MGAD40H3 : Identifying Strategic Risk - ch.12

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Strategic risk: unexpected event or set of conditions that significantly 9reduces the ability of managers to implement their intended business strategy. 3 sources of strategic risk: operations risk, asset impairment risk, competitive risk. Breakdown in core operating, manufacturing, or processing capability. Basic business strategy affect firm exposure to operations risk. Key process standardized and controlled to assure safety and quality. Use in critical parts of value chain to identify points where system errors damage key operations or impair important assets. Use tqm based on best practice, benchmarking, engineering studies. Resource owned to generate future cash flows. Reduction in likelihood of receiving future cash flows. Strategic risk if deterioration in financial value, intellectual property rights, physical condition. Future cash flows no longer sufficient to support b/s valuation. Decline in mv of b/s asset help for resale or collateral. Credit risk: when creditor insolvent and unable to pay contractual obligations. Balance risk and reward when granting credit (sales vs. default)

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