MBA503 Operations Management and Decision-Making Models

Assessment 2–Individual participation in on-line discussion forums

Words: 500

Reference: Harvard

What do you believe are some of the key risks associated with delaying decisions until

sometime in the future?

Risk is when there is a potential loss of something valuable and this potentiality of this loss of

value is unpredictable and uncontrollable. As a result, decisions are taken in order to mitigate

this risk factors. Therefore, any risk associated decisions are required to seek the following,

identification of risk, quantification of risk and absorption of the risk. The delaying of

decisions can bring various risks to an organisation and they are discussed below:

Identification of risks:

Managing an uncertain situation during a decision-making process relies on identification,

quantification and analysis of associated factors and which can also affect the outcomes.

These uncertainties can bring various risks and they are:

1. Strategic risks: Strategic risks can arise when an organisation pursues their

organisational missions and objectives. These risks are associated with competitions

such as transactional risks and investor relations risks (Handa and Garg, 2018). Thus,

these associated risks can be related to business operations, investor communications

and so on.

2. Financial risks: These are the potential losses that can affect an organisation

financially. Therefore, these risks are related to poor allocation of the organisational
 resources, fluctuations of currency value, price moderation for its commodities, tax

policies and so on.

3. Operational risks: These risks are associated with organisational strategies that

maintains their daily business operations. These risks are generally associated with

technological malfunctions affecting the productivity, production errors in terms of

both quantity and quality or marketing strategies to position the product in the market.

4. Legal risks: Threat of litigation in applicable legislations or regulations are related to

these risks. As legal factors create uncertainty in the organisation's operational

strategies and creates obligations for the organisation, it is one of the major risk

factors.

5. Risks related to act of god: These risks are associated with force majeure or events

that are beyond the organisation's control. These risks are environmental risks such as

bad weather, floods, earthquakes or war and other hostile conditions that are beyond

the control of an organisation.

Quantification of risks:

Once the risks have been identified by the organisation's management that has the potential to

adversely affect the organisation, the quantification of these risks are required. Thus, during

this step management is required to determine the costs of these risks to the organisation.

Generally, risk is equal to the sum of probabilities of the outcome multiplied by the

anticipated or potential loss (Ghanem et al. 2017). Quantification of risk is mathematically

daunting task as it requires management to perform sensitivity analysis of the perceived risk

factors by the organisation.

Managing the risks:

Ability of an organisation to absorb or manage the risk is the critical decision making process

by the management. This defines the risk appetite of the management to help determine as

soon as the risks are identified as well as quantified. As various types of risks are identified,

they can either be mitigated or transferred, during this stage management as a result is

required to develop strategies according to the quantification or analysis.

Reference

Handa, H. and Garg, A., 2018. Approach to Reduce Operational Risks in Business

Organizations. In Information and Communication Technology for Sustainable Development

(pp. 123-131). Springer, Singapore.

Ghanem, R., Higdon, D. and Owhadi, H. eds., 2017. Handbook of uncertainty quantification

(Vol. 6). New York: Springer.