RISK AND OPPORTUNITY

IN CLASS EXERCISE:
24,000 UBER DRIVERS MAY LOSE THEIR SIDE HUSTLE

Lecturer: Dra. Dewi Haryani Susilastuti, M.Sc., Ph.D.

By:

Dikky Kurniawan
Fauzi Rizki Putranto
Muhammad Irshadi Nur Amri W
Wahyu Hidayat

FACULTY OF ECONOMICS AND BUSINESS

MASTER IN MANAGEMENT PROGRAM
UNIVERSITAS GADJAH MADA
YOGYAKARTA
 RISK AND OPPORTUNITIES

1. What is risk? What is upside risk, downside risk?

The term ‘Risk’ is often used in many ways and basically has different meaning depending
on the context. However, the general definition of risk is a potential for loss of valuables
caused by an outcomes that is uncertain, uncontrolled and mostly undesirable.
Upside risk – chance that the value of one’s possession will increase beyond an
individual’s expectation, or in other words is an uncertain possibility of gain. Upside risk
is usually arise from an analysis or forecasting that makes an individual has better
information about the chance to increase their valuable possessions.
Downside risk – in essence is a risk that associated with losses. As explained in previous
answer about risk, it is something that commonly occurs in an uncertain and undesirable
ways. Sometimes it can be similar with upside risk where people try to analyze the
possible downside risk that might occur whenever they decide to take an opportunity,
hence the risk management. Nonetheless, risk management can also miss some
information that can cause a miss prediction or analysis.
In economics, we learn that what comes with a high risk, is a high return. Meaning, when
an individual decide to face with the uncertain and uncontrolled outcomes and he is ready
to take a risk or potential losses of their values, it is often that they also expect something
in return. The higher the risk, the higher their expectation for the return.

2. What is opportunity?
Similar with risk, opportunity is also can be differ depends on the context. But in general,
opportunity can be defined as a timing where the situation (external) and condition
(internal) is appropriate or favorable for an individual to take a chance for an advancement
or a success.

3. How does one measure opportunity and risk?

Financial professionals can develop approaches to identifying and measuring
opportunities and risks, contributing in six essential ways:
a. Establishing guidelines and procedures for strategic planning around opportunities
and risks;
b. Improving the identification, measurement, and management of risks and
opportunities;
c. Preparing the evaluation;
d. Integrating the model;
e. Training managers to make more effective evaluations of risks and opportunities; and
f. Implementing processes to monitor and communicate business risks and
opportunities.
In “Identifying, Measuring, and Managing Organizational Risks for Improved
Performance”, Marc J. Epstein and Adriana Rejc-Buhovac present a model and measures
for enhancing the identification and measurement of risks for improved management
decisions. Stemming from the risk assessment requirements of the 2002 Sarbanes Oxley
Act in the U.S., and similar new regulations in other countries, it also builds on the
Treadway Commission’s Committee of Sponsoring Organizations (COSO) “Internal
 Control Integrated Framework”, and its more recently issued “Enterprise Risk
Management Integrated Framework”.
Epstein and Rejc-Buhovac demonstrated that increased measurement of a broader set of
risks is necessary, both to meet recent regulatory requirements and to improve managerial
performance and stakeholder confidence. They provided a six-step risk assessment
model, includes :
a. Event Identification
b. Risk Assessment
c. Risk Response
d. Control Activities
e. Information & Communication, and Monitoring

4. What is play to win? What is play not to lose?

a. Play to win strategy
Generally speaking, it can be said that strategy is an integrated set of choices uniquely
positioning your firm in your industry to create sustainable advantage and superior
value relative to the competition. There are 5 choices of integrated set that can be
applied in Playing to Win Strategy which are:
1) What is your winning aspiration? The purpose of your enterprise, its motivating
aspiration.
Aspirations are statements about the ideal future. At a later stage in the process,
a company ties to those aspirations some specific benchmarks that measure
progress toward them. Moreover, aspirations can be refined and revised over time.
But, aspirations shouldn’t change day to day, they exist to consistently align
activities within the firm. So, it should be designed to last for some time.
2) Where will you play? A playing field where you can achieve that aspiration.
It will represent the set of choices that narrow the competitive field. The questions
to be asked focus on where the company will compete in which markets, with
which customers and consumers, in which channels, in which product categories,
and at which vertical stage or stages of the industry in question.
3) How will you win? The way you will win on the chosen playing field.
While where to play selects the playing field, how to win defines the choices for
winning on that field. It is the recipe for success in the chosen segments,
categories, channels, geographies, and so on. The how-to-win choice is intimately
tied to the where-to-play choice. To determine how to win, an organization must
decide what will enable it to create unique value and sustainably deliver that value
to customers in a way that is distinct from the firm’s competitors.
4) What capabilities must be in place? The set and configuration of capabilities
required to win in the chosen way.
It can be divided into our reinforcing activity and our specific configuration in term
of the required capabilities to win in the chosen way.
5) What management systems are required? The systems and measures that enable
the capabilities and support the choices.
The systems that support and measures the strategy should be purposefully
designed to support the choice and capabilities.
b. Play not to lose strategy
At its heart, this strategy will focus on guarding your weakness. Someone that applied
this strategy tend to be over-cautious because you want to avoid mistakes that makes
 you want to avoid mistakes. You will tend to wait to react instead of doing what you
know you need to do and instead of using all of your power to tilt things in your
direction, you choose to wait. In conclusion, play not to lose strategy can be called as
play it safe, focusing on eliminating weakness of ourself and others.

5. What are the sources of opportunity within the organization?

a. Supply Chain: Supply chains, or how value is created and delivered to the market,
can be a source of opportunity and innovation. How a company structures itself,
partners with other entities, and operates to deliver its products and services can be
examined for opportunities.
Perhaps bundling services can secure above average margins, as was GE’s
experience when it began to couple service contracts with its manufactured electric
turbines. Maybe a new approach to outsourcing can create value, similar to the value
Sun Microsystems gained when it created strategic partnerships with other
organizations. The vastness of many corporate supply chains means that innovation
is possible at many of the links along the chain.
Example: Toyota maintain good relation and networking with supplier, enabling them
to use JIT process.
b. Product and service offering: The search for opportunities and innovation can also
concentrate on new products and services, or changes to existing products and
services. Increasingly, customers are coming to expect these types of innovations, and
companies that can identify and deliver on these expectations often achieve great
success. New models of cars, mobile phones, iPods, and computer software are but a
few of the successful innovations that repeatedly bring customers back for more.
Examples:
1) Coach bags expanding from offering elegant bags marketed to mature women to
designing small wrist pouches for twenty-something women going clubbing in
response to a potential reduction in market share;
2) famous concert halls offering discounted tickets to dinner and “introduction to
music” evenings for singles in large cities worldwide in response to shrinking
audience size.
c. Process: Process improvement opportunities can lead to faster, better, and less
expensive products.
Example: innovations in petroleum refining that save energy and costs, electricity
generation, and equipment like telephone routers and mail sorting machines.
d. Technology: Technology provides another source of opportunity by allowing
companies to execute strategy quickly, thereby making time a source of competitive
advantage. For example, communications technology can speed up planning and the
exchange of ideas, while information technology can help to improve systems for
managing supply chains and finances. Beyond technology’s ability to hasten and
streamline operations and communication within companies, the Internet has
dramatically impacted the marketplace. Recent commoditization of a range of
products, from shopping to banking online, has changed how we do business.
Example: online shopping, e-wallet
e. New markets: New markets often create opportunities to source products differently
or tap into new consumer groups.
Example: companies like the piano manufacturer Steinway & Sons that twenty years
ago may have seen China as beyond the scope of its businesses are now sourcing
from, manufacturing in, and selling their products to this enormous market.
 IN CLASS EXERCISE:
24,000 UBER DRIVERS MAY LOSE THEIR SIDE HUSTLE

Article:
https://www.huffpost.com/entry/24000-uber-drivers-may-lose-their-side
hustle_b_5a16e58ae4b0250a107bfe24

1. What kind of risks and opportunities does Uber take according to this article?
a. Risk:
There are some risks that have to be faced by Uber when it decides to make an
investment in autonomous cars. Some examples for the risks are:
- Cyber crime (“Of course, this toggle feature and the concept of appropriate risk-
transfer in the autonomous vehicle market must not turn a blind eye to rampant
cyber threats and so-called internet of things (IoT) risks,”). As we may have
understand that cyber-crime is one of the biggest threat in technology era,
investment decision must really take into account for this kind of threat. As
interesting as it sounds, adapting to technology can be really beneficial although
it does not necessarily a good thing. As we have discussed in other question
about risk, high risk often followed by high return. It means that it also works the
other way around.
- Protest from Uber drivers try to protect their rights and interests (“Its
drivers, who are generally considered fractional labor, have few rights if any in
protecting their interests in this transition”). As we know that nowadays, an
organization is not only obligated to fulfill the employees’ basic needs, namely,
wage, proper working environment or health insurance, etc., but also other things
such as listen to their voice, caring to the emotional aspects of the employees,
etc. Making a transition where an autonomous property might replace the
traditional property –in this case, human, labor- can bring up such risk where the
labors will try to defend their rights. In a long term, a company can losses more
than the gain if they do not pay too much attention in this matters.
- Business model change that could lead to change of perspectives on how
the society see the company (“…up until now its business model was relatively
benign in pooling “stranded assets” and “stranded talent” into use.”). Nowadays,
how society sees us as a company could have a significant impact to the
company’s valuation. In technology era where information spread in a blink of an
eye, a single poor decision could lead to a massive loss for a company. Uber as
a company where was seen as a company that accommodate “stranded assets”
and “stranded talents” into use did help the government in terms of reducing
unemployment. Changing business models and using an autonomous cars could
deprive the good image that has been created by its initial business model. Of
course, it also carries risks where the society will no longer see Uber as a good
company. Thus, could lead to a decrement in company valuation.
- Increase of operational costs (“These stranded assets were a combination of
peoples’ downtime and under employment, or their vehicles, which often idled
on the side of the road or in their garages incurring carrying costs.”). As explained
 before that Uber utilize stranded assets such as peoples’ downtime or their
vehicle, Uber pushed their operational expenses to the bottom. By transforming
their assets into an autonomous cars, it means that in the future, Uber has to
give extra budget on their operational expenses for, say, maintenance of its
assets. Making an investment in autonomous cars is, of course, expected to
increase their effectivity and response toward customer, thus, increase their
productivity. Nevertheless, the increment of the operational costs is also a risk
that has to be taken into account.
b. Opportunity
- The advent of driverless technology, along with Uber’s impressive public policy
capabilities, means it may soon clear the regulatory and public safety hurtles that
stand in the way of its next big bet. This move also continues to chip away at the
lucrative logistics and package delivery market, which has long been dominated
by a triopoly of FedEx, UPS and national postal services.
- This technology will lead to the decreasing of Uber’s cost. The previous Uber’s
model business where they relatively benign in pooling “stranded assets” and
“stranded talent” into use will result in profit sharing between Uber and the driver.
There will be no need for this profit sharing when the autonomous car is used by
Uber. All the profit will belong to Uber.
- There is also an opportunity that the technology used by Uber will become their
competitive advantage because they are one of the first company who introduce
the technology.

2. How do you look at those strategies that Uber take from the perspective of ethics?
Ethical dilemma will be emerged when autonomous car is applied. For example, should
a driverless car hit a pregnant woman or swerve into a wall and kill its four passengers?
Human drivers make these choices instinctively, but algorithms will be able to make them
in advance.
The results from the research of Moral Machine suggest there are a few shared principles
when it comes to these ethical dilemmas. The researchers found that in countries in Asia
and the Middle East, for example, like China, Japan, and Saudi Arabia, the preference to
spare younger rather than older characters were “much less pronounced.” People from
these countries also cared relatively less about sparing high net-worth individuals
compared to people who answered from Europe and North America. The study’s authors
suggest this might be because of differences between individualistic and collectivist
cultures. In the former, where the distinct value of each individual as an individual is
emphasized, there was a “stronger preference for sparing the greater number of
characters.” Counter to this, the weaker preference for sparing younger characters might
be the result of collectivist cultures, “which emphasize the respect that is due to older
members of the community.”
Moreover, the variations of individualistic and collectivist cultures suggest that
geographical and cultural proximity may allow groups of territories to meet on shared
preferences for machine ethics. However, there were other factors that correlated with
variations that weren’t necessarily geographic. Less prosperous countries, for example,
with a lower gross domestic product (GDP) per capita and weaker civic institutions were
less likely to want to crash into jaywalkers rather than people crossing the road legally,
“presumably because of their experience of lower rule compliance and weaker
punishment of rule deviation.”
It is also structured in a way that removes nuance. Users only have two options with
definite outcomes: kill these people or those people. In real life, these decisions are
probabilistic, with individuals choosing between outcomes of different severities and
degrees. For example, “If I swerve around this truck, there’s a small chance I’ll hit that
pedestrian at a low speed,” and so on. Nevertheless, experts say that even if cars won’t
regularly have to choose between crashing into object X or object Y, they still have to
weigh related decisions, like how wide a berth to give these items. Furthermore, that is
still fundamentally an ethics problem.