A new business is most likely to face different categories of risks. An upcoming company may face risks including financial losses, reputational damage, customer and employee churn, technical environment, information security, and economic and regulatory changes. Financial risks are dangers that the business is likely to face due to a lack of funds to run its operations or mismanagement of the available funds. Financial risks affect the firm’s budget since some less important activities have to be controlled and priority given to the most influential businesses. Every business should have a discretionary fund that helps it overcome any losses attributable to financial risks. Effective management of finances, in addition, allows enterprises to control the frequency of financial losses.
Another type of loss likely to occur in a business is reputational damage. This risk harms the firm’s image and prevents effective communication and advertisement to potential customers. Leadership issues, data risks, and social media presence are some of the causative agents of reputational risk. These activities influence the business culture and structure, which may not be conversant with the customers (Edwards et al., 2020). Furthermore, poor management dissatisfies both the employees and the consumers, thus affecting a crack in the brand image. The business should ensure effective management to protect itself from having a reduced brand name. Furthermore, it should proactively ensure that leaders experience satisfying relationships with their juniors and the customers. An efficient leadership gives the business a sense of direction hence protecting its image since there is satisfaction and effective delivery. Reputational risks occur in many companies and require wise management to ensure that the brand image is safe from external and internal destruction.
On the other hand, technological risks are those that the business faces due to the technology change; hence a company’s current specialized appliances become outdated. Consequently, the industry experiences difficulties promoting its products since they are of low quality than competing brands. It is essential for businesses always to set aside an amount of money that will help them transform from one form of technology to the other, even when change occurs, to ensure that their services and products are competitive (Dandage et al., 2018). A technological risk reduces the firm’s competitive advantage, hence the need to possess effortless transformative power. Having updated technical systems helps the firm engage in activities that attract more customers since they have a competitive advantage. The martial arts facility should have all types of equipment that are up to date and recommended by the government to possess high potential and power to compete with other existing training centres.
Other business risks associable with many upcoming businesses are consumer and employee churn. This is where customer and employee turnovers are lower than the company had projected. A decreased employee turnover makes it challenging to offer services in a martial arts studio since the environment may not be sustainable. Employees help in the running of the nosiness. For example, cleaners within the organization eliminate all the unnecessary materials that may affect the businesses’ service delivery process (Wu et al., 2018). A clean environment protects the health and safety of all participants in the facilities; hence the failure of cleaners to attend to their duties is an unfavourable activity for the business’s progress.
Moreover, a loss of trainers to attend training sessions pauses service delivery to the customers since the company cannot run without trainers to guide the trainees on what actions to conduct. Consequently, the failure of the trainees to attend the training sessions as expected by the management is another business risk that may affect its progress significantly. Lack of enough customers reduces the profit margins hence failure in business growth. Such business risks are controllable by creating stringent laws to manage attendance and proper marketing to attract customers.
Risks
Any risk that a business faces is classifiable into positive and negative business risks. Positive risks affect the business performance in a beneficial manner where the attributes gained affect the business growth and development constructively. Positive dangers of the new martial arts studio in Bellflower, California, include economic risks, competitive risks, technological risks, project risks, and supply chain risks (Urbański et al., 2019). Financial trouble may be favourable for a business since a small expenditure on employees and other facilities help widen the profit margin since the number of customers gets retained. In contrast, the financial spending of the business reduces. Many companies target to decrease their expenditure on business operations and seek to increase their customer base to widen their profit margin hence the need for economic risks. The financial risks may arise due to the failure of employees to turn up, therefore reducing spending.
Competitive risk is another essential positive risk for the martial arts studio. Though many businesses wish to have a competitive advantage over their rivals, they do not intend complete elimination of competition. This is so because lack of competition means that the business has total control of the market and is treated by the government and customers as a monopoly hence high taxation and other regularities to contain the price through the price ceiling and price floor (Urbański et al., 2019). The existence of competition within the market is essential since it pushes the brand to offer more quality services. Such competition protects the firms from strict government laws that demand more funds from the business. It ensures that the customers choose preferences and get satisfied with different firms hence controlling the strain on the few resources owned by a single firm. Therefore, competition may be a constructive business risk that the martial arts studio may face.
Additionally, the new martial arts studio may face a technological risk where the potential risk positively affects the business. The extension of the demand for technology attracts the invention of new facilities that eliminate some cultural activities that hinder effective service delivery (Wu et al., 2018). The development of artificially intelligent robots to direct learners during training facilitates the business in controlling the spending on labour and other activities that do not need a human presence to run. Technological risks, therefore, help promote efficiency and minimize the company’s spending on unnecessary human resources than may be conducted by a robot or machine. Technical chances that enable manage business activities are essential and may be regarded as positive business possibilities. Specific risks identified and can result in disruption to the project goals and timeline are listed below. It is imperative to address these risks and develop risk responses to keep the project on track and within budget.
Qualitative Risk Analysis (Week 3)
The qualitative analysis table indicates the probabilities of different risks that affect the business negatively and how the opportunities influence the industry. There are many risks associable with martial arts studios, including injuries to the members. The right side of the threat column represents dangers that enormously affect the business under research and may include some like financial risks, management risks, and many more (PMBOK, 2017). The bottom right section of the matrix indicates high impact risks at lower probability, whereas the top right shows higher possibilities. On the other hand, the left side of the probability-risk matrix displays low-impact hazards such as bruises of the martial art studio members. The bottom left shows low impact and probability, while the top-left displays high probability and low impact risks.
Conversely, on the opportunity’s column, the right side indicates powerfully meaningful opportunities and the magnitude of their impact based on their occurrence chance. A more profitable opportunity appearing is highlighted on the top left of the matrix, but if the probability is low, it is on the lower left. Nevertheless, a low likelihood and less impactful opportunity lie on the bottom right, while a low impact opportunity with higher frequency is on the top right.
Quantitative Risk Analysis (Week 4)
The influence diagram graphically represents the relation model between different dependencies. It contains more details than a tree diagram since it means data in the form of arrows, rectangles, circles, ovals and many more. The different shapes represent unique forms of information that relate to the entire body. For instance, arrows depict the influence of some variables on others. On the other hand, rectangles portray independent variables, also known as decision variables. Circles and ovals indicate uncontrollable or intermediate variables and dependent or outcome variables. Influence diagrams are complex to use but contain all the information that one may require to determine the risks attributable to an event and their impacts. Therefore, it is the most informative model to determine the possibilities that may affect West Coast Martial Arts Training Academy.
An influence diagram is a compact or graphical way to view the factors involved in the decision-making processes. It indicates three main categories of relevant information and influences their decisions. The influence diagram depicts the vital elements as the available decisions, uncertainties, and the objectives of the entire decision-making (Edwards et al., 2020). The findings are variables that the person in charge of the process may alter frequently based on their projections about the future. The uncertainty is a chance variable that the person may not determine due to the lack of complete information. In contrast, the objective is the unit for measuring the outcome of the decision made by the manager. A general variable that is a function of the variable it depends on also helps make effective decisions. The arrow used in the influence diagram denotes the action which the decision-maker decides to use. Influence diagrams are essential in quantitative analysis since they show the dependency among variables.
Risk Response Planning (Week 5)
There are different approaches that the business management may use to face and overcome the risks that the initiation process of the martial arts studio faces. Based on the firm’s outcome from the individual threat or opportunity, the managers may use mitigation, acceptance, transferring, avoidance, exploitation, sharing, enhancing, and escalation as the main strategies for curbing or taking advantage of risks. The business may use mitigation to control the impact of lack of enough financial support by avoiding expensive materials and activities that limit the amount of capital presence. The finance department must create cost minimization processes to ensure that the available finances support onlyy basic requirements. Financial literacy is a critical component that the business’ management must have to avoid unnecessary expenses.
On the other hand, finding equipment within the budget is a difficulty that may arise for the business hence requiring vendors that can only supply under the projected statement. The company may avoid the vendor’s risk by avoiding expensive ones and focusing on those willing to deliver within the management’s budget line (Edwards et al., 2020). Avoidance eliminates vendors that demand excess payments for their deliveries. The most appropriate means to deal with supply issues that may lead to product and material delivery delays is by running mitigation processes. The business must ensure that it makes its orders in advance before the member of the martial art studio entirely consumes the present ones. Prior ordering helps mitigate the chances of delays resulting from supply issues since they are dealt with by the concerned parties before there are delays.
The regulatory boards’ delay in business licensing is a threat that affects many upcoming companies by pausing the initiation process. Since the management has no control over these governmental agencies, they may only deal with the issues at hand by accepting (Wu et al., 2018). The administration must understand that many other new businesses are undergoing registration; hence, it may take time before the government agencies fully assign them licenses to propagate their operations. The business’s other risks are controllable using the following means as dictated in the table below.
The martial arts studio’s management should exploit the leasing opportunity since it saves from the process rather than building a new structure to host the facilities. Exploiting increases financial management by reducing the amount of money the firm spends on creating unique buildings (Edwards et al., 2020). Using the current opportunities is relevant since the finance department may redirect the funds saved through leasing to other essential business plans. Additionally, the managers should mitigate the events when securing a lease since they will delay opening, impact the budget and threaten the ideal location (Urbański et al., 2019). It must identify potential activities that lead to a negative impact on the leasing process to protect the business from extreme damages resulting from unexpected delays and interference with the budgeting. The company must identify any challenge that alters the ideal positioning, therefore, mitigating the cracks before they extend.
Conversely, the risks affecting the studio’s construction and causing delays may be controlled by the management by avoiding them. The studio’s leadership should critically view all the possible events likely to cause reluctance in delivering the project on time and conduct stringent measures to prevent them in advance. A detailed listing of the most common risks that prohibit timely completion of the construction of the desired martial arts studio propels a fast response from the management team through prior avoidance, such as early delivery of the materials to prevent the construction team from pausing their operations.
The majority of upcoming businesses experience competition from already existing firms. West Coast Martial Arts Training Academy must ensure little direct competition within a 2-mile radius. However, suppose there is an already existing competitor in the target zone. In that case, the only way to deal with such a risk is to find better methods to attract customers in the underlying area. Acceptance of the competitor’s existence helps the business prepare measures to advance its customer base.
Insufficiency of the materials that the martial arts studio requires to be fully functioning is a challenge that it may face. The management may transfer the risks of delayed delivery to other people like the supplier (Wu et al., 2018). The leaders may transfer the risk, especially when they had pre-paid for the delivery and agreed with the supplier on time due for the delivery. Failure of the delivery agency to meet the timeline agreed on earlier may provoke the management to sue the supplier for the losses incurred hence transferring the risk.
Lastly, the business should exploit the grant awarded to them by the government agencies to run the studio. The studio managers must ensure that the studio runs all the possible programs in line with the governmental grant. The process increases its revenue margin since extended operations attract more customers to the business. Exploiting all the available opportunities is essential for the company and aids in the growth and development of the studio.
Risk Response Implementation (Week 6)
Interpersonal skills are essential for effective risk response planning. A person with such skills analyzes the available information with much keenness and ensures that their decisions on the latter are effective and facilitate effectiveness. Some of the crucial interpersonal skills people need while conducting risk response strategies include empathetic listening, effective articulation, purposeful thinking, influence, negotiation, and conflict resolution skills. Compassionate listening helps the management identify the source of the problem since they listen carefully and evaluate the words said by the communication team. The new martial arts studio’s management must determine what customers need by listening to them.
Effective listening will help the management avoid risks that may arise from purchasing unwanted technological facilities. After empathetic listening, the administration should possess articulate communication skills that aid in clarity when passing information. Communication skills are critical since they facilitate the coherent passing of directives and decisions (Urbański et al., 2019). All people in the organization require the following abilities: they promote teamwork and encourage the proper flow of information from one party to the other, eliminating avoidable risks. They also aid in projecting the future outcomes of events within an organization.
Teamwork protects organizations from hazardous outcomes that arise due to a lack of effective communication within the organization’s different departments. It improves the welfare of every individual within the organization and helps them navigate through the various objectives and duties of the organization. Businesses use teamwork to promote tolerance among individuals and create self-awareness and trust in the day-to-day business operations. Trustworthiness, tolerance, and self-awareness are the considerable teamwork skills people work on in businesses. Trustworthiness promotes unity and empowers employees to rely on each other to share critical information that aids in the formation of risk response implementation. These skills create a sustainable business environment that helps them attract unity in implementing the risk response plan, promoting effectiveness.
Risk Monitoring (Week 7)
Risk management is a continuous process requiring regular checking to ensure that the management is up to date with the current risks affecting their businesses. Serious management regularly evaluates their firm to oversee that there is prior preparation for any upcoming trouble. Risk assessment, auditing, variance, and trend analysis are the most common formats of determining the effectiveness of the risk management process (Wu et al., 2018). These actions provide information on how the risk management process works and evaluate the different skills that the management uses to determine the course of action.
After identifying the current risks and accessing them, the management imposes a risk response plan to control their chances. Later, they evaluate the process and formulate a track occurrence to determine how often the risk occurs and the evolution process. The management identifies other risks that the business faces after controlling the current ones. Some of the additional risks that West Coast Martial Arts Training Academy include reputational damage, customer churn, quality, credit, and legal risks. All these affect the business negatively since they either reduce its profits or increase the capital demand for its continuity.
References
Edwards, P., Vaz Serra, P., and Edwards, M. (2020). Managing project risks. [VitalSource version]. Web.
PMBOK. (2017). A guide to the Project management body of knowledge (Pmbok Guide). 6th ed. Project Management Institute
Urbański, M., Haque, A. U., & Oino, I. (2019). The moderating role of risk management in project planning and project success: Evidence from construction businesses of Pakistan and the UK. Engineering Management in Production and Services, 11(1), 23-35. Web.
Wu, D., Li, J., Xia, T., Bao, C., Zhao, Y., & Dai, Q. (2018). A multiobjective optimization method considering process risk correlation for project risk response planning. Information Sciences, 467, 282-295. Web.