Running head: RISK ASSESSMENT 1

Risk Assessment

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Risk Assessment of Abt Electronics

Risk assessment refers to determining the estimate of potential risk to an undertaking or

projected activity. It realizes how harmful a threat can be and what would happen if the hazard

did happen ("Risk Assessment | Ready.gov", 2017). A risk assessment can be quantitative or

qualitative. Quantitative risk assessments consists of estimating the two main components of the

risk: the probability that there will be a loss under the threat in the given scenario and magnitude

of the risk. An acceptable risk is the type of risk that is understood to be tolerated or bearable

under the given circumstances. This happens when the cost to counter the risk is too high and the

magnitude of risk itself is low and inexpensive as compared to the proposed countermeasure.

Risk Identification of Abt Electronics

Abt Electronics is a retailer of appliances, electronics, and furniture. It operates from a

single facility in Chicago, Illinois. It was listed in Forbes list of America’s best small businesses

("Forbes Welcome", 2017). With $400 million dollars in sales, the company is doing well

enough. Following are the major risks identified for the company in risk assessment research:

1. Strategic Risk

Abt Electronics has decided to keep itself traditional. It is one of the last surviving

examples of traditional family-owned business based on a single facility and dealing in

retail. While the company has successfully managed to survive in this day and age of

Amazon and online shopping, it is still under a strategic risk of becoming obsolete

because of the changing dynamics in retail industry. Internet and e-shopping has made it

hard to stay relevant for the businesses like this. While the company does have the option
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of online shopping, their focus is completely on their single facility retail outlet. In order

to avoid becoming obsolete and staying relevant for the customers, Abt Electronics needs

to pay more attention in this sector. A prime example of a company facing this risk is

Kodak which failed to adapt to digital camera technology in time and ended up losing its

huge market share.

Abt Electronics can mitigate this risk by researching and becoming better at online

shopping such as tapping into the potential of shopping through smart phone. Doing so

will require for the company to do all the work necessary to establish supply chain for

online shopping and have a conflict resolution team to resolve conflict that arise in online

settings. Disputes in online settings are harder to settle as compared to the offline ones.

However, the magnitude of such a risk is very high, seeing the example of Kodak, and

the possibility of it happening is not that rare, either. This is why the company should

invest in this side of market.

2. Reliance on Single Facility

The biggest problem with relying on a single facility retail outlet is that the external and

internal hazard can result in making the business vulnerable to huge losses which might

be hard to recover from if you have only a single facility. Abt Electronics has mitigated

much of this risk by having a considerable fire safety and insurance program. Still, if the

whole facility is exposed to a hazard, recovery will be too hard. This particular risk is

high in magnitude but has a low possibility of occurring, thus not being a good enough

reason for having a multi-facility store.

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References
Forbes Welcome. (2017). Forbes.com. Retrieved 7 March 2017, from
https://www.forbes.com/best-small-companies/list/
Risk Assessment | Ready.gov. (2017). Ready.gov. Retrieved 7 March 2017, from
https://www.ready.gov/risk-assessment