Uncertainty, Risk, Reward and Change GCSE Business and Communication Systems Business and Communication Systems

Students should be able to:  Demonstrate a knowledge and understanding of the balance between uncertainty, risk and reward, and the role of the entrepreneur; and  Demonstrate a knowledge and understanding of the changing nature of business in relation to the changing role of ICT in the following areas: −Changes in work patterns −Job displacement and retraining −Job creation −Home based employment; and −Video conferencing and teleconferencing Business and Communication Systems

 Demonstrate knowledge and understanding of how businesses may succeed or fail depending on how they manage the balance between risk and reward.  Demonstrate knowledge and understanding of how a business must manage change in order to be successful. Cont. Business and Communication Systems

Uncertainty Definition 1.Decision making: Situation where the current state of knowledge is such that (1) the order or nature of things is unknown, (2) the consequences, extent, or magnitude of circumstances, conditions, or events is unpredictable, and (3) credible probabilities to possible outcomes cannot be assigned. Although too much uncertainty is undesirable, manageable uncertainty provides the freedom to make creativedecisions. See also risk.Decision makingcurrent stateknowledgeorder magnitudeconditionseventsprobabilitiesassignedprovidesfreedomcreativedecisionsrisk 2.Information theory: Degree to which available choices or the outcomes of possible alternatives are free from constraints. See also entropy and information.Information theoryDegreechoicesfreeconstraintsentropyinformation 3.Statistics: Situation where neither the probability distribution of a variable nor its mode of occurrence is known.Statisticsprobability distributionvariable mode Source: Business and Communication Systems

Risk Definition of 'Risk' The chance that an investment's actual return will be different than expected. Risk includes the possibility of losing some or all of the original investment.investmentreturn Many companies now allocate large amounts of money and time in developing risk management strategies to help manage risks associated with their business and investment dealings. A key component of the risk management process is risk assessment, which involves the determination of the risks surrounding a business or investment.risk management Source: Business and Communication Systems

Reward 1.Financing: Concept that return or yield from an investment is proportional to risk. Thus, investors will demand a greater reward where the risk of loss is greater.FinancingConceptreturnyieldinvestment proportionalriskinvestorsdemandrisk of loss 2.Incentiveplans: Scheme to support and reinforce desirable behavior, such as wage rate that increases with the productivity of the worker.IncentiveplansSchemebehaviorwage rateproductivityworker Source: 6 Business and Communication Systems

Risk and Reward Risk and reward are related factors in the business world. Any company that chooses to enter the marketplace faces risks, whether financial or operational. Reward is the benefit achieved when companies mitigate their risk and earn income from their operations.earn Source: business.html Business and Communication Systems

Risk-Return Trade-Off What Does Risk-Return Trade-Off Mean? The principle that potential return rises with an increase in risk. Low levels of uncertainty (low risk) are associated with low potential returns, whereas high levels of uncertainty (high risk) are associated with high potential returns. According to the risk-return trade-off, invested money can render higher profits only if it is subject to the possibility of being lost. Investopedia explains Risk-Return Trade-Off Because of the risk-return trade-off, investors must recognize their personal risk tolerance when choosing investments. Taking on additional risk is the price of achieving potentially higher returns; therefore, if an investor wants to make money, he or she cannot cut out all risk. The goal instead is to find an appropriate balance that generates some profit but allows the investor to sleep at night. Source: Business and Communication Systems

Role of the entrepreneur Entrepreneurs are the individuals who start new businesses in the economic marketplace. These individuals may start businesses for a variety of reasons:  working for their own self-interest,  making more money,  improving their local community or  enhancing their quality of life. While entrepreneurs may face a number of issues when starting a business, they usually have the psychological resolve and positive outlook to overcome these issues. Business and Communication Systems

Changing role of ICT We will look at the changing nature of business in relation to the changing role in ICT in the following areas: −Changes in work patterns −Job displacement and retraining −Job creation −Home based employment; and −Video conferencing and teleconferencing Business and Communication Systems

Changes in work patterns This will have an impact on both employees and employers. Employees:  Employees can work from home with the use of portable technology e.g. Laptops, IPads etc;  Employees can be contacted anytime e.g. Mobile phones, PDAs;  The employees working day is extended and therefore the boundaries between home and work become less defined;  Employees may have to work shifts and unsociable hours. Business and Communication Systems

Changes in work patterns Cont. Employers:  Businesses want to operate in a global world;  Businesses want to be available 24 hours a day 7 days a week because of time differences.  Technology / robots may produce better quality products than humans;  Technology / robots do not get sick, need breaks or holidays. Business and Communication Systems

Job displacement and retraining Job displacement occurs when an employee who has an established working history is separated from the job or the job position is eliminated leaving the employee unemployed from that position. Retraining occurs when employees are updating their skills on-going. Business and Communication Systems

Examples Many offices jobs have been taken over by up to date ICT systems:  Reduction of clerical workers to businesses using databases and spreadsheets to manage and store their information.  Software packages like DTP allows businesses to design their own documents in-house quicker.  With these technological changes staff need to be trained continuous in these new skills e.g. software updates and newer versions, hardware upgraded, up-to-date digital technology, Business and Communication Systems

Job creation With new technology changing all the time this will led to new job creations for example:  ICT Consultants  Software engineers  ICT technicians  Programmers  Web designers  ICT security experts e.g. Prevent hackers Business and Communication Systems

Home based employment Working from work has now become easier because of ICT. Employees can stay in touch with the business through the use of , internet, video conferencing etc. Employees can log on to the businesses intranet from home. Working from home is called teleworking. Business and Communication Systems

Advantages to the employees of teleworking  There will be no travel costs or travel time wasted to and from work;  The employee can spend more time with their family;  The employee has the option to work for a company hundreds or thousand of miles away;  Working from home will allow employees with disabilities to carry out their jobs in an environment designed for them;  Employees are working from the comfort of their own home. Business and Communication Systems

Disadvantages to the employees of teleworking  The employee can be lonely working from home;  The employee may not feel part of a team;  It may prove difficult for the employee to separate work from home life;  There can be more distractions at home for the employee that in the office. Business and Communication Systems

Advantages to the employers of teleworking  The business does not need to rent expensive city office offices;  They do not need to provide the employee with a desk and computer if they choose to use their own;  The employee may do more work at home because they are happier to be there. Business and Communication Systems

 It will be harder for the employer to check what the employee is doing or up to;  The employees may feel isolated because of loss of social interaction and might end up doing less work. 20 Disadvantage to the employers of teleworking Business and Communication Systems

Video conferencing is similar to teleconferencing except that people in the meeting can now see one another because video cameras are used to send live images over telephone lines. Video conference means using computers to provide a video link between two or more people. The following equipment is needed to take part in a video conference call: a computer, web camera, a microphone, speakers, broadband Internet access and video conferencing software. 21 Video conferencing and teleconferencing Business and Communication Systems

 Less expensive as people do not need to travel and the time taken to travel can be reduced;  Meeting between people can be called instantly worldwide with little notice;  People do not need to leave their office as meeting can take place there;  People can still attend meeting even if they are physically unable to. 22 Advantages of video conferencing Business and Communication Systems

 Video conference meeting may not be as productive as a discussion around the table as people may not have all the relevant documents in front of them;  There could be a bad signal e.g. Image or sound;  There may be times when you have to meet face-to- face.  Confidential documents may need to be viewed and signed in person. 23 Disadvantages of video conferencing Business and Communication Systems