ECO 550 Managerial Economics And Globalization: Case Study 2: Cases Analysis of Risk, Uncertainty and Managing Incentives

Case Study 2: Cases Analysis of Risk, Uncertainty and Managing Incentives Name Professor ECO 550: Managerial Economics and Globalization Date In any business venture, the existence of risks and uncertainties is a factor that needs close consideration and management. The management of risks and uncertainties is vital for any business as it ensures that the organization’s resources are well protected for the long run. Risk often portrays itself as the potential occurrence of loss to a company. Uncertainty, however, refers to the lack of surety of the outcome of an event. Most businesses undertake risks for the sole reason that they can measure it, as opposed to uncertainty which is not measurable. Understanding the aspects of risks and uncertainties in moral hazards is critical as it gives business-oriented individuals a grasp of what companies undergo in such scenarios. The company that we will consider in this context will be Amazon. Amazon undertook the challenge to establish a second headquarter and this evoked the aspect of risks and uncertainties in the endeavor. With the company still under management by Jeff Bezos, Amazon saw the need to expand its headquarters and establish separate premises for its technical employees; most of who included programmers and other computer-related professionals. Amazon, the largest company in the world by market value, was ready to engage itself in finding a perfect candidate that would host its new headquarters. To tackle this risk and uncertainty on the best geographical location for their new headquarters, the management decided to come up with a strategical approach and solution to this problem. The administration placed an open bidding system for all cities that were interested in the company establishing a headquarter in their region. This measure was useful as the cities would submit their proposals to the company, detailing what benefits the company would receive in return and how the company and the city will mutually cooperate. The strategy by the Amazon management team was to come up with a list of requirements for the optimal candidate for their consideration. (Gupta, 2018).