The following report will aim to identify and categorise risks to easyJet as a company. By identifying risks to the company we are able to see what risks the company have and potentially how to avoid or deal with them. Then by classifying them in groups it may be possible to tackle a few risks with one solution. After listing the risks and putting them in a risk matrix, the report will then aim to explain how the risk will affect easyJet and justify the position of it in the risk map. The way the report has classified the risk is whether the risk is a generic risk that will affect the whole industry of whether the risk is specific to the company. There will then be a conclusion to summarise the risks and the probability and likelihood of them happening.
Ways to categorise and analyse Risk.
The way in which many people perceive risk is very much a bad one. People often think of taking risks as only having a bad outcome, this is untrue however, many risks have a positive outcome. When talking about a specific scenario where a good or bad thing could happen we call this a ‘two way risk.’ There are many risks that we undertake for a positive gain in day-to-day life. We call a positive risk and opportunity. One of the most common things that have great risk but people don’t think twice about doing everyday is crossing the road. There is always a risk or being hit by a car, whether a car goes through a red light, or whether you trip in the road. Another very common activity that has a lot of risks is making a cup of tea.
There are many ways in which we can classify/categorise risks. Classifying or categorising risks includes ‘grouping similar risks together.’ (S. Condon, 2010.) The first of many categories being Business risk and Non-Business risk. Under Non-Business risks there are two ways in which we can further categorise risks, financial risks and Event risks. Later in the report, an assessment will be made of some of the financial and event risks that could affect easyJet as a company.
Business risk is defined as ‘inherent in the firm, independent of the way it is financed.’ (Van Horne, 1974.) This means that business risks are things that naturally occur in the day-to-day operations of a business, such as new competitors. A non-business risk could be anything else, from the risks included to do with a change in the currency value to the risks incurred when a natural disaster happens.
Another way of categorising risks is by creating 2 sub-categories; Generic and Specific. A generic risk is a risk that could affect the whole company or the market that the company is in, whereas a specific risk is one that only affects the company. The report will look at a few risks identified and categorise them into these two classifications.
There is also a structural way in which we could classify the risks that could occur for easyJet. The structure is often abbreviated to PESTEL. This stands for Political, Environmental, Social, Economical and Legal.
By carrying out a ratio analysis of easyJet and comparing it to the market’s average or even last years financial outcome, we may be able to indicate what areas could be subject to risk..
Generic and Specific risks.
As explained earlier a generic risk is one that would affect the whole company or the market. A few examples of these are as follows.
• Fuel prices go up. (VAT increase)
• Increase in sales.
• Industrial action of workers. Means Loss of sales/ planes can’t fly. • Volcanic disruption, caused major delays etc. not the companies fault but had to pay out. • Advances in technology.
These are all risks that would affect the whole industry aswell as the company, these situations are ones that easyJet would not be able to control. If fuel prices go up, easyJet would be affected because it may mean they would have to increase their prices to accommodate for this. However, easyJet and other...