Week 4 - Mitigating Risk.docx - Mitigating Risks 8...

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Mitigating Risks 8 MITIGATING RISK EXPOSURE 8.1 Introduction to Risks Company risks are “inherent in a firm's operations as a result of external or internal factors that can affect a firm's profitability” (WebFinance). During our journey to see whether the acquisition of Starbucks would be advantageous for us to acquire we must understand the risks involved. First, we will take a glance at some of our own risks, then move on to some of the major risks that target company Starbucks has. Lastly, we can dive into how we could strategically mitigate these risks. 8.2 Existing Risks Here are Dunkin’ Donuts we have our own risks to worry about. First we address the unsystematic risks, or those that are unique to our company. Starting with the high volume of franchised store we hold, we are consistently at risk when it comes to the actions of our franchisees. With our control limited to contractual agreements with our franchisees, we can only hope that they will act in the interest of the ethics and values we at Dunkin’ Brands hold. Additionally, the safety of our customer and employee information is placed at risk when it comes to our franchised stores. We have worked closely with our franchise owners and invested in our enterprise risk management teams to proactively mitigate the risks at the franchise and IT levels as best as we can. Our notoriously high leverage and interest payments also put us at financial risk. Yet, our franchisee model allows us an extremely predictable cash flow to help us mitigate this risk.
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Furthermore, we can address the systematic risks, or those that are a result of general market influences. Circling back to the IT risk, it is one that almost all companies are experiencing as a result of new technology. We may have increased our interaction with
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