K151-ind-ny - Industry Risk Rating Reports

Explanation
IBISWorld developed a partnership with RMA to develop the Industry Risk Rating product.

Explanation
IBISWorld's model uses three industry risk factors to calculate the overall Risk Rating Score: Structural Risk, Growth Risk, and Sensitivity Risk. These factors are important in assessing the level of risk associated with an industry. Structural Risk refers to the potential for changes in the industry's structure, such as new entrants or technological advancements. Growth Risk evaluates the industry's growth potential and the likelihood of market saturation. Sensitivity Risk considers the industry's vulnerability to external factors like changes in consumer behavior or economic conditions. By considering these factors, IBISWorld provides a comprehensive assessment of an industry's overall risk.

Explanation
The sensitivity risk factor has a greater weighting when used to calculate the overall Risk Rating Score. This means that the impact of sensitivity risk on the overall risk rating is considered to be higher compared to the impact of structural risk or growth risk. Sensitivity risk refers to the vulnerability of a particular industry to external factors such as changes in interest rates, exchange rates, or commodity prices. This indicates that the industry's performance is highly dependent on these external factors, making it a significant consideration in determining the overall risk rating.

Explanation
IBISWorld's Industry Risk Ratings reports do attempt to quantify the difficulty of an industry's operating environment over the next 18 months. This means that the reports provide an assessment of the potential risks and challenges that an industry may face in its operating environment, helping businesses make informed decisions and strategies.

Explanation
The characteristics of an industry that are used to derive the Structural Risk Score include barriers to entry, international trade, and competition. Barriers to entry refer to the obstacles that make it difficult for new companies to enter the industry, such as high startup costs or government regulations. International trade involves the import and export of goods and services, which can impact the industry's competitiveness. Competition refers to the rivalry among existing companies in the industry, which can affect market share and profitability. These three factors are important in assessing the structural risk of an industry.

Explanation
A risk score is indeed a quantifiable measure of the difficulty of the business operating environment. It helps assess the level of risk associated with conducting business in a particular environment by considering various factors such as political stability, economic conditions, legal framework, and market volatility. By assigning a numerical value to the risk level, businesses can make informed decisions and take necessary precautions to mitigate potential risks.

Explanation
The Sensitivity Risk Score of an industry is typically determined by factors such as Goods and Materials Inputs, Government and Legislative Change, and Demographic and Consumer Changes. Goods and Materials Inputs can affect the industry's sensitivity to changes in the availability or cost of resources. Government and Legislative Change can impact the industry through regulations and policies that may increase or decrease sensitivity. Demographic and Consumer Changes can influence the industry's sensitivity by altering consumer preferences and demand.

Explanation
A Risk Score greater than 7 would be considered "Very High". This suggests that the level of risk associated with the situation or event is extremely high. It implies that there is a high probability of negative consequences or potential harm occurring. This indicates that caution and proactive measures should be taken to mitigate the risks and ensure safety.

Explanation
The majority of classified industries fall under the risk level of Medium Low to Medium High. This implies that these industries have a moderate level of risk associated with them, neither too low nor too high. This suggests that while there are potential risks involved, they are manageable and not extreme.

Explanation
A high industry growth rate is not necessarily associated with a higher risk for operators in that industry. In fact, a high growth rate can indicate potential opportunities for businesses to expand and thrive. While there may be some risks associated with rapid growth, such as increased competition or potential market saturation, it does not necessarily mean that the overall risk for operators in the industry is higher. Therefore, the correct answer is False.

Explanation
The correct answer is "Competitive Landscape" because the question asks for a chapter that is NOT included in a standard Industry Risk Rating Report. The other four options - Risk Overview, Structural Risk, Growth Risk, and Sensitivity Risk - are all commonly found chapters in such reports, providing analysis and assessment of various risks associated with the industry. However, the Competitive Landscape chapter typically focuses on analyzing the competitive environment within the industry, including market share, key players, and competitive strategies.

Explanation
A higher level of competition in an industry can lead to increased rivalry among firms, which can result in price wars, aggressive marketing tactics, and increased pressure to innovate. These factors can increase the structural risk score of the industry, as firms may face higher risks and uncertainties in maintaining their market position and profitability. Therefore, the statement that a higher level of competition increases the structural risk score of an industry is true.

Explanation
The Industry Risk Trend chart compares the risk for three different entities: the industry, the division, and the overall economy. This means that the chart provides a comparison of the risk levels for the industry as a whole, specific divisions within the industry, and the overall state of the economy. It does not specifically compare the risk for specific companies within the industry.

Explanation
Based on the given information, the chart from the Risk Report for Landscaping Services indicates that in 2013, the risk of the Landscaping Services industry was higher in relation to the Division risk in the same year.

Explanation
The explanation for the correct answer, "Lower," is that the chart from the Risk Report for Landscaping Services indicates that the risk of the Landscaping Services industry in 2008 was lower compared to the overall economy risk in the same year. This suggests that the Landscaping Services industry had a relatively lower level of risk or vulnerability compared to the broader economy during that period.

Explanation
The chart displayed in the Risk Report for Landscaping Services shows that the industry risk has been decreasing over the past 12 months. This means that the level of risk involved in the landscaping services industry has been steadily decreasing during this time period.

Explanation
High level of industry competition and high industry volatility would typically increase the Structural Risk Score of an industry. High level of industry competition indicates that there are many players in the market, which can lead to price wars and lower profit margins. This increases the risk for businesses operating in the industry. High industry volatility suggests that there are significant fluctuations in market conditions, such as demand, prices, and regulations. This uncertainty increases the risk for businesses as they may struggle to adapt to the changing environment.

Explanation
The Risk Rating Reports can be used by financial institutions in multiple ways. Firstly, the Banking and Finance departments can utilize these reports as part of their commercial lending assessment process. Secondly, Credit Officers and Relationship Managers can refer to these reports for loan assessments. Lastly, the reports can also be used for stress testing loan portfolios and as early warning systems. Therefore, all of the given options are correct.