Sample Management Paper on Risk Assessment and Decision Making in Business and Industry: A Practical Guide


Risk is the loss/gain incurred due to disparities between the expected returns and the actual return on investment. Such risk could be generated due to human error and or natural factors. Risk is determined on such parameters as organizational assets; Degree of exposure to risk; nature of losses to be experienced in cases of exposure (Glen, 2005). Notably, deliberate measures can be undertaken to minimize the adversity of risk to a business through risk management protocols (Zsidisin, Ellram, Carter, & Cavinato, 2004). These protocols are indulged to mediate business operational costs resulting from civil/ criminal liability hence loss of market share due to diminished consumer confidence.

Dynamic Risk

This form of risk is mostly associated with variations in environmental and political factors. This form of risk mostly affects businesses in areas experiencing extreme variations in weather conditions and or political uncertainty. These risks could either work in favor of the business or against the performance of the business (Glen, 2005). Sudden changes, to the extreme, in weather conditions and political tensions lead to losses in the tourism industry, hotel industry, delays in deliveries of products and services etc. On the other hand government policies that favor business performance such as increased levies on imported goods and or reduced costs of production necessitated by reduction on fuel levies etc. could improve business performance. Reversal of such policies by the government exposes businesses to losses on the investment. Dynamic risk cannot be preempted and is often unpredictable.

Static Risk

These are foreseeable and avoidable factors that affect investments. The risk factor in this case is fixed and unchanging, unlike dynamic risk where the risk factors are variable (Glen, 2005). Foreseen risks include; accidents, death, theft, negligence and losses associated with system weaknesses e.g. hacking etc. In business practice, a venture that subscribes to exclusive services from a single supplier is bound to be affected when the supplier fails to supply the agreed upon services (Zsidisin, Ellram, Carter, & Cavinato, 2004). In case of such inconvenience, the business has to seek an alternative supplier(s) in order to jumpstart the business to regain normalcy. Static risk can be anticipated and usually losses are incurred in case of exposure to these risk factors.

Legal risks: Legal risks are results of contravention of laws and regulations surrounding best practice. Associated risks could hail from contract breaches and legal suits for failure of compliance or conformation to certain set standards. Such risks could favor the company or lead to the business loosing the legal sit and hemorrhage in compensation claims.

Pure Risk: These are losses incurred due to claims filed by an insured party. The insured party experiences a loss for which the insurance company has to effect compensation to. Characteristically pure risks increase operation costs due to injuries, losses and compensation claims (Glen, 2005). Examples include; insurance on vehicles, houses, businesses etc. Pure risk has vast similarities with static or foreseeable risk, however, for pure risk these factors can be preempted but are unavoidable.


Glen, K. (2005). Risk Assessment and Decision Making in Business and Industry: A Practical         Guide (Vol. 2 Ed). Boca Raton London New York Singapore: Taylor & Francis        Group .

Zsidisin, G. A., Ellram, L. M., Carter, R. J., & Cavinato, L. J. (2004). An analysis of Supply             Risk Assessment Techniques. internationla Journl of Physical Distribution &            Logistics Management , 34 (5), 397-413.