Manage Risk Essay
Assessment activity 1: Review organisational processes, procedures and requirements for undertaking risk management 1. Create your own definitions for the following terms:
a) Risk: A probability or threat of damage, injury, liability, loss, or any other negative occurrence that is caused by external or internal vulnerabilities, and that may be avoided through preemptive action. b) Risk management: The identification, analysis, assessment, control, and avoidance, minimization, or elimination of unacceptable risks. c) Risk appetite: The amount a business is willing to place at risk in the pursuit of its objectives d) Risk capacity: The amount a business is capable of loosing before it endangers its own sustainability 2. Comment on the following saying in relation to the risk management policies and practices of an organisation: “ Organisations that fail to plan, plan to fail” If an organization does not have a risk plan is likely that any risk occurring with negative consequences occur organization. If the organization has a risk prevention plan is very likely that the risk does not occur and the organization and its workers could produce know how to deal with the negative consequences of that risk to minimize that consequences.
Assessment activity 2: Determine scope for risk management process Case study
Advantages: It will be holistic.
Disadvantages: It will require extensive resources to conduct it properly, especially if the scope of the risk management is large and covers a wide range of activities across the divisions; very large number of policies and procedures; and is taking into account differences in each state, territory, country. The scope of a risk management strategy is entirely reflective of the organisation, its activities and risk profile. It can also be indicative of the following: past history, knowledge and experience of risk management held by senior management, available resources, external environmental factors. Assessment activity 3: Identify internal and external stakeholders and their issues Why is it advantageous to consider stakeholders’ issues throughout the risk management process design? Stakeholders can contribute ideas, energy, skills, identifying risks and take steps to effectively manage them. Stakeholders can play an influential role in the direction and performance of the organisation.
Assessment activity 4: Review political, economic, social, legal, technological and policy context Consider your own organisation’s risk profile and comment on the influence/impact each of the following factors has on it: – Political: Through legislative and regulatory changes, political unrest, corruption and contractual issues. – Economic: Through economic booming / downturn, interest rate. – Social: Through aging population, migration, societal trends. – Legal: Through legislation changes, guidelines, code of practice. – Technological: Through new technology, consumer behaviour. – Policy: Through activities of the business and the associated risks. Assessment activity 5: Review strengths and weaknesses of existing arrangements 1. Conduct a SWOT analysis for the current risk management practices of an organisation with which you are familiar. SWOT analysis
Name of organisation: GRAEL (trucking company)
Brief description of core function of the organisation:
Strengths: Large installations, staff with enough experience, young fleet vehicles, good prices and delivery times, national coverage. Weaknesses: High staff cost, low technological level, small business size. Opportunities: Short delivery times, satisfied costumer, implementation of more efficient technologies, opening new markets. Threats: New competitors, strict rules, lower prices in the market, little capacity of investment. I think this analysis is quite adequate and accurate because goals of this company is to grow in the freight market and satisfying the customer with meeting deadlines and the decreasing cost. if the business knows what his weaknesses and threats can be set to convert these shares in just the opposite, that is, opportunities and strengths. Assessment activity 6: Document critical success factors, goals or objectives for area included in scope 1. Case study: Nautilus Boat Hire
The business has to establish specific and achievable goals because otherwise the risk management team and the individuals in it will have no direction, nothing to aim for. Goals provide a focus and purpose for action. In this case we have to turn weaknesses into strengths and threats into opportunities and all this has to be specific, tangible and measurable. Examples of how managing risk that Nautilus Boat Hire could adopt:
– Provide of life jacket to all crew of the boat.
– Provide of guide service in every trip.
– Restructure the boats to make their use easier. Buy boats with easier use.
– Distributed to each passenger a pamphlet advising the use of protective sun cream and even offering to purchase such product also sell bottles of water.
– Advertise of possible noise pollution.
All this actions could help our business to grow, manage risk, and achieve goals. Assessment activity 7: Obtain support for risk management activities 1. Getting people on board and keeping them engaged is a key part of managing risk. Explain, in our own words, the importance of getting support for risk management plans and processes. In a business is very important getting support for risk management plans and processes because if people do not understand the consequences of not managing risk, they are likely to view the process as more administration that takes them away from performing their core duties. 2. Create your own checklist for the qualities of a risk management champion. – Commitment and belief that managing risk is a good thing to do. – An ability to confidently speak about risk and its management. – Credibility within the business, team, department.
Assessment activity 14: Evaluate and prioritise risk for treatment 1. Using the severity and likelihood matrix that you created for Nautilus Boat Hire, list the risks in priority order and give reasons for your rankings. 1º. People who are not strong swimmers, especially children, drowning. Reasons: Negative impact on the business and the customer. May cause the closure. 2º. Clients making a lot of noise when moored and residents complaining. Reason: Negative impact on the business. May cause the closure for noise pollution. 3º. Houseboat clients getting lost and/or stuck on sandbanks. Reason: Negative impact on the business. Bad image for the business. 4º. Clients finding the houseboat very difficult to control in high winds resulting in damage to the houseboat and/or land structures. Reason: Negative impact on the business. A part of the bad image for the business may be a fee arrangement of these houseboats. 5º. Clients being sunburned and dehydrated on hot, sunny days.
Reason: Risk is likely high to occur but with a low index of business impact. 2. Discuss some of the problems that you might encounter when trying to determine priority of risks. The problem is when you determine that there are several risks with the same degree of probability of occurrence and with the same degree of severity when it occurs. In this case the problem that we find is which risk we have to manage first. Assessment activity 15: Determine and select most appropriate options for treating risks 1. In your own words, describe what the ALARP principle means and give an example of it in practice. When controls are applied to a risk, it might be lowered to a level that is considered tolerable. If the staff of a chemical company uses the appropriate protective clothing, the risk of physical damage occurs by the use of chemicals will be less than if you do not use the protective clothing. 2. Give examples of risk that could be managed by each of the following treatment strategies a. Avoid the risk: Choose not to borrow money to finance a project: Expand the facilities of the company. If I cannot finance the expansion project cannot be carried out.
b. Reduce the risk: Install warning signs to alert people of a possible risk: A construction company that is building a building has to signal alerts the dangers of possible risks. c. Share the risk: Contract multiple suppliers for each product: A company dedicated to the manufacture of given product has to have different suppliers to ensure that you can make this product even if some of the provider fails to supply the raw material. d. Retain the risk: Agree that the small risk of a client defaulting on payment in worth taking to obtain a new line of business that can then be used to prospect for other clients: The risk is very small so it doesn’t influence in the new line of business.
3. Describe a situation from your own experience where you applied a control to a risk. Explain the nature of the risk, which type of control that you chose to use, what you actually did and how successful it was. When moving heavy furniture you must use appropriate such as a forklift mechanisms and you have to put the most appropriate posture for lifting heavy furniture to avoid damaging the back. You need to wear a protective boots to prevent falling objects cause injury. Assessment activity 16: Develop an action plan for implementing risk treatment 1. Use the template below, create an example action plan to show how you would implement 2 risk management strategies of your choosing.
Assessment activity 17: Communicate risk management processes to relevant parties Case study. Explain who the action plan, and its associated details, needs to be communicated to and when and how this could be best achieved. The action plan must be communicated to all parties who will have a responsibility for actioning or overseeing them. It has to communicate what must or must not be done, who should be doing it, by when and what the consequences are of failing to do it. Abacus Accounting has to communicate risk management strategies to the staff involved in that business. It has to explain all protocols and procedures contain in the plan. The best way to achieve it, is using two way rather than a one way communication process, “Feedback”. Communication methods: Face to face discussions, written procedures manual, email, training. Assessment activity 18: Ensure all documentation is in order and appropriately stored. In the space below, list the policies, associated procedures and person/s responsible for completing the record-keeping that your organisation has in place for risk management.
Assessment activity 19: Implement and monitor action plan
1. Discuss why it is important to monitor an action plan once it has moved into its implementation phase. Should be undertaken with the overall objective of continually improving the organisation’s performance through effective risk management. The monitoring regime should be considered as a key part of the plan development phase. Monitoring allows for any variance against the intended goals to be quickly identified and rectified. 2. Using the review scope and frequency triangle, give at least 2 examples of activities that could be performed at each level Regular checking / continuous monitoring: Proper use of machinery, Compliance schedule by workers Line management / Review: Review the economic performance, Review compliance with internal regulations Audit: Check the quality system, Review the risk plan
3. At what point is it best to consider the monitoring aspect of a risk management plan and what factors should be included? Monitoring allows for any variance against the intended goals to be quickly identified and rectified. Monitoring factors that should be included:
– What date do you need to collect?
– How will you ensure that the data is valid and reliable?
– How will you know if you are moving towards the goal set?
– How will you know when the goal has been reached?
– How frequently will you assess the plan?
Assessment activity 20: Discuss the following statement: “Audits conducted by external companies are just another academic exercise designed to create employment for consultants”. I am not agree with this statement because I think that external Audits are necessary sometimes to audit some companies because it is a external company to your company so it is impartial. Choose an external auditor endeavour to find one who: – specialises in your organisation’s industry
– is appropriately qualified and experienced
– demonstrates the ability to quickly build rapport with workers – is impartial, thorough and investigative
Assessment tools 2 (AT2)
1. What is the purpose of the standard AS/NZS ISO 31000:2009 Risk Management? In that standard Risk is defined as “The effect of uncertainty on objectives”. Risks affecting organizations can have consequences in terms of economic performance and professional reputation, as well as environmental, safety and societal outcomes. Therefore, managing risk effectively helps organizations to perform well in an environment full of uncertainty. AS/NZS ISO 31000:2009 Risk Management provides principles, framework and a process for managing risk. 2. There are a number of Key provisions of relevant legislation and regulations from all levels of government that may affect aspects of business operations. Why is it necessary to have a working knowledge of the legislation involved in business? What is duty of care?
A business will face issues if you do not abide by the law. It’s important to have a working knowledge of the legislation involved with your business so that with every move your business makes, you can ensure that you are complying with the laws of the land. The primary responsibility lies with the person who is conducting the business and is also the responsibility of all staff of the company to know the laws that are involved in the business. 3. What is risk management? Why must risk management procedures be followed? Risk management is a process that enable board of directors, managers, staff and shareholders to have a reasonable degree of confidence that business goals will be achieved within an acceptable level of risk. Risk management is an effort to reduce risk.
Risk management activities identify whether there are any risk controls in place, and if so, whether they are adequate. Risk management policies set out, for employees, the instructions and operating procedures that must be followed. 4. What are the advantages and disadvantages of carrying out a risk assessment for a whole organisation and its overall operations? On what basis/scope might risk assessments be carried out if they are not carried out for an entire organisations? The advantages of conducting risk assessment for the whole business is that it will be holistic and parts of the business are less likely to be overlooked. It will allow a uniform risk management plan whose sections all work in relation to others and it can be communicated to employees in the same manner and at the same time. Scope of a business’s risk assessment might include: specific projects, specific business units or areas, specific business functions, the external environment, the internal environment.
5. Employees with disability have the same rights as other employees to a safe and healthy workplace and they also have the right to workplace modifications or adjustments that ensure their safety. What Acts affords these rights to disabled workers ? What types of adjustments might be required? The Disability Discrimination Act (ADD) 1992 gives disabled workers the right to workplace adjustment. Adjustments might include: Wheelchair ramps, access to safety information I the required format, extra wide exit doors, the provision of special personal protection equipment, the provision of special equipment, changes or modifications to policies and procedures, ergonomic adjustments to work stations, adjusting work schedules.
6. Businesses can take out a variety of insurances that will indemnify them and/or their employees, customers, members of the public in the case of an accident or other adverse occurrence. What types of insurance can they take out? What companies offers insurance for businesses? Types of insurance: Business insurance, fire insurance, kidnap and ransom insurance, worker’s compensation insurance, life insurance, Directo’s and officer’s insurance, industrial special risk insurance, public liability insurance, motor vehicle fleet insurance, compulsory third party insurance, professional indemnity insurance, key person insurance. Example of companies offering insurance: Allianz, AMP, QBE, GIO, RACV, MLC, AAMI, SGIO, Zurich, Vero, Rural and General. Assessment tool 3 (AT3): Project
Part 1- Plan for enterprise risk management:
With my project I will develop the study and application of a risk policy for a company that is dedicated to fashion market by own local fashion stores. Before the development of the risk policy I have to make clear what the mission and vision of our business. Mission: to be a leader in the market, offering quality, good service and plenty of outlets offering care and quality of life for people. Vision: To be the retailer that offers the best quality and variety of services and products for sale to customers, generate added value to people with our products. Why do we have to approach risk management?
– We anticipate events that may be unexpected or uncontrolled, such as people stop buying any product we sell because the market has entered a new fashion label. – Analysis of business opportunities, or as to open new sales channels, to improve products or to improve our facilities. – Improved performance outcomes due to effective planning, if we know that there are risks to our business address them on time and know we will always have an effective response to address them. – Optimal efficiency and economy. Know how the money is spent and when to spend, eg making a risk analysis can allow me know if I should invest in a particular area or not, or in a particular product or not. – Improved relationship with stakeholders, because all stakeholders must understand the business risks. – If all future events that may occur are provided of course the director or team conducting the study of risk will have a good reputation both inside and outside the business Through the system of risk management we know how our company is willing to spend to achieve the objectives and how are willing to lose if it does not address future risks.
The scope for risk management will make for this business includes both an internal area of operation of the company as well as an external scope thereof. Internal because I will analyze what are the risks that can find me in my business. External, because I will try to study what are the external factors that may affect my business. For example, an internal factor is the reform and adaptation of shops to allow access for the handicapped. An external factor would be as such can influence the economy in buying fashionable clothes. Therefore when establishing our risk management should take into account the following circumstances: – Political: depending on whether there will be a government or other legislation and other issues that may affect me in varying degrees relating to such licensing to open outlets.
– Economic: Depending on how the economy is or the area where I’m shops sell more or less. – Social: Depending on social trends when it comes to fashion I’ll have to adapt the models to these new trends. – Legal : I have to adapt my business to existing legislation. – Technological: I’ll have to adapt production of garments production technologies and even the addition of new tissues. – Policy: Activities of the business and the associated risks. To manage the risk facing a business it is important to identify all of the stakeholders and issues.
What are internal and external stakeholder in our business? Internal stakeholder: It would all the staff with which our company, shareholders, management, administrative department, financial department, buying department, marketing department, design department, production and logistics, and all the staff working in stores in different cities where we are set. External stakeholder: Any person who makes the purchase in one of our stores can consider stakeholder. Supplier could be considered as external stakeholder. The government can be considered as a stakeholder in the way laws on trade. Part 2: Identify the risks:
Identify the risks through a SWOT diagram
Strengths | Weaknesses |
– Quality and designed at very reasonable prices. – Strong financial system. Solid and profitable company.- Vertical integration: control over the entire production chain.- Production of garments to be sold. Very little stock. High turnover of product.- Quick delivery to shops.- Variety of models.- Strong presence in each city.- Stores in the best locations in the city.- Good after sale system. | – Very little advertising system.- Employee wages low- Stores have a poor image abroad.- Stores are not adapted for disabled input.- Clothes sewing defects.- High cost of maintenance shops. | Opportunities | Threats |
– Growth of cities due to immigration.- Creating outlets: selling clothes from other seasons at lower prices.- Growing interest in personal image.- Globalized world: others markets.- New technologies. | – Other companies have similar products with good quality and good prices.- Increased competition in the sector.- Demanding customer: People do not like to dress like others.- Other businesses have online shops.-Climatic diversity: different climates that make manufacturing clothes according to the weather, is very wide. | This SWOT analysis follows that our company can be found on the following risks: 1. Not having a good advertising system do not reach people our deals so many people do not know the products we have. The only way to know that we can offer it’s entering one of our stores. 2. Salary of employees is low so they are not motivated. Not being motivated not only contribute ideas and really made a mechanical sales job but do not persuade the buyer to make a purchase top. 3. Image abroad offering shops is very poor and the decor is not very good.
On the other hand, the lighting is bad and there are clothes in the windows are not all that should be visible. Another problem is that the prices are in clothing exposed in the window and is not seen very divicil identify which price corresponds with each garment. 4. Virtually all of our stores are not adapted to the input of people with disabilities “Wheelchair”. The problem here is that we find the latest legislation on this issue gives us a period of two years to adapt to every store possible input disabled. 5. Many of the items have defects resulting from poor workmanship. This involves not a major economic expenditure for the company because you have to add the price of the withdrawal of the garment all transportation costs. 6. The high cost of maintenance of the stores is another risk that we are as it is a very negative factor financially to the income statement.
7. Increased competition. Other companies are appearing on the market with very similar to our products at very competitive prices so our sales could lower. 8. We do not have Online Shop. We don’t have online shop and currently that sales are increasing. 9. We manufacture garments for all seasons so our manufacturing models are many and this leads us to the problem of strong economic investment we have to do to purchase machinery to manufacture all that wide range of models. All these risks have deduced the SWOT analysis we have made to our business and lessons learned in the past, data and statistics that we have on our business. If we want a more detailed analysis of all risks that may affect our business, we might go to an outside consultant as these people are prepared and have specialized knowledge and appropriate tools to identify what are the risks that may affect our business. Tools and techniques that it could be used in the audit process:
– Fishbone diagrams
– Process mapping
– Force field analysis
– Scenario analysis
– Markov chains
1. Not having a good advertising system do not reach people our deals so many people do not know the products we have. Minimal impact. Our business is built on the basis of an almost nonexistent outside advertising so this is a risk but almost irrelevant. If we want to expand the business or increase sales if you should do some advertising campaign and should consider the most appropriate way of doing this campaign. 2. Salary of employees is low so they are not motivated. Moderate Impact. We study the possibility of increasing the wages of workers in our company to try to increase the productivity of these workers. Although productivity and wages are two issues that need not be proportionate if it is true that a worker is more encouraged to work with a slightly higher salary than another worker performing that function this but a minimum wage. Slightly increasing wages and participation could increase sales because the seller would find more willing to sell and deliver the products and therefore more likely the buyer would buy.
3. Image abroad offering shops is very poor and the decor is not very good. Minor impact. Although I have an external image in not very good trades I think his impact is less when talking about risks to our business as it is not very expensive to redecorate all the windows to make them more attractive to our customers. A different question is the issue of bad lighting since the change the entire lighting system stores would be costly for the business but could make a sequence and always depending on the importance regarding the location and quantity of sales shops. 4. Virtually all of our stores are not adapted to the input of people with disabilities “Wheelchair”. Disastrous / catastrophic. If we do not adapt to the existing legislation on trade our stores may be closed by the competent authorities. As our business would cease to exist. I think this risk is a priority when looking for a solution.
5. Many of the items have defects resulting from poor workmanship. Severe impact. When carrying a defective garment market the basic cost of the garment triples so this risk we must approach it as a must urgently increase the benefit of our business to carry out the whole process of reforms that we are talking about and that our shareholders are demanding us to increase business benefits. This can solve it with a higher quality control. The quality control mechanism must be present in all of our business processes, that is, from the design of the garment to the customer buys it, through manufacturing, logistics, customer service …… .
6. The high cost of maintenance of the stores. Severe impact. Negative impact on the income statement. We should make the necessary reforms in stores to ensure that the cost of maintaining them is less for the benefit of the business is greater. Depending on the degree of need for the reform of local we could also think of relocating these stores. We should conduct a market study of the area where the store to see if it is the right place or if instead Store could relocate elsewhere something less expensive is located. 7. Increased competition. Minor impact. The increase in our competition is a fact that can not be denied. We are still having good sales in our business and we were not too concerned that other companies entering our market but the probability of this happening is quite high and although initially the impact is small can lead to over time this impact becomes high due to the loss of competitiveness. We must establish appropriate in our company to always be ahead of possible companies that want to enter our niche market mechanisms.
8. We do not have Online Shop. Moderate impact. Not having a online sale mechanism first time does not mean a loss of sales in our business but precisely for the opposite if we establish this system of Internet sales our sales increase. Perform this process would not be very expensive for our business and could bring great benefits because we could reduce very significantly the costs, especially the costs of maintenance shops and staff costs. 9. We manufacture garments for all seasons. Moderate impact. We have adapted the production chain to see how we can reduce costs in manufacturing garments. But this we can do it in a leisurely way without making a large financial outlay. Likewise we can stop making certain models that are the least sold and are left less benefit. Communication with all relevant parties.
To communicate with all relevant parties in the process of reforms resulting from all risks I have described, would do it two ways: 1. Internally in our company through briefings to all staff employed in our company by exposing what are the changes that are going to make an attempt on one hand the people brainstorm such change and on the other side that all staff have knowledge of such changes. I think it would be a good way to create a positive feedback. Also would have to send the entire management team and the financial team with a report of all findings of the risk because ultimately they are the ones who have the power of decision on the feasibility of these reforms.
We should also make a report to shareholders equipment at all times know what steps you are following the company. 2. An external way our company would be good to communicate throughout the process of change to all our potential clients in order to publicize the company how it works and what the goals are the same. We could do some kind of advertising campaign. On the other hand we must notify the competent bodies our stores comply with current regulations. Finally I would say that our plan of risks and their treatment should always be in line with the goals of our business, as well as the mission and vision of it.