Question

After a company identifies potential risks, it must measure those risks. Epstein and Buhovac (2014, p. 185) identified a seven-stage process for measuring those risks.

Seven stages are:

1. Calculate the benefit associated with each issue that may generate risk.
2. Calculate the potential costs for each and include reputation risks.
3. Estimate the probability that the risks will happen.
4. Multiply the potential cost by its probability to determine the expected value of each risk.
5. Estimate when the risk may happen and calculate NPV.
6. Add the NPVs of all risks and add as a line item in ROI.
7. Calculate expected value of ROI.

Q- Consider a Saudi business and the risks it faces. Describe these and then address how the company might estimate the probability the risk will happen

NEED SAUDI COMPANY AS EXAMPLE

Answer 1

Since no data is given as to what kind of business we are dealing with,let us approach the same in terms of a general business.

Saudi Arabia as a place of doing business has the following characteristics.

A huge population with considerable disposable income.

Huge oil reserves leading to creation of wealth.

Economic Stability

However the main risks of doing business is due to lack of economic transparency and a deteriorating geopolitical environment.

The potential costs for this may be huge depending on global macroeconomic events.

The probability of these happening depend again on the probability of certain events happening.