ASSESSING RISK IN BUSINESS ENVIRONMENT

Pankaj Yadav MBA 1st Sem Roll No:- 120

CONTENT
Definition

of Business Environment and Risk. The factors affecting on the functioning of an Organization. Economical Risk Political Risk Legal Risk Social Factor Technological Factors Demographic Factors

Different

methods of assessing risks. Check list method Expert based scoring method Economical Method Rating and Ranking System

How to avoid such risks? Conclusion.

DEFINITIONS:What

do you understand by the term Business Environment

Ans:- Business environment may be defines as the total surrounding which have a direct or indirect affect / impact on the functioning of the organization / business.
What

is Risk ? Risk is taking your chances.

Ans:Refers to the factors which affect the functioning and decision of any organization.

FACTORS AFFECTING BUSINESS DECISION/FUNCTIONING

ECONOMICAL RISK/FACTORS
1.

Economic Policies :- All business activities and operations are influenced by economic policies framed by government like industrial policy , fiscal policy , export-import policy etc. Ex:- Hike in export import duty will affect the rates of the item and the impact will be on the demand of the item ,as we all know there is inverse relationship between price and demand.

2.

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 parties many times the ideology of political party also influences the operation and functioning of organization.

LEGAL ENVIRONMENT
This refers to the set of laws, regulations, which influence the business organizations & their operations. Every organization has to obey and work within the framework of law. Followings are the examples of few laws.
1. 2.

Companies Act 1956 Prevention of Food Adulteration Act , 1954

3.
4. 5.

Compensation Act , 2002

Environment Protection Act Customer Protection Act.

SOCIAL RISK/FACTORS
Social Environment of business includes social factors like customs , traditions , value , beliefs etc. Ex:- In India , Indian Flag mean the pride of India , and if any company uses Indian tri color on their packaging , it will hurt the feeling of all Indian and the ve impact would be there on the company where as in U.K or USA one can use their flag in whatever manner or way want they to .

TECHNOLOGICAL RISK
Technology keeps changing , hence the change in technology and technology upgradation is must for the companies to remain in the market. It also includes the technological difference in countries. Ex :- In USA and many other countries the electrical appliances are designed for 110 volt where as when they are made for India , they are designed for 220 volt.

DEMOGRAPHICAL RISK
Risks cause of the geographical presence of the organization.

Ex:- One cannot open a wine shop in 50 meter radius of a temple , nursing home and a school. Because of the demographical presence of above said places near by for the prospective location the government will never issue the licence .

METHODS OF ASSESSING RISK IN BUSINESS ENVIRONMENT

Check List Method :- Checklist is a type of informational job aid . Expert Based Scoring Method :- Questioners are designed to assess risk and send to experts for their expert opinion . Economic Method :- Used to qualify economic risk and related aspect. Method is used for both Estimation & forecasting. Econometric methods have high forecasting values Rating & Ranking System :- System is very close to scoring method. Countrys rating is done on the basis of no. of factors such as economic , financial , political etc. Weightage is given according to its importance in the environment risk.

1.

2.

3.

4.

HOW TO AVOID SUCH RISKS ?

Proper study of economical condition and status of the country where the organization is planning to set up its new 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:- According to labour law of UAE one cant employ children under 15yrs where as in India its 14 years.

CONCLUSION

The functioning of every organization is influenced by its surrounding and the people nearby .The factors influencing the operations of any organization has been divided 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 going into expansion process . The study is called Feasibility Study . Alternative and rescue plan should be kept handy.

THANK YOU AND HAVE A NICE DAY