If a real estate investor comes to you for advice on new investment opportunities in Baghdad and Chicago, how would you compare and assess the risks between these two locations? Most people would consider an investment in Baghdad to be riskier than that in Chicago, but how would you quantify that risk in terms of dollars and cents? Whenever investors are presented with two options, they must assess their risks. While the differences between Chicago and Baghdad real estate may be extreme, this type of comparison is representative of the skill of risk assessment. For finance professionals, risk should be given due consideration at every opportunity.
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Now let’s consider risk on a different scale. McDonald’s is both a multinational corporation and a collection of franchise owners, and decisions made at the highest levels incur a variety of risks for those invested in individual stores across the country. In this week’s Discussion, you evaluate the level of risk incurred in a decision-making scenario. This scenario involves McDonald’s deciding between offering a new sandwich in all their stores versus opening a brand-new individual store. You evaluate these risks from the perspective of the McDonald’s Corporation and an individual franchise owner who would own the new store.
To prepare for this Discussion, consider the calculation of risks associated with potential opportunities, including how the context of these risks might affect the decisions made. Also, search the Internet for recent news stories about McDonald’s financial health and the company’s relationship with its franchisees.
- Compare and contrast the risks of McDonald’s deciding to offer a new sandwich versus a franchisee opening a brand-new store.
- Explain which decision would incur more risks to the restaurant chain and why.
- Explain which decision would incur more risks to the individual franchisee and why.
Please provide reference with paper.