Suppose that you are a Kia car dealer in La Rochelle who has to face the following risks (amongst others): Windstorm risk, intellectual property theft risk , foreign exchange risk and credit risk

Justification:

• Windstorm Risk - It is considered as an "Act of God" and due to uncontrollable external factors hence it is classified under Hazard. It is a risk that cannot be controlled and not very likely as of other risks by the company and only precautions could be taken. Classification - Unlikely and Uncontrollable
• Intellectual Property Theft risk - This risk is likely if measures aren't taken but can easily be prevented by taking sufficient measures and using various IT tools. This risk management in under than hands of the company and a controllable factor. Classification - Likely and Controllable.
• Foreign Exchange Risk - This risk is possible and can affect the business if enough measures aren't taken. It shall affect the investments of the company and they export & imports. Classification - Likely and Controllable to an extent.
• Credit Risk - This risk is highly likely and can easily be controlled. Customers might defer the lease payments or the EMI but the risk can be controllable and enough measures are present. Classification - Highly Likely and controllable.

Risk Measurement Steps for each Risk:

1. Windstorm Risk: This risk can be mitigated by taking the following steps:
   • Follow weather forecast to predict if there is going to be a windstorm
   • Take enough architectural steps by constructing elevation and consulting an architecture designer
   • During the forecast of windstorm move the cars inside a safe warehouse away from the "eye of the storm"
2. Intellectual Property Risk: This risk can be mitigated by:
   • Consulting with a cybersecurity expert regarding the current firewall status and precautions and means to upgrade them.
   • Use various FIrewall tools.
   • Use encryption.
   • Teach the employees regarding the IT theft risk.
   • Hire a cybersecurity expert to use their paid services.
3. Foreign Exchange Risk: This risk can be mitigated by
   • Using Derivatives to hedge the positions.
   • Get into futures transactions as soon as an import-export deal has been closed to secure the investments.
   • Hire a portfolio manager if the foreign exchange transaction is too high.
4. Credit Risk:
   • Check the customers' credit rating before providing them with lease and EMI options.
   • Have a bank process their end to end transaction so that in case of payment lapse it is easy to impound the vehicle and cover the damages.
   • Buy insurance protecting the credit risk.
   • Have a significant amount to be deposited as a down-payment before leasing or selling cars on EMIs.
   • Keep the documents and agreements with tight clauses so that there are no lapses in case of credit defaults.

Please see the attached file for the complete solution