Sustainability risks usually threaten the sustainability of a business within a competitive business environment. They typically lower the ability of the organization to withstand the business pressure exerted by the competitors in the market. The sustainability risks often contribute to business risks that threaten the ability of the organizations to attain their targets or financial gains. Business risks emerge from various sources. Thus, they require the managers to implement multiple risk management measures to control the risks, which would considerably help the organizations to achieve their targets. This paper, therefore, offers a definition of risk and description of what constitutes sustainability risk along with the impacts of the risks on the reputation of an organization.
Definition of risk
Risk is the probability that the outcome or the actual gain of an investment will differ from the anticipated yield. Risk entails the possibility of losing part or all of the original investment. It is normally evaluated by taking into account historical behavior and outcomes.
Description of sustainability risks and its components
Sustainability risks, on the other hand, are the uncertainties in being able to sustain the development of a specific system since some activities may have adverse externalities, which lead to the destruction of the value chain of the system over a given time. The sustainability risks comprise of the political uncertainty, financial risk along with the investor’s risk. Financial uncertainty is a form of threat that can lead to the loss of capital to interested parties. The financial uncertainty usually contributes to the loss of money by an organization.
Furthermore, financial risk is grouped into four distinct categories, which entail operational uncertainty, market uncertainty, liquidity uncertainty along with credit risk. Grouping of the financial risk to various categories habitually assists the managers of the organizations to effectively understand financial risk as a constituent of sustainability risks to enable them to employ the most appropriate measures to control the risks to promote the sustainability of the organizations. The financial risk usually threatens the viability of businesses by limiting the ability of the organizations to accumulate enough funds that would promote the growth and sustainability of the organizations. Thus, it is a vital component of sustainability risks that curtail the continuity of businesses in an aggressive business environment.
Similarly, political risk is the uncertainty faced by the investment’s return due to the unstable political environment in a country. The instability that affects the return on investment emerges from the change in government, legislative bodies, and military control, which collectively contribute to political risks. The political uncertainty is an essential component of sustainability risks in business because it curtails the viability and growth of the organization by creating a hostile business environment that does not support the operation of organizations. Likewise, the investor’s risks are the uncertainty incurred as a result of investing in a foreign country. It involves market risk, which involves the decline in the value of the investment caused by the economic development that considerably influences the whole market. Investors risk usually threatens the growth and sustainability of organizations, and this makes it a vital component of sustainability risks that adversely affect the viability of business organizations in the competitive business environment.
Risks faced by Signet Jewelers
I am familiar with the Signet Jewelers. The company has lately incurred the financial risks, market risks along with liquidity risks. Financial risks mainly involve the loss of money by the organization, shareholders, or by the investors. Recently the organization has been facing the challenge of financial risks, which has posed a threat to its operation. It has not been effective in undertaking the causes of the financial burden on its service, and this has exposed it to the financial risks. The company also faced market risks due to the various factors that affected the performance of its market.
How the risks affected the reputation of Signet Jewelers
The market risks and financial risks incurred by Signet Jewelers impacted the general reputation of the organization by lowering the brand of the company, which adversely affected the general performance and ranking of the company among the best retail companies. The risks exposed Signet Jewelers the threat of sustainability, and they lowered the competitive edge of the company, which considerably affected the viability and reputation of the company.
Steps the organization should take to mitigate risks Don't use plagiarised sources.Get your custom essay just from $11/page
The steps that a corporation should take to reduce risks encompass identifying the threat, evaluating the consequences of the risks, evaluating the potential impact of the risk, risk treatment, and finally monitoring and reviewing the risk. Locating the risk typically involves uncovering, recognizing, and evaluating the risk that is likely to affect the organizations and their associated activities. Analyzing the consequences of risk is the second phase in risk mitigation, and it entails determining the likelihood and impact of each risk to enable the organization to understand the risk and its viable impact on the projects and goals of the company. Likewise, evaluation and ranking of the impact of the uncertainty involve assessing and grouping the risks based on their implications to the organization.
Moreover, in the risk treatment step, organizations are required to create risk mitigation strategies that would eventually help in mitigating the risks. The strategies should be in line with the risk treatment plans, which include avoidance, reduction, sharing, and retention of risk. The last step in the risk mitigation involves monitoring and reviewing the risks where the identified risk is regularly tracked and examined.
The local regulation that requires the removal and reporting of uncertainty in an organization
The HSWA imposes a duty on the employers to promote health safety by ensuring the elimination of any potential risk within an organization. The act requires employers to identify and execute risk prevention and control measures that would eventually assist in removing risk within an organization.
In conclusion, risk habitually impacts the organizations by lowering the gains that the organizations are likely to achieve from their business activities. It typically threatens the sustainability of the organization since it curtails the ability of the organizations to grow. Sustainability risk as a form of uncertainty faced by the organizations usually hinders the viability of the corporation by inducing political burden and financial burden to the organizations. Corporations are, therefore, required to employ various risk mitigation steps to alleviate themselves from the sustainability risks to enable them to remain viable in the competitive business environment.