Navigating Risks Essay

User Generated

CebsrffbeNeabyq

Humanities

A1 Business and Technical College

Description

Earlier in the quarter we discussed Southwest Airlines’ use of game theory to create new strategy. Continue to research Southwest Airlines or a company of your choice and write a six to eight (6-8) page paper in which you:

Evaluate a company’s recent (with in the last year) actions dealing with risk and uncertainty.

Offer advice for improving risk management.

  1. Examine an adverse selection problem your company is facing and recommend how it should minimize its negative impact on transactions.
  2. Determine the ways your company is dealing with the moral hazard problem and suggest best practices used in the industry to deal with it.
  3. Identify a principal-agent problem in your company and evaluate the tools it uses to align incentives and improve profitability.
  4. Examine the organizational structure of your company and suggests ways it can be changed to improve the overall profitability.
  5. Use at least five (5) quality academic resources in this assignment. Note: One of your references regarding your should have been published within the last 6 months. Note: Wikipedia does not qualify as an academic resource.

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Explanation & Answer

Attached.

Running Head: SOUTHWEST AIRLINES

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Student Name
South West Airlines
Affiliation

SOUTHWEST AIRLINES

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Evaluate a company's recent (within the last year) actions dealing with risk and
uncertainty.
The Southwest Airlines just like any other business has its share of the risks and
uncertainties that it faces. Although it is valued and laughed as one of the best airlines, it has
taken several risks and uncertainties. It is how the company handles the risks and uncertainties
that determine its ability to keep dominating in the marketing. Some of the risks are the high
prices of the fuels and the fact that it is highly volatile and also the risk of losing finances due to
the introduction of Airlines with lower prices for customers and many more.
Another of the companies risk includes accidents which may occur by employing pilots
that are reckless. This can cost peoples life's and may cost the company a lot of finances and
even the name they have established for a long period of time. However, all companies will
always have to deal with the risks and the uncertainties. Below is how the Southwest Airline
Company deals with the uncertainties.
In dealing with risks and uncertainties in the recent years, the Southwest Airlines has
used fuel derivatives to ensure that they don't lack fuel and also don't incur a lot of prices buying
fuel especially when the prices go high. The fuel derivatives were able to take care of their fuel
expenses for up to the year 2017 and also 2018. This has been of help to the Airline as they have
maximized their profits even when the fuel prices increased.
The Airline has also ensured that their planes get checked and serviced often so as to
avoid the risk of an accident. They also ensure that their pilots go on regular training sessions.
This is the reason why, although a southwest airline plane may undergo an accident, the

SOUTHWEST AIRLINES

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company cannot lose it customers because they have believed in them for their professional
services and customer satisfaction.
Offer advice for improving risk management
On improving the risk Management and especially on the risk of increased fuel prices, I
would advise that Southwest Airlines should have a long-term save up plan of their own fuel
Depot. This would reduce the costs and increase the profit maximization. It would also ensure
that even in times of fuel shortage to the other Airlines, Southwest Airlines is still working.
Before setting up their own fuel depot, I would advise that they buy fuel in large amounts when
the prices are low before they hike.
I would advise that they set aside funds for emergency activities. This can be of great
help especially if there is an accident. They can very well repair or refund the customers. The
funds can also be used for training or refresher courses for the personnel so as to sharpen their
skills. This will also make the Airline better and therefore increase their customers and profits
consequently.
Dealing with competition from some upcoming cheap airlines is also an uncertainty
which the Southwest Airline is dealing with. To deal with this uncertainty, the Airline also has
been able to maintain constant fair prices but with quality services compared to those of the
competitors. The personnel also go an extra mile to ensure that the customers are satisfied. They
also have very professional personnel that are well trained and motivated to work.

SOUTHWEST AIRLINES

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Examine an adverse selection problem your company is facing and recommend how it
should minimize its negative impact on transactions
One of the adverse Selection problems Southwest Airlines is facing is when the airline
decides to discriminate the passengers that use the plane. One can be tre...


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