Risk analysis can be described as the systematic process of identifying and managing imminent threats that may compromise business growth and development. Today, the business landscape is under constant threat of risks such as natural disasters, employee liabilities, financial constraints, legal compliance issues, and operational failures, which is why firms should conduct risk analysis to recognize impending risks. A business entity utilizes the outcome of risk analysis to manage and mitigate their impact. The process guarantees the growth and sustainability of a business since adequate procedures are instituted to build the resilience capacity to cope and minimize the effects of risks. For Intel, having a risk analytic program against different types of threats is critical to its sustainability. Due to its global presence, it faces stiff competition risks that it has to mitigate in order to maintain its relevance in the marketplace. Intel should implement an effective and well-thought risk analytic program to lower competition risks and guarantee the sustainability of competitive sales and profit margins.
Risk identification is the preliminary phase of a risk analytic program, which is geared towards determining potential risks. According to Mishra, Rolland, Satpathy, and Moore (2019), risk identification plays a leading role in the recognition, classification, and documentation of imminent business risks and their sources. Therefore, it would be of great significance to Intel in a bid to identify and document looming competition risks as early as possible. Risk identification will comprise the cornerstone of the proposed program. Kot and Dragon (2015) note that identification a continuous process that enables organizations to determine the evolving risks. Thus, Intel’s proposed risk analytic program should be designed in a manner that constantly identifies risks before they arise and influence business processes.
Intel can identify its competition risks in two different approaches. The first entails conducting a comprehensive SWOT analysis, which enables the firm to obtain crucial information regarding its strengths, weaknesses, opportunities, and threats. The approach provides an ideal framework for an organization to isolate potential risks that stem from the internal and external environments (Helms & Nixon, 2010). Therefore, Intel can leverage the strategy to identify its weak areas and strategize the way it can alleviate them to ensure steady business growth. Furthermore, the company can adopt Porter’s five forces analysis model. According to Arshed and Pancholi (2016), the approach is effective in evaluating the competitive capacity of an entity since it focuses on the threat of new entrants, bargaining power of buyers, competitive rivalry, bargaining power of suppliers, and the threat of substitution. By conducting the analysis, Intel can identify and document competition risks for further action. Essentially, the two risk identification approaches outlined above provide ideal alternatives for Intel to identify and document risks before they occur.
Following a comprehensive identification of risks, Intel’s analytical program should shift focus to risk measurement. According to Aven (2016), risk management is aimed at evaluating and gauging the magnitude of an identified risk. Risks are categorized into three definitive sets. Abd El-Karim, Mosa El Nawawy, and Abdel-Alim (2017) describe high impact risks as the ones that cause a huge damage to the business when they occur. The middle impact risks, on the other hand, are not severe, but they pose a considerable threat to the sustainability of the business. Low impact risks bear the least negative effect on the business. Overall, risk measurement guides a company to determine the risks that should be highly prioritized and allocated more resources.
Intel’s risk analytic program will measure its competition risks by assessing two different dynamics. The firm can measure the risks by determining the Maximum Probable Loss (MPL), which demonstrates the maximum business value at risk if competitors were to surpass the company’s performance level. Therefore, MPL would provide Intel with vital statistics of the losses it would make if competing companies were to outshine it. Notably, if the MPL value is high, the risk is deemed severe. Intel’s competition risks can also be measured by evaluating the frequency of losses. The Chief Finance Officer (CFO) can analyze the number of times the corporation incurred a loss in the last three financial years. The company can leverage the gathered information to quantify the magnitude of competition risks from close rivals. Based on the identified trend, Intel’s CFO can predict whether competition risks are likely to unsettle the cooperation. The two risk measurement approaches would be instrumental to Intel’s risk analytic program in gauging the severity of risks, classifying them, and allocating priority.
The ultimate phase of Intel’s proposed risk analytic program is risk mitigation. Carvalho and Junior (2014) claim that it entails the development of appropriate action plans that are geared towards countering the threat posed by an identified risk. Depending on the magnitude of a risk, a suitable mitigation strategy is employed in an effort to enhance the competitiveness of a business.
Intel’s proposed risk analytic program can adopt three different strategies to mitigate risks. The first one is risk avoidance. If Intel faces an unwanted consequence of an identified competition risk, the most feasible mitigation approach is to avoid it. For example, if other computer chip companies are offering relatively low prices to the market, the company will be compelled to avoid the risk by matching the prices they offer. In this way, Intel will be able to sustain its market share.
Intel’s risk mitigation can also be achieved through risk reduction and control. This strategy is primarily aimed at reducing the likelihood of risk occurrence. In case a risk is inevitable, the firm can consider risk control and reduction as they employ different action plans that seek to lessen the severity of consequences. For example, the risk of disruptive innovation from other computer chip companies is a major competitive risk for Intel. Therefore, Intel is obliged to maintain constant innovation research to ensure that its chips are competitively advanced compared with others within the market.
Lastly, the risk analytic program shall entail risk transfer or sharing as a mitigation strategy. It involves shifting liabilities and risk consequences to another party. For instance, if Intel launches new computer chips that are susceptible to malware and virus attacks, it can share the risks by purchasing insurance to indemnify itself from incurring major losses. Risk transfer would enable the corporation to continue doing business sustainability regardless of the occurrence of risks.
Pros and Cons
Without a risk analytic program, a firm may lose relevance in the marketplace within a short period since risks may cause an unbearable burden when they occur. Risk analytic programs are beneficial in the timely identification and mitigation of competition risks, which enables a company to avoid the far-reaching negative consequences that ensue when a risk arises (Fjermestad, 2017). Businesses that adopt risk analytic programs are guaranteed of sustained growth, stable profit margins, and improved operational efficiency. Moreover, risk analytic programs enable a company to attract investors and maintain the trust of shareholders (Ellul, 2015). Nonetheless, a risk analytic program is marred by the fact that its implementation cost is quite high (Berry-Stölzle & Xu, 2016). Running a comprehensive risk analytics program requires intensive research and professional expertise, all of which are capital intensive. An organization may want to establish and implement a risk analytics program but be unable to due to the significant resources required. Since the benefits of running a risk analytic program surpass the shortcomings, Intel should be determined to facilitate its execution.
How the Chief Financial Officer Would Benefit
Implementing the risk analytic program will have enormous benefits for different stakeholders in Intel Corporation. The CFO will have the capacity to forecast the financial trends of the company. In discharging mandates, the CFO will be empowered to develop sound and informed strategies that guarantee competitiveness, alleviate financial catastrophes, enhance capital expenditure, and sustain revenue flow. In essence, the CFO will be well-poised to ensure Intel remains aggressive in the market.
Risk management is a challenging process for many business enterprises. Since risks are often unpredictable and evolve constantly, a business may suffer significant losses in case it does not establish a proper risk analytics program to be able to identify potential threats and mitigate them before they happen. By adopting the proposed risk analytics program, Intel will benefit immensely due to timely identification, measurement, and mitigation of competition risks. It will enable corporation to operate effectively in the competitive field and still sustain its future growth and development.
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