Individual Learning Project Enterprise Risk Management
This may include financial risk resulting from commodity price fluctuations, changes in interest rates, or currency fluctuations. Hazard risk is another type of risk which results from fire or floods catastrophe. Strategic and operating risks are those associated with the top management decisions and, the customers and products respectively. Enterprise Risk Management (ERM) is one of the contemporary management techniques that companies use to achieve their critical success factors. There is increased competition in today’s business world and as a result, gaining a competitive advantage is becoming a major challenge for many organizations, (Gamble et al, 2013). Its growth results in an expansion in its risks due to the big decisions that have to be made regarding certain issues. Therefore, it is vital for the company to invest in managing its risks to control their effects on the company operations.
The expansion of the firm means that it is exposed to various types of risk that can be hazardous to the success of the company. For instance, strategic risk exposes the company to lose a significant amount of money if the top level management makes a poor decision. Also, since the company has a huge market base, operational risk can affect many customers leading to huge losses. Similarly, Panera as a company has various security threats that need to be addressed. Such threats can hinder the success of the company in many ways if not properly addressed. For example, hazardous risk can result to fire that can cause huge losses to the company. Thus, it is essential for the company to reduce the enterprise risk by developing a risk management plan that addresses all the security threats to the company.
There are many advantages associated with Enterprise Risk Management in an organization. The technique also enables the management to respond in a manner that capitalizes on the threat to ensure that its outcomes are likely to be beneficial rather than disadvantageous. For instance, fluctuation of interest rates in the market can be taken advantage of to increase profits of a company by proper timing. Risk by management using Enterprise Risk Management involves various activities done in different stages. The aim is to identify the potential events that may have significant impacts on the entity as well as its operation whether within the internal business environment or the external environment, (Olson et al, 2015). When doing different activities, organizations ensure that any risk to the business is within a manageable range.
More focused should be placed on such risks that affect critical business process to avoid wastage of resources and time on risks with little impact. The second step is to analyze and assess the identified risks and their effects on the critical business processes. Threats that could jeopardize business objectives are determined, and the information is shared with the appropriate individuals and departments in a company, (Coso et al, 2004). It provides a basis deciding how the risks should be managed. There is the setting of controls to offset these risks using different approaches. Also, the management should only implement those critical decisions whose risk can be managed. The last step in risk management is monitoring the whole process and the implemented actions.
Managers monitor and measure the establish metrics to identify any fundamental control deficiencies, (Nocco et al, 2006). There is an evaluation of the progress of the whole risk management program to determine if it conforms with or varies from the risk management policies. Monitoring is also done at an activity level where each activity and its risk is evaluated to check on the progress. The structure of Newell Rubbermaid Inc. played a vital role in the implementation of the risk management initiative. The company is divided into three global operating groups each headed by a group president. Each group splits into twenty-three business divisions each led by a division president. During the initiative, the corporate president asked each group president to identify all the top seven risks as well as the likelihood of the impact of these risks to the achievement of current and future business objectives, as per their respective divisions.
The second reason was due to the frequent occurrence of product quality and liability related problems. There were also regular problems associated with information security. The company also realized that causes of its failure were within the company. The final factor was the necessity to achieve the set critical objective of global Excellency by 2010 which required the company to stretch to higher targets as well as reducing risks at the same time. The company is currently focusing on the successful integration of Enterprise Risk Management technique in its operations. The company has a reputation for selling fresh products due to its emphasis on buying fresh ingredients, (Lipson et al, 2008). It is, therefore, necessary to invest in managing the risk that may occur as a result of the products and ingredients that the company deals with.
Panera’s top management should focus on controlling such risks to reduce their occurrence that may lead to massive losses. In addition, investing in managing these risks can be advantageous in other ways such as laying out better strategies and structures. A better plan can be used by the organization in implementing the Enterprise Risk Management in its operations. This helps to know how the identified risks are responding to the laid out control measures, (Ogutu et al, 2018). The results from the responses should be communicated within the organization to see where the technique is working and where it is not working or requires some improvements. The next step should be monitoring the entire program to ensure that the implemented procedures are in place are working effectively.
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