Business Risk Evaluation – General Electric

General Electric is an international industrial company that was incorporated in 1892.  the company’s services and products range from gas and oil production, power generation, and aircraft engines equipment to industrial products, financing, and medical imaging. This company is experiencing a number of business operation risks. The company faces strategic risks such as acquisition risks that include loss of customers due to the lack of trust and increase in the mergers operational cost among other issues (General Electric, 2016). The company is not able to completely safeguard its design from imitation. Thus, it is highly likely to experience competition from a company with similar products in the market. The company is involved in the production of complex machinery and products that require high level of technology to enhance effective operations. This subjects the company into production risks that include poor quality risk and quality consistency risk.

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The company is also unable to guarantee safety, high rate of production and environmental risk control to its customers due to inability to satisfy the quality standard. The company has in the past relied on the debt and equity to finance its operations. This has not changed the company debt interest rate has been increasing from 2014, which shows increase in the company’s level of debt on annual basis. Despite of this, the company has a plan to add more into its long-term debt in the year 2017. The company considers incurring new long-term debt with intention of financing the Baker Hughes transaction, refinancing current unsecured term debt and for other corporate functions. The new debt might contain new unsecured termed debt given by intercompany or GE arrangements between the GE and capital utilization of GE. The company also upholds a commercial paper program containing $1.5 billion as balance at 31st December 2016 (General Electric, 2016).

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The company is also facing the cyber security risks which are highly likely to compromise its data integrity, confidentiality and availability.This may affect the customers trust to the company especially if their data are compromised in any way.  Other possible risks include the supply chain risks, legal and compliance risks. Other possible risks include the technology risk andsupply chain risk which seems to be still going on. All these risks are likely to increase the company production cost (General Electric, 2016).

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The company has tried to employ measures to mitigate the identified risk in its financial statements. The company has added the amount of money used in research and development. This will assist in eliminating the issue of product imitation even after employing patent and copyright measures. The addition in the research and development funds demonstrates the company’s effort to develop more creative products and to incorporate modern technology to enhance this development. The financial statements also show higher acquisition profits in 2016 from the previous years.

The market is highly likely to experience change of the technology and the need to develop more advanced and quality products to keep up with the competition in the future. Thus, the company will be required to invest more in innovation, quality assurance, and general production process to enhance quality. The inability to do this will subject the company to server competition from the upcoming and existing international companies in this business niche. This will influence the company’s revenue and profitability.

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