Risk-taking is vital to successful decision making. The risk universe for the telecommunications and networking service providers is changing dramatically. In order to maintain a sustainable growth strategy, such service providers require secure and stringent risk management. Vegasion is a £10 million start-up that has entered into the telecommunications and networking industry. To use the commercial frequency spectrum for providing 4G telecom services, Vegasion had to obtain a special licence from the telecom regulatory body, DOSCOM. The licence has to be renewed every five years. Vegasion has also invested heavily in high quality equipment such as base transceiver stations, routers and switching solutions to provide uninterrupted service to its users. Additionally, it has engaged in technical support service contracts with the equipment seller. Vegasion has outsourced the customer billing process to an outside vendor with a 24-month contract. Vegasion uses the net present value (NPV) method for capital budgeting analysis in order to ensure long-term profitability for the company. The telecom industry is on the verge of migrating from 4G technology to 5G technology. Emerging technologies always have the potential to present an opportunity as well as a threat. The threat is that the innovations in technology may outpace the investment timelines projected by the management of a company. A recent survey conducted by the telecom authority indicates that the growing popularity of smart phones, data
streaming sites and social media platforms is leading to a massive surge in data usage by subscribers. Currently, there are only two other major established players in the telecommunications and networking industry, and they have limited bandwidth with which to meet the requirements of the dynamically growing customer base. So, Vegasion has the opportunity to make inroads in a number of untapped markets by making some additional investments. Until now, the company has raised most of its capital by issuing common stock. It will need more capital for the purpose of investment in new market segments. Vegasion is planning to raise the additional capital by issuing bonds. The current cost of capital for the company is 8%. Currently, the economy is booming, and the capital market is in a growth phase. This growth is accompanied by a high inflation rate. Evidently, operational and regulatory risks constitute a major part of the risks faced by telecom service
providers. All the service providers need to articulate their appetite for risk and define their risk tolerances and appropriately assign ownership of the top risks and accountability for the results.

Required
1. For effective enterprise governance, with whom should Vegasion consider placing the responsibility of managing risk and providing strategic direction?
2. Explain some of the avoidable and unavoidable potential risks that Vegasion faces.
3. Determine what would help Vegasion in effectively screening high-risk investment options.
4. Vegasion categorizes its risks into two broad categories: operational risk and financial risk. Identify the financial and operational risks faced by Vegasion.
5. According to the Turnbull model of risk management, a healthy enterprise risk management system should concentrate on identifying and prioritizing risk. Explain this in relation to Vegasion.