Key Risk Indicators and Performance Indicators questions

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Business Finance

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For the following two questions please write 250 words for EACH questions, as well as include APA for Each one, too.

  1. How do Key Risk Indicators help companies identify emerging risks?
  2. How do Key Performance Indicators help companies to manage existing risks?

Also, please answer to the following paragraphs (attached) with 100 words each showing substantive responses that extend or provide alternate views. Include APA if possible.


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#1 The Kilgore Custom Milling company had clearly outlined characteristics in the text usable for a rudimentary strengths, weaknesses, opportunities, and threats (SWOT) analysis. Among their strengths, the first that can be identified is their primary product. Their power windows assemblies were described as a commodity due to being comprised of widely available and simple technology. This meant that their component was easy to quality control and generally affordable to manufacture. This was connected to their next strength of access to low-cost manufacturing due to their access to plenty of workers in the area. This good relationship with the local worker pools gave them another strength of a good rel iable reputation as a supplier. Finally, the company followed a philosophy put forth by their owner of “sticking to its knitting” or focusing on engineering and manufacturing in which they knew best to minimize cost and maximize reliability (Fraser, Simkins, & Narvaez, 2015, pp. 365367) The company weaknesses were made apparent with the owner being averse to coordination with foreign suppliers, especially in Asia. The listed concerns of language barriers, time zone differences, and distance are all valid concerns, but they clearly display a major weakness for the company. The lack of a foreign affairs specialist or small team limits their potential greatly with the limit from other markets where materials, labor, and supplies could be much more competitively priced. Another weakness related to this was their lack of a coherent solution to their cash flow issues derived from foreign currency volatility in relation to the Canadian dollar (Fraser et al., pp. 368-371). There were several opportunities for the company that could have been utilized with a few more advisory or management positions. A new position to specialize in foreign sales and customer relations would open the company to plenty of markets, including the Asian markets for supplies and labor (Fraser et al., p. 368). The expansion into larger markets would open more contracts, increase revenue, and gain the company more widespread recognition across international markets. The creation of a proper chief risk officer would also allow for the CFO to give more focus towards the primary threat to the company involving finances. Also, the chief financial officer’s strategy to utilize short-term forward contracts would have been an opportunity to resolve cash flow issues due to foreign exchanges (p. 373-374). The threats to the company primarily were fixed on foreign capital and its volatile relation with the Canadian dollar. Other threats included possible more affordable competitors from overseas, an increasingly strong Canadian dollar cancelling out the stability and profitability of a contract, and other inflation differentials. What was perhaps the most concerning threat to the company was the cavalier attitude of decision-makers towards risk management and lack of a cohesive strategy (Fraser et al., p. 370-374). References Fraser, J. R. S., Simkins, B. J., & Narvaez, K. (2015). Implementing enterprise risk management: Case studies and best practices [Yuzu] (2nd ed.). #2 It appears that the new contract might be the answer for owner Steve MacLinden’s plan to liquidate some of his ownership in the company in the next 510 years. To be able to make a good decision or be fully aware of all the factors he must review the company’s strength, weakness, opportunities, and threats to identify issues and or opportunities that could affect the new contract results. Let’s review Kilgore Custom Milling SWOT analysis. Kilgore Custom Milling Strengths: is their high-quality manufacturing ability, skilled workers, and geographical placement. Previously in 1990’s the company’s strength was the weak Canadian dollar that helps win the price-based contract but now with the Canadian dollar nearing par to the U.S. dollar price-base is no longer a high strength for the company. (Fraser 363, 364) Kilgore Custom Milling Weakness: is the short cash flow due to the company’s low margins and generous payment term to their clients. The exchange rate fluctuation might also affect cash flow. (Fraser 369) Kilgore Custom Milling Opportunities: is the possibility of extending the 5 years contract to 8 years. This contract would give Kilgore the experience to deal with future large volume contracts. Kilgore Custom Milling Threats is that all the proceeds need to be made in U.S. dollars while all the expenses are being done in Canadian dollars, therefore the exchange rate would be an issue since rates constantly change. Another treat is that the base profit margin in U.S. dollars will be fixed. The possible changes in design and production could affect the manufacturing cost thereby affecting the profitability of the contract. (Fraser 370-371) It is impossible to make a good risk management decision without reviewing the company’s strength, weakness, opportunities, and threats, that can help with the strategic plan to come out with a better hand in a negotiation. Yes, Kilgore Custom Milling should sign the contract, however, to have a better hand the company should get a bank line of credit to have access to cash when needed.
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Explanation & Answer

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OUTLINE
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RISK MANAGEMENT

Risk Management
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RISK MANAGEMENT
RISK MANAGEMENT

Risk key indicators are unique tools that are available within the risk management and assist in the
predicting of any possible or upcoming risk and also mitigating the risk. Risk key indicators help
to prevent any adverse and unfavorable event which might affect the company negatively. Risk
key indicators recognize the leading signs in the organization’s environment hence giving an early
signal (Frigo, Mark L. 2015). Risk key indicators play a significant role in the initial monitoring
of risks in an organization. Risk key indicators determine the risk level and their exposure to the
management; thus it becomes more comfortable for the companies to mitigate them at earlier
stages. Risk key indicators are considered measurable thus they could be computed to ensure
awareness of any possible risk which could be determined.
These critical tools alert the organization about the upcoming unfavorable events, which makes
the company get prepared after determining the risk trend. The key risk indicators, therefore, give
the organization the opportunity to examine the risks through finding ways in the prevention of
those crises and mitigating them before they cause more effects. Risk key indicators characterized
as educational; in this case, these tools help the managers in making the right decisions when a
possible risk faces them.
Risk key indicators are useful to the managers as they help these individuals to understand the
level of risks and how these risks could...


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