Risk analysis (business)

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Risk analysis is a technique to identify and assess factors that may jeopardize the success of a
project or achieving a goal. This technique also helps to define preventive measures to reduce the
probability of these factors from occurring and identify countermeasures to successfully deal
with these constraints when they develop to avert possible negative effects on the
competitiveness of the company. Reference class forecasting was developed to increase accuracy
in risk analysis.[1]

One of the more popular methods to perform a risk analysis in the computer field is called
Facilitated Risk Analysis Process (FRAP).

Contents
[hide1 Facilitated Risk Analysis Process2 See also3 References [edit] Facilitated
Risk Analysis
Process
FRAP analyzes one system, application or segment of business processes at time.

FRAP assumes that additional efforts to develop precisely quantified risks are not cost effective
because:

 such estimates are time consuming

 risk documentation becomes too voluminous for practical use
 specific loss estimates are generally not needed to determine if controls are needed.

After identifying and categorizing risks, a team identifies the controls that could mitigate the
risk. The decision for what controls are needed lies with the business manager. The team's
conclusions as to what risks exists and what controls needed are documented along with a related
action plan for control implementation.

Three of the most important risks a software company faces are: unexpected changes in revenue,
unexpected changes in costs from those budgeted and the amount of specialization of the
software planned. Risks that affect revenues can be: unanticipated competition, privacy,
intellectual property right problems, and unit sales that are less than forecast. Unexpected
development costs also create risk that can be in the form of more rework than anticipated,
security holes, and privacy invasions. [2]
Narrow specialization of software with a large amount of research and development expenditures
can lead to both business and technological risks since specialization does not necessarily lead to
lower unit costs of software.[3] Combined with the decrease in the potential customer base,
specialization risk can be significant for a software firm. After probabilities of scenarios have
been calculated with risk analysis, the process of risk management can be applied to help manage
the risk.

Methods like Applied Information Economics add to and improve on risk analysis methods by
introducing procedures to adjust subjective probabilities, compute the value of additional
information and to use the results in part of a larger portfolio management problem.

Importance of International Organizations

International organizations, such as International Trade Centre and World Trade Organization, assist
member countries in promoting fair trade with each other.
To enhance sustainable economic development in the world.
To provide monetary help to member countries.
To provide food security to member nations
India's and China's Role in International
Trade and Finance and Global Economic
Governance

In cooperation with the Indian Council for Research on International Economic Relations
(ICRIER) and the International Monetary Fund (IMF) the Konrad-Adenauer-Stiftung organized a
conference on India’s and China’s Role in International Trade and Finance and Global Economic
Governance. Many high ranking international and Indian economists from five countries
participated in the conference held in New Delhi on 6th and 7th December 2007.

The main focus of the conference was besides the comparison of the economic systems of the
two Asian giants the current and future role of India and China in the Global Economic
Governance. More than 30 high ranking economists from India, China, the US, Germany and the
Netherlands participated in the very well attended conference. During five sessions the following
aspects were discussed:

1) China and India in the Global Economy

2) Challenges for Growth in India and China
3) Sustainability of Growth in India and China
4) India, China and the Global Trading System
5) Emerging Trends in Global Economic Governance

China and India in the Global Economy

The trade relations between the US and India and China are characterized by a large trade
imbalance, so Barry Bosworth, The Brookings Institutions. But taken a closer look it shows that
a low level of US exports is a global phenomenon and not one limited to trade with the Asian
economies. Alan Heston, University of Pennsylvania, pointed out that China and India will face
the structural shift to services in their economies that may constrain their future growth.

Challenges for Growth in India and China

One of the major challenges that India and China will face in the future, is the growing economic
and energy demand which leads to a growing share in Global Greenhouse Gas Emissions, so
Sergey Paltsev, Massachusetts Institute of Technology. The pollution across Chinese provinces
was presented by Shinling Lin, School of Economics, University of Peking. He stressed that
more stringent rules are needed to fight industrial waste water and industrial dust pollution. The
government should provide incentives to local governments for environmental protection. Bart
van Ark, University of Groningen, compared the cost competitiveness of the Manufacturing
Sector in China and India. In recent years China showed slightly higher labor productivity level
than India, but due to its higher compensation level, China was somewhat at a disadvantage in
terms of unit labor cost relative to India.

Sustainability of Growth in India and China

The sustainability of the Chinese growth miracle was analyzed by Eswar Prasad, Cornell
University and Barry Eichengreen, University of Berkeley. Despite of the fact that China has
achieved remarkable economic progress in the last three decades, a great deal of work remains to
be done to make the economy resilient to large shocks, to ensure the sustainability of growth and
to translate growth into corresponding improvements in the economic welfare of its citizens, so
Eswar Prasad. Berry Eichengreen stressed that China has been the principal motor of global
growth in recent years. China was aspected to slow down in the last years but it has not. China’s
growth is characterized by the extraordinary high saving rates and high investment rates. The
constraints of the Indian Manufacturing Sector were presented by Poonam Gupta, Delhi School
of Economics. The analysis found that in particular three types of industries have not done well
in India. These are the industries more dependent on infrastructure, industries with greater
dependence on external finance as well as those with high labor intensity.

India, China and the Global Trading System

The rising sophistication of China’s Exports has been analyzed by Shang Jin Wei, International
Monetary Fond (IMF) and NBER and Jahangir Aziz, International Monetary Fond (IMF).
Improvement in human capital and government policies in the form of tax-favored high-tech
zones appeared to be the key in the evolving export structure of China. Comparing the Trade
Integration of India and China, Przemek Kowalski, OECD, pointed out that international trade
will probably remain the single most important fact that can allow China and India to continue
the growth of the last decade. The necessity of reforms of the Global Financial System was
stressed by Dr. Sebastian Paust, Executive Director, Asian Development Bank (ADB). For future
developments a Global Equilateral Triangle consisting of solid domestic, regional and global
financial architecture will be very important. Central roles in this will be played by the US, Asia
and Europe.

Emerging Trends in Global Economic Governance

Prof. Ansgar Belke, University of Duisburg-Essen, presented what kind of trading partner China
and India will represent for the European Union in the future. He stressed that the current
differences in capital-labor ratios will disappear rapidly and trade between the EU and China is
thus more and more likely to become intra-industry in nature. Dr. Heribert Dieter, German
Institute for International and Security Affairs, adverted to the urgently needed reforms of the
International Institutions of Global Trade and Finance such as the World Trade Organization
(WTO) and the International Monetary Fond (IMF).