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Risk Review: MacVille Ltd

Paper type: Review
Pages: 8 (1847 words)
Downloads: 46
Views: 206

Scenario

As part of their overall strategy in the Australian beverage market, MacVille Pty Ltd have developed a chain of cafes in the Central Business District (CBD) of Brisbane, Queensland and the CBD of Sydney, NSW. The board of directors have made the decision to expand their operations in Queensland with the purchase and re-branding of the existing Hurley’s cafe in Toowoomba, 130km west of Brisbane. You are currently the assistant manager of their flagship store in Queen Street, Brisbane, and have been given the opportunity to manage the new store in Toowoomba.

The CEO for MacVille’s cafes in Queensland is Paula Kinski. You are a member of the Finance, Audit and Risk Management (FARM) Committee described in the MacVille Risk Management Policy.

Key problems identified in the report were as follows:

1. Lack of internal controls, particularly over cash handling, monitoring and recording.

2. Failure to meet compliance standards in WHS, Privacy and industrial relations law.

3. Lack of written policy and procedures to guide staff in carrying out their duties.

4. Lack of a professional business culture in the family run business.

5. Failure of the business to monitor the external environment and find opportunities and threats to the business. The team agreed that similar issues would pose a risk to the Toowoomba expansion.

Risk management policy

Introduction

MacVille recognises that risk management is an essential component of good management practice and is committed to ensuring the implementation of risk management processes that focus on the proactive management of risks across the organisation. This risk management policy forms part of MacVille’s internal controls and corporate governance arrangements. The risk management
policy is designed to: identify, evaluate, control and manage risks ensure potential threats and opportunities are identified and managed inform directors, senior management and staff members about their roles, responsibilities and reporting procedures with regards to risk management ensure risk management is an integral part of planning at all levels of the organisation.Policy MacVille is committed to achieving its vision, business objectives and quality objectives by the proactive management of risk at all levels of the organisation. MacVille will identify, evaluate, control and manage risk throughout the organisation in accordance with the ‘MacVille Risk Management Framework’. See risk management strategy for framework details.

Responsibility and Authority

Directors, management and employees of MacVille have responsibility fro implementing aspects of this policy.

Role of the Directors

The directors have a governance responsibility in the management of risk. This includes: determining what types of risk are acceptable and which are not setting the standards and expectations of staff with respect to conduct approving major decisions affecting MacVille’s risk profile or exposure monitoring the management of significant risks to reduce the likelihood of potential organisational risks and threats or failure being satisfied that risks are being actively managed, with the appropriate controls in place and working effectively annual review of MacVille’s approach to risk management and approval of changes or improvements to key elements of its processes and procedures.

Role of the Senior Management Team and Store Managers

Key roles of the senior management team are to:
implement policies on risk management and internal control where this is deemed appropriate identify and evaluate areas of significant risks potentially faced by MacVille for consideration by the directors identify areas where risk management is not adequately addressed and advise the directors accordingly review and update the Risk Management Strategy undertake an annual review of the effectiveness of systems of internal control and provide an annual report to the directors, including a summary
review and respective recommendations.

Role of Cafe Employees

Key roles of the employees are to:
familiarise themselves with the content of the risk management policy and clarify any aspects necessary with a senior team member consider any risks they feel could impact on them meeting their objectives and either manage the risk if it is in their control to do so, or inform a management team member of their concerns advise senior management, in the first instance, or the Board, if concerned about any fraud or unethical behaviour.

MacVille Risk Management Framework

This framework encompasses a number of elements that together facilitate an effective and efficient operation, enabling MacVille to respond to a variety of operational, financial, commercial and strategic risks. These elements include: Policies and procedures – A series of policies underpin the internal control process. These policies are endorsed by the directors and are implemented and communicated by the senior management team to all staff. These policies include:

  • Human Resources Policies
  • Staff Travel Policy
  • Harassment Policy
  • WHS Policy
  • Return to Work Policy
  • Work/Life Balance Policy
  • Equity/Discrimination/Diversity Policy
  • Parental Leave Policy
  • Organisational Culture Policy
  • Financial Policies
  • Bad Debt Policy
  • Cash Reserving Policy
  • Revenue/Expenditure Recognition Policy
  • Finance, Audit and Risk Management (FARM) Committee Terms of Reference including delegations Corporate Governance Policies
  • Board Protocol
  • Sitting Fees Policy
  • Directors Remuneration Policy

Monthly reporting – Decisions to rectify problems are made at regular meetings of the senior management team. Comprehensive reporting at board and sub-committee meetings is designed to monitor key risks and their controls. Business planning and budgeting – The business planning and budgeting process is used to set objectives, agree on action plans, and allocate resources. Progress towards meeting business plan objectives is monitored regularly by the senior management team and by directors at board meetings. Risk Management review – The Finance, Audit and Risk Management (FARM) Committee are required to report at board meetings on internal controls. The Finance and Audit Committee pay particular attention to risk management.

It is the CEO’s responsibility to brief the directors periodically and as appropriate on the development of policies and procedures to ensure effective and efficient operations, risk management strategies and implementation. In addition, the FARM committee oversees internal audit, external audit and management as required in its review of internal controls. The committee is therefore well placed to provide advice to the board on the effectiveness of the internal control system, including MacVille’s strategy for the management of risk. External audit – The final audit of financial statements is controlled by an external chartered accountant who provides feedback to the Board through the Finance and Audit Committee.

Development of a Risk Management Profile

The following outlines the process for developing a risk management profile.

Establish the context

Define and identify the environment, characteristics and stakeholders, their goals and objectives, and the scope of the specific risk management process. Develop criteria against which risks are evaluated and identify the structure for risk management.

Identify and describe risks

Risks are best identified through a collaborative approach involving a cross section of stakeholders. All conceivable risks must be considered. Ensure any certainties are identified as problems and addressed in the risk management profile.

Conduct current risk analysis

An analysis of the risks is conducted to determine their causes, and estimate their probability and consequences. This analysis provides the basis for working on the ‘right’ risks.

Conduct risk evaluation

Risks are considered and prioritised according to their potential impact, and each risk is assessed to determine its level of acceptability.

Develop and implement proposed risk treatments

Risk treatments are developed to cost-effectively reduce, contain and control risk. Formal risk management reporting mechanisms are defined and documented. Categorise the risk likelihood.

Monitor, report, update and manage risks

As risks change constantly, the risk profile is continuously monitored, reviewed and updated by management. New risks may be identified as more information becomes available and existing risks may be eliminated through the effectiveness of the risk treatments/actions. Record risks identified through regular audit on the risk audit log. Record risk management activities on the risk management register.

MacVille’s Risk Areas

The following are four broad areas where potential for risk to MacVille has been identified. Under each area, examples of possible risks are detailed.

  • Operational/Organisational
  • Legal and regulatory compliance
  • Technology
  • Insurance
  • Resources: human, physical
  • Logistics
  • Marketing
  • Product quality
  • Communications
  • Infrastructure, plant and equipment
  • Customer interaction
  • Market needs
  • Financial
  • Accountability
  • Fraud or theft
  • Capital investment
  • Interest rates
  • Loss of income, funding/finance
  • Governance
  • Conduct of board
  • Conflict of interest
  • Project Management
  • Procedures and tools for project management
  • Stakeholders – strength of relationships/conflict of interest Human resources
  • Financial resources

Risk management strategy

Introduction

MacVille recognises that risk management is an essential component of good management practice and is committed to the proactive management of risks across the organisation. The strategy is designed to: identify, evaluate, control and manage risks

ensure potential threats and opportunities are identified and managed inform directors, senior management and staff members about their roles, responsibilities and reporting procedures with regards to risk management ensure risk management is an integral part of planning at all levels of the organisation.

Guiding Principles

MacVille is committed to achieving its vision, business objectives and quality objectives by the proactive management of risk at all levels of the organisation, acknowledging that embracing innovative ideas and practices carries with it risks, but that these are identifiable and measurable and therefore capable of being subject to realistic risk mitigation processes.

Responsibility and Authority

The directors have responsibility for ensuring that risk management is in place. The Finance, Audit and Risk Management (FARM) Committee has the responsibility of reviewing the Risk Action Plan on a six-monthly basis. The CEO and the senior management team have responsibility for managing risk and advising the Board on appropriate controls. The CEO and the senior management team support and implement policies approved by the directors. Key risk indicators will be identified, closely monitored and action taken where necessary, by the staff and directors. MacVille Risk Management Framework

This framework encompasses a number of elements that together facilitate an effective and efficient operation, enabling MacVille to respond to a variety of operational, financial, commercial and strategic risks. These elements include: Policies and procedures: A series of policies underpin the internal control process. Reporting: Decisions to rectify problems are made at regular meetings of the senior management team. Business planning and budgeting: The business planning and budgeting process is used to set objectives, agree on action plans and allocate resources. Progress towards meeting business plan objectives is monitored regularly by the senior management team and by directors at board meetings.

Contingency planning is undertaken as required. Risk Management review: The Finance, Audit and Risk Management (FARM) committee is required to report at Board meetings on internal controls. CEO: The CEO has responsibility to brief the Directors periodically and as appropriate on the development of policies and procedures to ensure effective and efficient operations, risk management strategies and implementation. External audit: The final audit of financial statements is controlled by an external chartered accountant who provides feedback to the Board through the FARM Committee.

Definitions

Risks are identified on a scale of likelihood of occurring in the next 12 months and assigning an impact or consequence to the risk as high, medium or low. High includes either a significant shortfall of around 40% in achieving budget or a significant reduction in ability to function. Medium includes either a shortfall of budget of between 10% and 20% or some reduction in function. Low indicates minor reductions in achieving budget or minimal reduction in performance.

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Risk Review: MacVille Ltd. (2016, Apr 01). Retrieved from https://studymoose.com/risk-review-macville-ltd-essay

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