Question

Risks of Energy Solar Business

Environmental risk: The direct environmental impact of installing a solar farm has to do with the clearing of large areas of land which in turn affects native vegetation and wildlife in numerous ways and has an adverse ecological impact can affect the rainfall and the drainage of a region. Reflecting light beams coming from a concentrated solar power system can, if misdirected, interfere with aircraft operating pathways. CSP system operations involve high-temperature emissions in surroundings which may pose an environmental risk. These facilities also produce electric and magnetic fields which can hamper the natural surroundings.

Financial risk: A lack of readily available capital can make or break a business—particularly during tough times, such as a recession or a pandemic like the COVID-19 crisis. Cash is used to cover not just short-term debts like vendor invoices and operating costs, but interest payments on long-term financing. Without careful, consistent, and complete cash flow risk management, a company could find itself teetering on the brink of disaster due to a lack of readily available funds.

Market risk: This risk fluctuates from time to time and depends on the market across the globe. Since in recent COVID-19 times we see people have lost their jobs and are ready to do work on any pay scale, therefore, people working in this industry would probably make a good profit over the salaries as they don’t have to pay much to the employees. Similarly, people are staying in house and the electricity bills are going up during this time, it’s a good time to play for the solar industry, but if there was no COVID-19 situation, the risks can be on the other side and maybe of neutral or slightly higher risk.

Inherent Risk Assessment
Risks	Likelihood	Impact
Environment Risk of environmental damage caused by the solar park including any liability following such damage	Possible	Minor ($5,000 - $10,000)
Finance Risk of insufficient access to investment and operating capital	Certain	Severe ($30,000 - $50,000)
Market Risk of a cost increases for key input factors such as labor or modules, or rate decreases for electricity generated	Possible	Minor ($5,000 - $10,000)

For the three risk events above, how would you respond to each event (accept, avoid, reduce, or share)? Why?

Answer 1

Environment Risk - In case of environment risk if we think as financial perpective here impact is low but likelihood is high we will try to share this risk but you considered different point of view today government are focusing much on environment so harm to environment will lead to serious action in that case we will try to avoid the risk. Here decision lieswith management on the basis of their prior experience

Finance Risk - Here the likelihood is certain and amount is also severe so we will try to avoid the risk

Market Risk - Here the outcome is possible but the amount involved is low so we can share the risk