Introduction
Analyzing a company’s potential risks is necessary to secure its growth and sustainability. Each business may be affected by systematic and unsystematic risks that decrease its stability and income. Finance-related damages harm the entire staff and can demand serious measures to prevent them.
Thus, a business must proactively adapt to market changes and evaluate the possibility of avoiding damages. As an example, the 10Q Form of McDonald’s Corporation (2023) may be used to analyze this phenomenon and the tactics used to address it. Examining the potential impacts and consequences of different factors on the company’s future strategies is necessary.
Systematic and Unsystematic Risks
Several elements may contribute to business risks. In general, there are two groups of risks: systematic, which affects the market, and unsystematic, which is specific to a particular field or establishment (Institute of Business & Finance, 2023). The interest rate risk, for example, is a systematic risk addressed by McDonald’s (2023) by creating treasury locks designed to hedge a portion of future cash flow. Another case may include an economic risk, which affects the whole market on a macroeconomic scale. This type is more challenging to predict as it may involve unexpected events affecting several countries of operation.
Thus, the McDonald’s Corporation (2023) chooses to adapt to these changes using highly protocolized solutions. Conversely, the contract may address unsystematic credit risk by including netting agreements. A combined approach is utilized for operational risks associated with failed processes or systems. McDonald’s (2023) optimizes its strategies to prevent damages and quickly adapts to unforeseen changes to limit the harm. Thus, different types of risks are analyzed and negated by the corporation using ranging approaches depending on the nature of the issue.
Lower Growth Impact
A lower growth in sales may substantially change the short-term business strategies. According to the 10Q Form, the core elements of business will be prioritized as the primary source of income, impacting the dividend strategy (McDonald’s Corporation, 2023). While guaranteeing the cash flow for stakeholders is essential, McDonald’s will focus on preventing future damages to avoid further complications. Thus, dividend strategy and retained earnings will be included in cash flow and risk management. These tactics involve maintaining the restaurants’ success and improving customer service (McDonald’s Corporation, 2023). Therefore, the essential business elements will be prioritized to negate the following complications.
Higher Growth Impact
A higher sales growth may allow the company to expand and provide new services. The 10Q form mentions a list of possible development plans that will be focused on after calculating the appropriate dividend price and retained earnings (McDonald’s Corporation, 2023). The decision will be made by comparing the current year’s sales to past statistics and regarding the management reviews. This strategy will be beneficial for long-term stakeholders interested in maximizing their capital. As a result, increased sales will lead to a fixed rise in divided prices and create a potential to improve future operations.
Conclusion
In conclusion, risk management is essential to a company’s success. The business must prevent potential damages, including systematic and unsystematic issues. Big corporations utilize great strategies, such as creating hedge funds, protocolizing processes, and analyzing economic changes. Moreover, risk prevention must be a part of the establishment’s focus, even in decreased sales, since it guarantees long-term stability. At the same time, an increase in profits may create an opportunity to expand and change the divided policy to satisfy the stakeholders or accumulate retained earnings.
References
Institute of Business & Finance. (2023). Systematic and unsystematic risk. Web.
McDonald’s Corporation. (2023). Form 10-Q. Web.
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