Running head: Analyzing risks associated with investment decision
Analyzing risks associated with investment decision
University of Phoenix
MBA 540 - Maximizing Shareholder Wealth
Risk analysis can serve a variety of purposes, such as help decision makers and others to identify current problems, compare new and existing technology and determine the effectiveness of different control and mitigation techniques intended to reduce risks in investments. A risk analysis model can include multiple elements risk assessment, risk management, and risk communication allowing management to focus on fixed resources for those problems that pose the greatest external and internal risk to a particular project. Additional risks can include initial tests, competition, comparable products, and price decrease that can occur over time. Risk analysis essential for key players to ensure that controls and expenditure are fully appropriate with the risks to which the organization is exposed.
Silicon Arts Inc. (SAI) is a four-year digital imaging integrated Circuits (ICs) company looking to analyze two capital investment proposals to pursue potential growth plans that can benefit the company. As identified in the University of Phoenix simulation, Silicon Arts Inc. has two capital investment proposals that need to be researched in order to choose the one that will yield the most return on investment and that will have the best future growth. SAI’s Chairman is planning to increase market share and keep up to date with technology by either expanding the existing Digital Imaging market share or entering the Wireless Communication market. Even though both markets are expected to grow, SAI needs to be aggressive in its investments for each of the markets to ensure SAI’s market share grows and secure its place amongst competitors. There are ways to understand the implications of risk, but no ways to eliminate uncertainty. To assess each individual proposal, some...