to experts for theirexpert
opinion .
3. Economic Method :- Used to qualify economic riskand related
aspect. Method is used for both Estimation& forecasting.
Econometric methods have highforecasting values
4. Rating & Ranking System :- System is very close toscoring
method. Countrys rating is done on the basis ofno. of factors such
as economic , financial , politicaletc. Weightage is given
according to its importance inthe environment risk.
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HOWTOAVOIDSUCHRISKS ?
Proper study of economical condition and status of thecountry
where the organization is planning to set up itsnew branch
Avoiding political sensitive products
Risk shifting strategies .Ex:- Insurance companies.
Proper study of the customs , traditions ,values and the
beliefs of the people.
Organization is abide to the Countrys Law. Ex:- Accordingto
labour law of UAE one cant employ children under 15yrswhere as in
India its 14 years.
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CONCLUSION
The functioning of every organization is influenced by
itssurrounding and the people nearby .The factorsinfluencing the
operations of any organization has beendivided into 6 broads
categories i.e Economical factors,
political factors , legal factors , social factors
,technological factor and demographical factor.
Measures and proper study has to be done before goinginto
expansion process . The study is called FeasibilityStudy .
Alternative and rescue plan should be kept handy.
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THANKYOUANDHAVEANICEDAY
