From the e-Activity, propose a methodology for assessing the risk in business.

As described in the research paper Risk Assessment of Business Contracts by Vandana Kabilan and Hans Weigand, there are various risk assessment models available over the web which revolves around a range of functional areas like the investment analysis, critical mission analysis, and auditing etc. The author after evaluating and researching on various the methods has fine tuned the existing ones into the contract drafting and contract assessment. The method discussed in the research paper can be described as below: Identification of primary obligations: As a key / underlying assumption, nonfulfilment of obligations (by either party involved in the contract) is regarded as the major risk to the interoperable systems Scenario Modelling: Using the above primary obligation as the base, risk events can be derived for the non-performance of the obligations under discussion. Since the risks events usually follow a temporary sequence, the partial orderings can be presented using the scenario modelling Global risk assessment: Post identifying the risk events or scenarios, for each of the scenarios possible risks can be derived using the Event tree method. The risk as derived is in the form of a probability estimate. Thus using this technique across all the risk events or possible scenarios, an aggregate risk can be computed Detailed risk analysis: Further to the assessment of an aggregate risk, the scenario risks can further be broken to analyze the causes of non-fulfilment using the Fault Tree Analysis. Further to assessing the causes of non-fulfilment using a backward looking method, its actions or implications can be analysed using the forward-looking Event Tree method Risk mitigation: Post determining and assessing the key risks associated with contract, risk mitigation strategies are the next to be determined. Once determined, their feasibility should again be tested using the Event Tree method (repeating steps 3 to 5). Examples of few risk mitigation strategies are: Down payment, LOC or the letter of credit, bank guarantee etc In order to have the most optimum results, a range of alternatives should be generated which needs to be checked and compared before selecting the best alternative as per the business requirement

Analyze the potential downfalls of any team effort (e.g., free riders) and make at least one recommendation for minimizing risk. Provide specific examples to support your response. The major problem of any team effort occurs when the individual performance is decided based upon the teams performance. According to the Standard economic theory, since majority of the people rate leisure higher than work, and given the option they would always prefer leisure over work, often team based incentives fall victim to the problem associated with free-riding. The major problem occurs when each individual knows that his/her performance will be gauged on the performance of the team not by individual performance. As a result, there is no/little incentive for a slacker to contribute towards a teams goal. Moreover, being a part of the team, the slacker cannot be left out of the team reward as a result he/she becomes a freerider i.e. without any effort the person enjoys similar benefits as a hardworking individual in the team. It goes a long way in impacting the motivation of the team, whereby risking the future performance of a team. One such example of free rider situation is using one of the principles of the game theory where if the team achieves its target it will be incentivized, however if a team fails to achieve its target each and every team member will be punished and penalized. In such a case, each and every team member will be induced to monitor the activity of the other, whereby reducing the chances that free-rider can hide his slackness amongst the performance of the others. Thus both under the pressure of team members monitoring his/her performance, and the punishment for not able to meet the target goals, the person will work hard in anticipation of escaping both the punishment while at the same time not being regarded as a slacker while earning the incentives. Live example is the Nanjie Village in China, which is the largest base for productions of rice chips and instant noodles in the Country. Amongst the various methods employed for controlling the free-riding problem, the one discussed above is widely used. For instance, in their rice chip production line the minimum production quota of each team is 280 bags per day. If the team meets the production quota they are rewarded handsomely, however, if they fail to meet the quota by even a single bag, then they are punished. As a result, each and every member of the team keeps on monitoring the others performance so as to ensure that every individual is performing for meeting the end goal.

Describe a company you would like to start and determine which form of ownership would be most appropriate given your current financial status. Explain your rationale. Being a CPA (Certified Public Accountant), given my current financial condition, and my expertise in the field of accounting, I would like to set up a boutique accounting firm (tax advisory and financial auditing). The firm would aim to provide services to small and medium enterprises by helping them out in their monthly, quarterly, semi-annual, and yearly (or as decided by the statute) financial audit and book keeping process for the requirement of declaring advance tax, filling income tax returns and maintaining the books of accounts for future reference. As a start up, I would like to start the firm as a sole-proprietorship firm, without falling into the hassles of seeking various approvals for setting up a partnership or a limited company. The major advantage of having a sole-proprietorship firm is that I will not be bounded, and I can take all my business decisions independently. Further, I will be able to reduce the instances of free-rider problem, where the partner if not appropriate can be a major hindrance to the performance of the Company. Even, profit sharing will not be a problem as it would have been in the case of a partnership firm, where profit apportionment would have been a severe headache for both the partners.