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Financial Management of Risk Report

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Updated: Aug 27th, 2019

There are numerous challenges entrepreneurs face seeking to succeed in business, in fact, these challenges are determined by the environment in which a business operates.

Therefore, a business may be affected by either internal or external factors, whereby internal factors include factors emanating from the business structure, while external factors include those that are outside the business, and may emanate from other business organizations, or even political organization.

For this reason, the choice of the environment is always critical when starting a business. Thus, the paper seeks to elaborate on the risk involved in moving business to Thailand or Louisiana, and review financial reports of Coca-Cola Company to highlight the management of risk involved in moving the business.

Political instability in Thailand has become a serious threat to business, thus entrepreneurs starting a business in this country face the risk of insecurity and violence (UK Trade and investment, 2012). Since the election in 2011, there have been incidences of unrest and bombings.

On the other hand, the political structure in Louisiana is more stable compared to Thailand, hence providing a favorable business environment. Moreover, a significant factor affecting businesses in Thailand is bribery and corruption.

Therefore, transferring a business to Thailand would mean that one has to take a significant risk hence discouraging foreign investors. In Louisiana, the levels of corruption are minimal, which is why it is more accommodating for investors than for Thailand (Coca cola Hellenic, 2012).

In Louisiana, tax rates are higher as compared to those in Thailand; hence, transferring a business to this state would result to low returns and slow business growth. Consequently, this poses a limiting factor on investors, especially the small business entrepreneurs (Louisiana EDSP, 2012).

In business organizations, it is critical to establish factors limiting business success in order to have an organized approach to each of them, and aim at optimizing the revenue. These factors may be found within the business itself (internal factors), or outside the organization (external factors).

However, there is a need to identify and deal with these factors because they are the key determinants of the business success. In this case, management is expected to compare company data obtained from various accounting periods, in order to identify the trend of business performance.

In addition, managers also need to observe various changes in the market conditions during the financial periods to assist them in decision-making.

A critical financial analysis of the Coca cola Company indicates that there is a drastic fall in the revenue margins due to internal and external challenges the company is currently facing.

An example of these internal factors is high manufacturing costs, which are contributing to high total costs resulting to low profits, and a substantial threat to the company (Verity, 2003).

One of the external factors causing a drawback in the company progress is competition from other companies. There has been production of similar brands in the market such as PEPSI resulting to competition, which reduces the sales volume leading to low income.

Moreover, a crucial factor is the political structures in the countries where products are sold. Since in some countries tax rates are high, there is an increase of price, which as a result, reduces demand leading to low sales, thus overall affecting the business negatively.

References

Coca cola Hellenic. (2012). Financial Report: Coca cola Hellenic bottling Company, South America. Web.

Louisiana EDSP. (2012). Louisiana Economic Development Strategic Plan 2012‐2016. Web.

UK Trade and investment. (2012). Overseas Business Risk-Thailand. Web.

Verity, M. (2003). Mecca Cola challenges US rival. Web.

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