Introduction
Large and small businesses in all industries face particular risk, which is either perceived or unknown. The risk can occur at any time during the firm operation cycle and lead to the collapse of the particular business. Importantly, the management of various companies includes risk management as part of their strategic plan. Known risks are easy to manage than unforeseen circumstances. Regardless of the risk, every management is keen to implement proper ways to ensure the business doesn’t suffer negatively. Some companies choose to avoid the risk while others control the loss. In some instances, a company may accept the unknown or perceived risk.
This paper offers real world examples that utilize avoidance, loss control and retention methods in risk management. Also, the paper will address how the administration adopted these techniques and why they choose them.
Risk avoidance
The simplest way for a company to control its recognized risks it to shun them altogether. Perry (5) holds that risk avoidance comes in when a firm decides not to take part in an activity that is thought or unknown to cause a particular risk. For example, a business may forgo locating a business in an area that is prone to earthquakes. The two real examples of companies that practice this kind of risk management are Dillard’s Inc and Uber drivers.
How Dillards Inc practices avoidance
Dillards Inc is among the leading store chains in the United States dealing with sales of clothes, cosmetics, and home furniture. The company shut down close to 60 outlets in different states around the U.S. in 2015. Also, the management decided to launch smaller stores than the previous ones.
Why Dillard’s Inc choose avoidance
In 2015, the Dillard’s management realized that the company was making a loss for operating in some states (Dillard’s n. p.). Additionally, the company wanted to reduce the cost operation and choose risk avoidance as the best option. Furthermore, the management thought it was a good idea to concentrate in Texas and Florida since they contribute a huge part of the company’s revenue.
How Uber drivers adopted avoidance
One strategy about the Uber drivers is that they don’t operate in bad weather (Alderman n. p.). Also, the company doesn’t work in countries that face insecurity and political instability. Further, Uber drivers don’t do business on bad roads even in the developing countries.
Why Uber drivers practice avoidance
The Uber drivers adopted the avoidance method so as to protect their cars from damage. Also, the strategy is ideal since it offers the convenience of operation. In countries which experience political instability, the drivers avoid physical injuries and vehicle damage.
Loss control
Enterprises can decide to manage a perceived risk through loss control. According to Langston and Lauge-Kristensen (111), damage control aims at reducing the negative results or effects of a particular, recognized risk and is adopted in situations where risk is not avoidable. Business seeks ways that will help it stay in the market without being impacted by the current hazards. For instances, companies implement various security measures in their buildings to reduce cases of theft. Wisconsin University and McDonalds in the Middle East are two enterprises that practice loss control in their operations.
How Wisconsin University utilizes loss prevention
Wisconsin University offices have surveillance cameras and other security devices (University of Wisconsin n. p.). The University also requires the international students to obtain health insurance. Additionally, there are several security officers around the compound to ensure enough security.
Why Wisconsin University adopted loss prevention
The primary aim of this method is to minimize instance of theft and make employees and students feel secure when in the compound. The health insurance is meant to prevent risks of financial difficulties in case a student gets sick.
How McDonalds in the Middle East practice loss prevention
McDonalds in the Middle East usually imports its ingredients from the United States and stocks in its stores. Also, the fast food outlet has installed surveillance cameras in and out of the building.
Why McDonalds in Middle East Practices loss prevention
Installation of security cameras at the store helps to prevent risks of attacks and theft. McDonald in the Middle East Keeps a large stock in its stores to avoid the risks of scarcity delays in supply.
Retention
Risk retention is a case where a business accepts a perceived risk. The company decides to venture in a certain line of production despite the high risks involved. The main reason why a company chooses to retain risks is due to the high returns in the particular area. For instance, most companies enter into the manufacture of aircraft and other space crafts despite the high risk of failure. Additionally, pharmaceutical companies venture in risk research of new medicines without worrying about the high risk of failure. The examples of businesses that apply retention are the Virgin Company and Bill and Melinda foundation.
How the Bill and Melinda foundation uses risk retention
The Bill and Melinda Foundation fund risky research such as malaria and HIV, which high risks of failure and negatively impacting the researchers (What We Do, n. p.). Also, the foundation funds other non-profitable research.
Why Bill and Melinda's foundation applies risk retention
The Foundation supports these risk ventures since the benefits are enormous. Also, without enough funding, the ventures have a risk of failure. Bill and Melinda's foundation seeks to realize benefits once the research is successful.
How Virgin Company applies risk retention
Virgin Company is one of the largest companies in the United States dealing with a broad range of businesses. The company decided to launch commercial airship, one of the riskiest ventures in the world (The Future of Airship Travel n. p.). Virgin Company also operates commercial air crafts, the “Virgin Air”.
Why Virgin Company apply Risk Retention
The company is aware of the severe risks involved in the airship venture; however, it aims at maximizing the return on this investment. Also, there are risks that other companies lack enough funds to venture into the airship business.
Conclusion
All success driven companies include risk management in their strategic plan. The success of business is determined by its ability to deal with both known and unknown risks. The Uber drivers and Dillard’s Inc employ risk avoidance in their operations. The Uber avoids inclement weather, roads, and countries that have political instability. The aim of the Uber drivers is to prevent vehicle damage and human injury. Dillard’s Inc shut down close to 60 outlets in the United States in a bid to reduce the cost of operating and risk of loss.
On the other hand, Wisconsin University and McDonald in the Middle East employ loss control in risk management. The Wisconsin University emphasizes on the installation of CCTVs in its offices and advises international students to acquire health insurance. That helps to reduce theft and risk of insufficient funds in case a student gets sick. McDonald has surveillance cameras in its outlets to reduce cases of theft and attacks. The Virgin Company and Bill and Melinda foundation employ risk retention in their operation. The Virgin Company ventures in airship business due to the promise of high returns. The Bill and Gates Foundation fund investments that have a high risk of failure.
Works cited
Alderman, Louis. “Risk avoidance - Uber risk mitigation?” velociteach. 2011. Web. 14 May 2016. < https://www.velociteach.com/2011/02/risk-avoidance-uber-risk-mitigation/>
Dillard’s, Inc.:Company Profile. Vault. 2016. Web. 14 May 2016. < http://www.vault.com/company-profiles/retail/dillards,-inc/company-overview.aspx>
Langston, Craig, and Rima Lauge-Kristensen. Strategic Management of Built Facilities. United Kingdom: Routledge, 2013. Print.
Perry, Pat. Risk Assessment: Questions and Answers (questions & Answers). United Kingdom: Thomas Telford, 2003. Print.
The future of airship travel. Virgin, 2015. Web. 14 May 2016. < https://www.virgin.com/travel/the-future-of-airship-travel>
What We Do? HIV - Strategy Overview. Bill & Melinda Gates Foundation, 1999. Web. 14 May 2016. < http://www.gatesfoundation.org/What-We-Do/Global-Health/HIV>
