M4 (TW) RESPONSE

NEED RESPONSE – ONLY 2 – 3 PARAGRAPHS WITH 1 REFERENCE

ORIGINAL TOPIC:

Assignment 1: Discussion—Assessment of Risks

Risks are common for all firms, but there are different levels of risks in different industries and in different countries. The differences in risks from firm to firm or industry to industry are called unsystematic risks. Consequently, individual firms and industries deal with risks in different ways.

Tasks:

Consider two companies that deal in two entirely different industries, such as Microsoft, which is a technology company, and Caterpillar Inc., which manufactures heavy equipment.

Respond to the following questions:

• Explain how the risks and the approaches to anticipate these risks differ for each company.
• Analyze the kinds of risks that are most intimidating for each.

STUDENT RESPONSE:

According to Carnette (2017), there are multiple risks for Microsoft. One being a new CEO and a new project that may or may not be successful.

While this risk is nothing new in fact, it’s largely why Ballmer is no longer the CEO — the transition from desktop to mobile is a risk to Microsoft. In 2016, we crossed the Rubicon in terms of mobile versus desktop — Stat Counter found that users accessing the Internet from mobile devices exceeded personal computers for the first time ever.

Microsoft’s mobile operating system market share is small compared to its desktop operating system share. Earlier efforts by Ballmer to design a vertically integrated smartphone by buying hardware-maker Nokia Mobility ended in a $7.6 billion write down. Nadella finally pulled the plug on this experiment.

According to Seek Alpha, there are three risks that are effecting Caterpillar, Inc:

Earnings growth does not warrant the current multiple.

5 out of the 6 past quarters have seen negative earnings growth.

Longer-term support is being tested.

The differences in the risks are that caterpillar risks are actually affecting their stocks and Microsoft risks are causing their customers to wonder if they are making good decisions which can later affect their stock if they are not careful.

For Microsoft the new project is more of a risk instead of the new CEO. The new project can cause customers to not trust the new way that Microsoft is heading and not buy it. Losing customers is a huge risk. The Caterpillar risk is lost in stocks growth. The goal will need to be for both companies is to find a way to get back on top.

References

Jamal Carnette, CFA. (2017, December 6). 3 Risks Microsoft’s Management Wants You to Know. Retrieved from https://www.fool.com/investing/2017/12/06/3-risks-microsofts-management-wants-you-to-know.aspx

Stock Traders Daily. (n.d.). Risks In Caterpillar Are Very Clear. Retrieved from https://seekingalpha.com/article/2415145-risks-in-caterpillar-are-very-clear

NEED FOLLOW-UP RESPONSE – ONLY 2 – 3 PARAGRAPHS WITH 1 REFERENCE