City Bus Case Study

Document Type:Essay

Subject Area:Finance

Document 1

Contracts are awarded on the basis of the lowest cost provider whilst factoring in other factors; level of service and overall performance The city bus manager should undertake the following steps outlined below in in establishing the risk management process; Identify potential losses the firm is subjected to this involves distinguishing both the main and minor potential exposures, subject to the bus company. There are various forms of loss exposure that comprise: asset loss , this includes both fixed and current assets of the firm such as premises, equipment, receivables, vehicles, furniture ,software, intangible assets comprising of ruin to the public image of the bus company, declining goodwill and loss of intellectual property. Revenue exposure that consist of unexpected increase in expenses, constant loss made by the firm, personnel loss exposure involves, retirement, death , or injury on key members of staff.

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Liability loss arising from polluting the environment. The next step is to Evaluate and compute the identified loss exposure the firm is subjected to. The principal approaches to risk financing include: insurance, retention and non-insurance transfer. Whereby insurance, the firm contract an external firm to compensate for the loss incurred, retention technique, the firm, absorbs the loss completely from its own finances. On the other hand a non-insurance transfer involves transferring the losses to another party by means of contracts or leasing. The last part of the risk management plan involves Execution and screening of the risk management plan. This final step involves implementing and screen the risk management plan to ensure it is effective. Loss exposure of intangible assets such as when the public image of the firm is ruined can be avoided by establishing a Public Relations company to ensure the firm upholds a good image.

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Declining goodwill and reduction of market share can be reduced by delivering quality customer service (Hubbard &Douglas, 2009) Revenue loss exposure is a potential risk to the business, in that they may incur more expenses than the revenue being earned, thus making losses. This can be prevented by re-engineering the business model applied by the firm so as to maximize revenue and minimize expenses. Personnel loss exposure: personnel loss arising from diseases and injury can be prevented by the bus firm insuring all its employees so they can be in a position to access proper medical care in case of any of the mentioned occurrences. Liability loss exposure is the kind of exposure the firm faces liability exposure in the form of environmental pollution.

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Marketing department: prevent loss as a result of damage to the reputation of the firm by marketing the firm extensively ad addressing any issues identified with customers, this it to avoid decline in market share. Finance; they should ensure effective management of funds to prevent loss exposure to constant loss making by the business, to prevent revenue loss exposure. The finance department should also re engineer the business model to maximize returns and prevent loss resulting from constant loss making by the firm. The top management should come up with regulations and guidelines that are in line with the risk management plan to ensure its success. The top management should also provide go ahead to finance and accounting department for them to fund the risk management plan.

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