Reference no: EM13479114

The Week 4 group assignment requires each team to prepare a Risk Analysis of both the parent company and the target acquisition company as it relates to the merger of the two companies. This means that you are being asked to evaluate the risk factors present in both companies and to prepare a report on this analysis.

This report should complement the work you have already done in preparing the Project Proposal during Week 2 and the SWOT Analysis during Week 3 and should delve into areas of risk exposure for the parent company in making the acquisition. The key is to identify the major risk exposures and how they can be mitigated. A Google Search of the term "Risk Analysis" will yield you numerous sources of information about how to complete such an analysis.

The basic purpose of any risk analysis is to help you identify and manage any potential problems that could undermine key business initiatives or projects. In this case, that means the potential merger of your parent company with your target acquisition company. Keep in mind that risk is made up of two things: the probability of something going wrong with the merger, and the negative consequences that will occur if it does.

The first step in a Risk Analysis is to identify the existing and possible threats that the parent company might encounter if it goes through with its decision to merge with the target acquisition company. These risks or threats can arise from any number of sources, including but not limited to the following examples:

The second step in a Risk Analysis is to estimate the likelihood of the identified threats or risks occurring and to quantify their potential impact. One way of doing this is to make your best estimate of the probability of the event occurring and then multiplying this probability by your best estimate of what it will cost you to set things right if the potential threat or risk actually occurs.

The third step in a Risk Analysis is to look for way to manage any potential threats or risks that you have identified. Three ways of managing risks are:

First, using existing assets - this may involve reusing or redeploying existing equipment, improving existing methods and systems, changing people's responsibilities, improving accountability, and improving internal controls.

Second, developing a contingency plan - this is where you accept a threat or risk but then develop a plan to minimize its effects if it happens.

Third, investing in new resources - your risk analysis will help you decide whether you need to bring in additional resources to counter the risk. This can include insuring the risk, particularly whenever the risk is so great that it might threaten your firm's solvency.