Assignment 8 - Optimizing Risk for Strategic Advantage

After an organization develops and implements its strategic plan, it needs to determine how risk taking will be controlled. Which one of the following statements is correct with respect to risk taking? Select one: A. In general, there is little difference between risk taking at the strategic and operational levels within an organization. B. Organizations that are risk adverse usually have little difficulty meeting strategic goals if managers are excessively cautious. C. At all levels with an organization, decisions are made about which risks should be taken to gain competitive advantage. D. A factor in strategic decision making is whether an organization has an advantage in controlling risk with a given activity.

A factor in strategic decision making is whether an organization has an advantage in controlling risk with a given activity.

Which one of the following analysis methods concentrates on an organization's competitive environment? Select one: A. PESTLE analysis B. Porter's Five Forces analysis C. SWOT analysis D. Scenario analysis

Porter's Five Forces analysis

During which one of the following stages of the strategic management process would an organization use methods such as Porter's Five Forces Analysis and PESTLE Analysis? Select one: A. Formulating Strategies B. Analyzing Environments C. Developing Goals D. Evaluating Strategies

Analyzing Environments

Which one of the following statements is correct regarding formulating an organization's long-term strategies? Select one: A. Long-term strategies to improve performance and/or create a competitive advantage, are based on the organization's goals and analysis of internal and external environments. B. A long-term strategy should be an aspirational description of what an organization will accomplish in the long-term future. C. All parts of an organization play a role in formulating an organization's long-term strategies. D. Formulating an organization's long-term strategy involves determining the "who," "what," and "when" responsibilities of each department.

Formulating an organization's long-term strategy involves determining the "who," "what," and "when" responsibilities of each department

Hi-Tech Phones has been working on two new models of their flagship smart phone. The Research and Development department has been working on a touch-based phone and a voice-activated phone. Which one of the following is a tool that could be used to assess the risks of developing and marketing either or both of these phones? Select one: A. A topographic map. B. A heat map. C. A tree map. D. A risk map.

A risk map

Taylor owns Paoli Hardware, a mid-sized hardware store with 25 employees. Paoli Hardware has won best local hardware store 3 years in a row. Taylor would like to expand operations and has undertaken a SWOT analysis. His most dedicated customers are generally over 40 years old and engaged in small house projects, but his biggest revenue generator continues to be the sale of lumber. He would like to obtain more commercial customers and increase lumber sales. One of the major complaints Taylor hears from his customers is the difficulty finding local contractors. So, he is considering hiring a general contractor at the store who would also make house calls to assist customers. This will allow him to bill for labor and increase the sale of his products, but he is concerned it may increase his insurance claims and premiums. One of the younger store employees suggested they create a website to expand sales to on-line purchases and target electronic advertisements to commercial accounts. Taylor is not sure that he has the expertise to maintain a website and run the store. The employee claims to know a company that can maintain a website for Paoli at minimal cost. Taylor believes the website is a good idea and will increase sales of lumber. To protect Paoli from increases in the cost of lumber, Taylor is considering a forward contract with the lumber yard. If Taylor completed a PESTLE analysis instead of a SWOT analysis, the PESTLE analysis would include which one of the following? Select one: a. Need for a growth initiative b. Lack of expertise among employees c. Increase in competition d. Introducing on-line sales

Increase in competition

The four SWOT headings are strengths, weaknesses, threats and Select one: A. Priorities. B. Markets. C. Ideas. D. Opportunities.

Opportunities

Which one of the following statements is correct with respect to risk tolerance? Select one: A. A zero-risk tolerance level will typically result in the best risk-based decisions. B. Risk tolerance levels can have high-end thresholds, low-end thresholds, or both. C. An organization's risk tolerance is typically unrelated to its risk appetite. D. Risk tolerance is stated in both quantitative and qualitative terms.

Risk tolerance levels can have high-end thresholds, low-end thresholds, or both.

Which one of the following is the most intangible and abstract of the four risk quadrants? Select one: A. Strategic risk B. Financial risk C. Operational risk D. Hazard risk

Strategic risk

Strategy development is an important element of the strategic management process. Which one of the following statements is correct with respect to strategy development? Select one: A. Strategies should reflect an understanding of the business, including its identity, customers, and purpose. B. Whether a strategy will yield a return on investment in the form of profit or stock price is generally not a consideration. C. Normally, strategies are the same in all departments and at all levels within an organization. D. Managers typically do not consider the likelihood that personnel will support a strategy before implementing it.

Strategies should reflect an understanding of the business, including its identity, customers, and purpose.

Taylor owns Paoli Hardware, a mid-sized hardware store with 25 employees. Paoli Hardware has won best local hardware store 3 years in a row. Taylor would like to expand operations and has undertaken a SWOT analysis. When Taylor completes his SWOT analysis in which quadrant of the SWOT analysis will he place reputation? Select one: A. Weakness B. Opportunities C. Strength D. Threat

Strength

Taylor owns Paoli Hardware, a mid-sized hardware store with 25 employees. Paoli Hardware has won best local hardware store 3 years in a row. Taylor would like to expand operations and has undertaken a SWOT analysis. Which one of the following could Taylor's SWOT analysis consider an opportunity or a threat, or both an opportunity and a threat? Select one: A. Technological advancements B. Lack of Expertise C. Reputation D. Shortage of personnel to explore new projects

Technological advancements

Which one of the following is the goal with strategic risk? Select one: A. The goal is to use information about strategic risks to eliminate negative risks and/or their consequences. B. The goal is to remain solvent and cover the risk retained by the organization. C. The goal is to make sure that products and processes are done right. D. The goal is to use information about strategic risks to make informed decisions that optimize the risk-reward ratio.

The goal is to use information about strategic risks to make informed decisions that optimize the risk-reward ratio

Which one of the following statements is true regarding the strategic management process? Select one: A. The strategic management process is the responsibility of an organization's board of directors. B. The strategic management process aligns all of an organization's strategies and activities to enable it to meet its short-term goals. C. The strategic management process can be applied to any type of organization, including business, not-for-profit organizations, and government entities. D. The strategic management process focuses on the internal environment of the organization.

The strategic management process can be applied to any type of organization, including business, not-for-profit organizations, and government entities

Clark's Electronics is considering launching new technology for the medical industry. Before investing major resources in the project, the company decided to perform a SWOT analysis. The fact that there are new medical industry regulations pending would fall under which one of the following quadrants of a SWOT analysis? Select one: A. Weaknesses B. Opportunities C. Strengths D. Threats

Threats

Risk appetite is an important component of strategic risk management (SRM). Which one of the following statements is correct with respect to an organization's risk appetite? Select one: A. An organization's risk appetite is typically independent of its capital and other assets, including its human resources. B. Because risk appetite is based on the attitudes of executives and shareholders, it is usually static and does not vary over time. C. Regulatory conditions, political risks, and anti-trust or other legal concerns can reduce an organization's risk appetite. D. Economic forces, market forces, and competition generally have little effect on an organizations' risk appetite.

Regulatory conditions, political risks, and anti-trust or other legal concerns can reduce an organization's risk appetite

Strategic risk can be created and affected by external factors or internal factors. Which one of the following is considered an internal factor? Select one: A. Resource allocation B. Changes in labor market C. Changes in regulations D. Competitive pressures

Resource allocation

When assessing strategic risk, which one of the following represents the amount of risk an organization is willing to take on in order to achieve an anticipated result or return? Select one: A. Risk-adjusted return on capital B. Economic capital C. Risk appetite D. Risk threshold

Risk appetite

Taylor owns Paoli Hardware, a mid-sized hardware store with 25 employees. Paoli Hardware has won best local hardware store 3 years in a row. Taylor would like to expand operations and has undertaken a SWOT analysis. One of the younger store employees suggested they create a website to expand sales to on-line purchases and target electronic advertisements to commercial accounts. Taylor believes the website is a good idea and will increase sales of lumber. To protect Paoli from increases in the cost of lumber, Taylor is considering a forward contract with the lumber yard. Which one of Porter's Five Forces is most greatly affected by Paoli's ability to negotiate a forward contract with a lumber supplier? Select one: A. The threat of customers finding a substitute way of doing what you do. B. How competitive you are with existing firms. C. The customers' bargaining power to drive prices down. D. The suppliers bargaining power to drive prices up.

The suppliers bargaining power to drive prices up.

A company's management team is preparing to conduct a SWOT analysis as part of its strategic management process. Which one of the following questions can the management team expect to answer as a result of the SWOT analysis? Select one: A. Will this organization achieve its objectives for the current period, or is an intervention required? B. Will this organization's current business strategies still allow it to achieve its goals, or is a change required? C. Are this organization's objectives in alignment with the sound enterprise risk management practices in a changing environment, or are changes required? D. Are the organization's current business strategies in alignment with its mission statement, or is a change required?

Will this organization's current business strategies still allow it to achieve its goals, or is a change required?

Widget Manufacturing board of directors recently adopted a zero-risk tolerance for work place accidents. Initially the chief risk officer thought this was a great idea, however, he has found it very hard to implement. One reason that a zero-risk tolerance policy is hard to implement is because zero-risk tolerance Select one: A. Requires supervisors to constantly monitor and often micro-manage their direct reports. B. Results in higher levels of customer defections due to the high costs of implementation. C. Results in higher capital expenditures and significantly lower returns on investment. D. Will typically result in risk-based decisions that are too rigid and counter-productive.

Will typically result in risk-based decisions that are too rigid and counter-productive