BSBMGT501-20190379-Weekly activity 5.doc.docx

A company with a higher level of business risk should

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dollar in sales revenue held on the accounts receivable ledger. A company with a higher level of business risk should choose a capital structure that has a lower debt ratio to help ensure it can meet its financial obligations at all times. Internal Risk Factors Internal risks are faced by a company from within its organization and arise during the normal operations of the company. These risks can be forecasted with some reliability, and therefore, a company has a good chance of reducing internal business risk. The three types of internal risk factors are human factors, technological factors and physical factors. 1. Human-factor risk can include:
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Union strikes Dishonesty by employees Ineffective management or leadership Failure on the part of external producers or suppliers Delinquency or outright failure to pay on the part of clients and customers Personnel issues may pose operational challenges. Staff who become ill or injured and, as a result, are unable to work can decrease production. A company may need to hire or replace personnel key to the company's success. Strikes can force a business to close. 2. Technological risk includes unforeseen changes in the manufacture, delivery or distribution of a company's product or service. For example, a technological risk that a business may face includes outdated operating systems that decrease production ability or disruptions in supplies or inventory . 3. Physical risk is the loss of or damage to the assets of a company. A company can reduce internal risks by hedging the exposure to these three risk types. For example, companies can obtain credit insurance for their accounts receivable through commercial insurers, providing protection against customers not paying their bills. Credit insurance is usually very
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  • One '14
  • Management, Operational risk, risk management process

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