FIN 630 Milestone 3 Risk Assessment

Southern New Hampshire University FIN-630 Capital Budgeting & Financing 7-1 Final Project Milestone Three: Risk Assessment Justin Hardy 8/20/2023
Risk Assessment Evaluating the Design Your Own Doll and the Match My Doll projects involves a crucial examination of potential risks associated with both endeavors. A wide array of risks must be considered, encompassing operational issues like manufacturing challenges, marketing concerns such as targeting the right audience, economic factors like rising interest rates, and business- related risks including employee turnover. Common risks shared by both projects encompass changes in regulations at local, state, or federal levels, infringement upon trademarks or intellectual property rights, heightened market competition, disruptions in supply chains or from vendors, logistical complications, and business interruptions stemming from conflicts or natural disasters. Each of these projects inherently carries its own set of risks as well. According to the Allianz Risk Barometer, the top 10 global business risks and their percentages are as follows: Business interruption (including supply chain disruptions) at 42%, Cyber Incidents (including cybercrime, IT failures, and data breaches) at 40%, Natural catastrophes (such as storms, floods, and earthquakes) at 30%, Market developments (like increased competition, market fluctuations, and market stagnation) at 22%, Changes in legislation and regulation (such as government changes and economic sanctions) at 21%, Fire or explosion risks at 20%, New technologies (including the impact of interconnectivity, AI, 3D printing, and drones) at 15%, Loss of reputation or brand value at 13%, Political risks and violence (including war and terrorism) at 11%, and Climate change/weather volatility at 10% (Risk Management, 2023).
The success of the Match My Doll line is closely tied to the availability of raw materials, making it vulnerable to price fluctuations or sudden supply changes. Consequently, this project faces potential risks if government regulations impact the materials' supply, demand, or logistical aspects. In contrast, the Design Your Own Doll project hinges significantly on technological aspects for its potential triumph. Any impediments that hinder New Heritage Doll Company's ability to implement or develop this technology pose a significant risk. Additionally, the security of the technology presents another potential concern, with the possibility of security breaches. These prospective risks need thorough consideration when assessing the project's potential. Each of the envisioned projects carries many risks. While precisely quantifying the potential monetary impact of these risks is challenging, it's reasonable to assume that the impact could exceed $100,000 and potentially impede the company's future performance. Hence, New Heritage must actively seek ways to minimize these risks. By formulating and implementing mitigation strategies, New Heritage can position themselves optimally to navigate these challenges. Specifically, New Heritage should focus on addressing the top two risks: business interruption and cyber incidents. The company's success heavily relies on collaboration with vendors and suppliers for both projects. Therefore, effective communication with them is paramount. Monitoring the performance of these partners and considering incentivization to enhance their performance is crucial. If not already in use, New Heritage should explore the possibility of developing or acquiring a technology to track this performance. To tackle the risks associated with cyber incidents, New Heritage should prioritize robust and efficient data encryption and security measures that align with their budgetary considerations.
References Gatti, S., & Caselli, S. (2011). Risk management in project finance. In Baker, H. K., & English, P. (Eds.). Capital budgeting valuation: Financial analysis for today's investment projects (pp. 259-278). Hoboken, NJ: John Wiley & Sons.
Uploaded by jbhardy34 on