St.

Mary's University

Department of Marketing Management

Assignment of Project management

Prepared by :- Israel addisu

ID Number :- RMKD/1606/2011/secj

Submitted to :- Daniel
M.Gebremariam
1.Before you’re able to analyze the risk in your project, you have to acknowledge that risk is going to
happen in your project. By planning for risks, you begin the process of knowing how to identify, monitor
and close out risks when they show up in your project.

Part of that process is risk analysis. It’s a technique that helps you to mitigate risk. There are also tools
that can assist. You should at the very least, have a risk tracking tool or use a risk tracking template to
identify and list those risks.

2.Interest rate risk covers the volatility that may accompany interest rate fluctuations due to
fundamental factors, such as central bank announcements related to changes in monetary policy. This
risk is most relevant to investments in fixed-income securities, such as bonds.

(iii) Purchasing Power Risk: Variations in the returns are caused also by the loss of purchasing power of
currency. Inflation, is the reason behind the loss of purchasing power2

(i) Security Market Risk: 2

This indicates that the entire market is moving in a particular direction either downward or upward. The
economic conditions, political situations and the sociological changes affect the security market.2

Equity risk is the risk involved in the changing prices of stock investments, and commodity risk covers
the changing prices of commodities such as crude oil and corn.

Currency risk, or exchange-rate risk, arises from the change in the price of one currency in relation to
another. Investors or firms holding assets in another country are subject to currency risk.

3.Market risk, or systematic risk, affects a large number of asset classes, whereas specific risk, or
unsystematic risk, only affects an industry or particular company. ... Market risk cannot be mitigated
through portfolio diversification. However, an investor can hedge against systematic risk.

4. Various reasons of internal business risks

(i) Fluctuations in the Sales- The sales level has to be maintained. It is common in business to lose
customers abruptly because of competition. Loss of customers will lead to a loss in operational income.
Hence, the company has to build a wide customer base through various distribution channels.
Diversified sales force may help to tide over this problem. Big corporate bodies have long chain of
distribution channel. Small firms often lack this diversified customer base.

(ii) Research and Development (R & D)- Sometimes the product may go out of style or become
obsolescent. It is the management, who has to overcome the problem obsolescence by concentrating on
the in-house research and development program. For example, if Maruti Udyog has to survive the
competition, it has to keep its Research and Development section active and introduce consumer
oriented technological changes in the automobile sector. This is often carried out by introducing
sleekness, seating comfort and break efficiency in their automobiles. New products have to be produced
to replace the old one. Short sighted cutting of R & D budget would reduce the operational efficiency of
any firm.

(iii) Personnel Management- The personnel management of the company also contributes to the
operational efficiency of the firm. Frequent strikes and lock outs result in loss of production and high
fixed capital cost. The labor productivity also would suffer. The risk of labor management is present in all
the firms. It is up to the company to solve the problems at the table level and provide adequate
incentives to encourage the increase in labor productivity. Encouragement given to the laborers at the
floor level would boost morale of the labor force and leads to higher productivity and less wastage of
raw materials and time.

(iv) Fixed Cost- The cost components also generate internal risk if the fixed cost is higher in the cost
component. During the period of recession or low demand for product, the company cannot reduce the
fixed cost. At the same time in the boom period also the fixed factor cannot vary immediately. Thus, the
high fixed cost component in a firm would become a burden to the firm. The fixed cost component has
to be kept always in a reasonable size, so that it may not affect the profitability of the company.

(v) Single Product- The internal business risk is higher in the case of firm producing a single product. The
fall in the demand for a single product would be fatal for the firm. Further, some products are more
vulnerable to the business cycle while some products resist and grow against the tide. Hence, the
company has to diversify the products if it has to face the competition and the business cycle
successfully. Take for instance, Hindustan Lever Ltd., which is producing a wide range of consumer
cosmetics is thriving successfully in the business. Even in diversification, diversifying the product in the
unknown path of the company may lead to an internal risk. Unwisely diversification is as dangerous as
producing a single good.