Risk Management Assignment Sample

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Risk Management Assignment Sample

Introduction

The risk management process creates the value to the organization and forms the integral part of the organizational activities and should be incorporated into overall decision making process of the entity. It interfaces all the unstructured and uncertain threats by appetizing all the calculated risks. Risk management process should be robust and reliable and easily understandable and flexible so that necessary changes can be updated into the policies and procedures for streamlining the activity carried and continuous improvement of all the products and services offered by the organization.

Task 1

1.1

Risk management is the process involving identifying the threat, assessing the same and controlling the factors affecting earnings and capital of an organization. To critically examine the process and procedures of the entity and better understand the current risk management process involved for smooth functioning of the organization and successful growth and development in long run by gaining competitive advantage (Tummala and Tobias Schoenherr, 2011). Risk management plan includes assessing corporate proprietary data, customer’s confidential data and intellectual property rights acquired by company. Since the organization is involved coffee Ville is into food industry where franchises can be sold out and revenues can be generated by selling the licenses and therefore process and activities can be streamlined and mandatory be followed throughout all the chains for standard performance and maintaining the quality and increasing customer satisfaction.

Threats or risks can take face of any natural disaster, information related risks, strategic management risk and financial risk failure, legal liability. Risk management standards of ISO 31000 (2009) should be followed which states Risk Management Principles and Guidelines Different technical focus, guidelines and motivation are appropriate distinctly for different organizations and circumstances. Generally standards are voluntary however can be mandated with help of agreements enforceable by law (Lam, 2014). Reviewing and understanding the requirements of organizational, process and procedures in respect to current established risk management standards is necessary for overall growth and development.

1.2

In case of establishing a new organization or launching a new product risk management process is involved in all the phases and stages of the project. Establishing Coffee Ville is all over a new project and therefore will have to be incorporated at all the levels of management. Training the staff and employees and providing them information about presence of possible risk factors (The Risk Management Process, 2016). All the equipments and safety measures should be placed at reachable distance and space foe easy retrieval at the time of threat.

  • Risk Management Planning: At this initial stage of planning risk perspective should be kept in mind and organizational activities should be planned and organized in a manner involving all the elements of external and internal factors (Pritchard and PMP, 2014).

  • Risk Identification: Identifying the risk at all the levels and categorizing them into structured and unstructured and taking appropriate actions accordingly.

  • Qualitative Risk Analysis:All the categories of risk should be analyzed and calculative methods should be taken to erase or reduce the impact of potential threats to the restaurant.

  • Quantitative Risk Analysis: Quantitative techniques should be adopted for analyzing the risks in more accurate manner involving study of facts and figures (Haimes, 2015).

  • Risk Response Planning: Since the risk is assessed in very beginning, responses to the same should be examined in advance for quick and better performance if the threat materializes.

  • Risk Monitoring/Control:Procedures needed to track and effective monitoring of risks and revising the risks in case of changes in situations and circumstances and learning from various outcomes.

1.3

  • Internal stakeholders: Internal stakeholders of an organization are persons who are responsible for all the primary activities of an organization and serve the organization in the best possible manner. Internal stakeholders are employed by the company and serve the organization and even company has full responsibility towards them. Employees constitute the most important part of organization composition therefore risk related to them is great part of company, for a restaurant employees may impose risk such as lack of availability of competent chef’s and staff to serve. Owners of the organization are focused only to maximize their wealth ignoring the other factors and overall development this may act as major threat towards the company (Cheese, 2016). Board of Directors will impact risks of organization if they take decisions keeping in mind their bias needs and ignoring the resources involved and if following discriminating policies and formulating policies which negatively impact restaurant. Managers may have malicious intentions and pose a great threat as they are most responsible for middle level management and therefore are vulnerable to risk such as mismanagement of activities or lack of qualifications and certifications which may cause loss of revenues and consumer satisfaction which is of at most importance for Coffee ville.
  • External Stakeholders: External stakeholders are the parties or groups who are not directly involved into prime activities but have a vital impact on the organization. Company has secondary responsibility towards them and these are not the employees of the company. They indirectly impact the organization and get influenced by the decisions of the company. Suppliers are part of external stakeholders and may have issues such as failure to delivery of raw materials at correct time which will impact coffee ville as it is customer service industry and negatively impact goodwill of business (Soederberg, 2016). Consumers being the king of business as they are the ultimate consumer of goods and services offered therefore change in their taste and preferences will cause great impact and sometimes issues for organization. Creditors providing finance if denies providing finance when it is most needed may cause insufficient of funds and reduces quality and uptime services to the clients. Competitors being the greatest threat to any industry if any company in the industry with same target industry and locality may produce great threat to the coffee ville therefore techniques and policies should be followed and proactively formulated to be followed in such scenarios.

1.4

Analysis of various technological, political, economical and social factors in addition to legal factors influence the risk faced by the organization in several manner .Unexpected or sometimes anticipated factors may act as a threat to the company and endanger its influence therefore better understanding is a must.

  • Political Context: Alteration of government policies may impact the infrastructure of whole nation .This may include changes in various employment laws, taxation laws, environment laws, tariff and trade restrictions, reforms etc (Tummala and Tobias Schoenherr, 2011). Therefore restaurant should consider where the economy supports provision of such services and where restricting them and constantly following government instructions.
  • Economic Context: Factors including inflation rates or recession, increased wage rates, increasing or fluctuating interest rates, reduced working hours or reduction in standard of living of citizens or economic growth pose a great threat to the survival of the Coffee ville and the way it operates and decision.
  • Social Context: Cultural aspects and changes in ethical standards of people and also health and safety consciousness may avoid them preferring to restaurants frequently may pose great risk and also high population growth and various other demographics factors.
  • Legal Context: This considers all the factors that may impact operations of the Coffee Ville including Food Laws in the nation and Standards on Food industry which will differ from country to country.
  • Technological Context: Existing products and services and ecological and environmental aspects impact on how innovative up gradations should be adjusted into the existing organization and their compatibility and relevance in the present working conditions (Zsidisin and et. al., 2016). It also involves technological changes across the globe and their interchange ability.
  • Policy Context: Various policies should be formulated and circulated internally to support smooth functioning of the restaurant and standard results therefore nonacceptance of policies or stringent policies poses a risk to the organization.

1.5

Opening a restaurant serving coffee is much greater task than just knowing the difference between a mocha latte and a caramel macchiato. Analysis of identifying good, bad or potentially Schoenherr, 2011)worse is very important for success of organization thus Strength and weaknesses are analyzed and worked upon for continuous improvement of products and services offered and also to know the position in the circle of competitors.

Strengths: Coffee Ville needs to stand out as very different among several other competitors by providing some unique products and exclusive services. At least one or two features should be established which will drag and attract customers repeatedly (Hopkin, 2014). Strength might be serving homemade dessert or beautiful and calmly ambiance which will contribute to the taste and innovative pastries and cakes and donuts to stand out the competition and high range products offered by Cafe Coffee Day or Mad over Donuts or Starbucks. Also selecting the location with either no or one restaurant already existing to avoid local competition .

Weakness: Every organization is prone to some weakness or the other. Weakness can be budget based such as insufficient funds or liquidity issues. If premium blends from all over the world are intended  then huge funds are required also lots of competitors in the locality is great weakness or areas where Coffee Ville lacks the expertise and therefore reduce the quality and dissatisfaction among customers or rising complaints.

1.6

Critical success factors or activities are important factors for success of an organization and needs to be focused upon to achieve the intended results and outcomes. Competitive performance of individual, department or organization will depend majorly on only limited areas for satisfactorily results. Determining what is really necessary for its better future accomplishment of goals and objectives effectively and efficiently . In planning important factors for achieving the goals should be considered. In analyzing the risk quantitatively and qualitatively should be analyzed very practically to take calculative risk and dealing with them in appropriate manner. Communication process of the organizational and its structure consisting of hierarchy plays a major role in success of coffee ville. Organizational culture and ethics contribute a lot towards achieving the role and designing the high level of performance. Support of top management and involving all the stake holders in achieving targets affect the overall success and growth of entity (Lam, 2014). Correlation between ideas, pattern of values, ethics economy of nation and critical success factors helps in shaping the behavior of organization. Empowerment of all staff and managers acts as simulator towards success. Best employees around the world (Hopkin, P., 2014). Fundamentals of risk management: understanding, evaluating and implementing effective risk management. Kogan Page Publishers.

and most suitable hospitality services should be employed as it acts as critical success factor. If restaurant is located in area which is a holiday destination or situated in a good healthy environment therefore refreshing customers by giving best of services?

1.7

It is very important to get the support of all the external and internal stakeholders for organisational success working within the circle of policies and legal framework of the nation. Risk control methods should be deployed to assess and reduce the impact of risk and mange it in most appropriate manner. Finding weaknesses and strengths and therefore overcoming them to provide backbone to all the decisions making process (Cheese, 2016). Overall support and encouragement from all the staff and employees is promoted for better risk management. Good communication and motivation skills should be adopted for successful implementation of all the risk management policies and frameworks.

1.8

Risk management process and policies should be communicated to all the internal and external stakeholders through appropriate and reliable means of communication for successful implementation of risk management process at all the stages and smooth functioning of the Coffee Ville. Higher management should be communicated by forming and posting exhaustive reports on risk factors through comprehensive approach and explaining all the factors (Soederberg, 2016). Communicating to staff and employees should be training session and posting updated on common platform or domain followed by company and displaying it on the bulletin boards placed in the precincts of Cafe to provide them periodical reminder about the risk involved.

Task 2

Risk Analysis report, action plan and risk treatment

Companies just not only need to identify factors for arising risk but also need to analyze its likelihood or occurrence so as to identify their consequences on business operations. With the help of effective analysis, managers can take superior decisions and necessary actions to combat risk and meet targets. Effective ways to treat risk in the best possible manner helps to minimize hurdles and ensure successful operations (Poolsappasit, Dewri and Ray, 2012). With references to CoffeeVille, its managers, directors and executives are responsible to evaluate factors responsible for business risk and undertake several actions and decisions to treat risk in the best possible manner. There are various steps involved in risk assessment procedure such as setting objectives, identifying possible impact of risk on CoffeeVille’s business performance, setting key prioritizing and taking actions to overcome such risk contributing factors. Moreover, at the end, management must examine that what step they took did really worked or not to minimize risk and accomplish targets. This step proves beneficial for CoffeeVille’s executives to identify required modifications in the risk control planning and process so as to overcome barriers and ensure successful operations.

Risk Analysis Report

Assessing likelihood of the risk occurring

Risk assessment is the process of analyzing the possibility of risk occurrences to assess its likelihood and thereby taking appropriate actions to overcome this. In corporate world, companies are facing different kind of risk due to number of internal as well as external variables that are uncontrollable. Adverse or unfavorable changes in the market forces give rises to corporate risk, however, positive changes helps to conduct operation successfully (Teller, Kock and Gemünden, 2014). There are ranges of techniques available to the CoffeeVille for risk assessment such as brainstorming, inspective and audit, flowchart, dependency analysis, FMEA approach, SWOT and PESTLE analysis as well. With reference to CoffeeVille, there are number of risk contributing factors exists in the market such as banking risk, travelling risk, risk due to non-compliance and threat of negative corporate image or brand reputation. At the inaugural step, CoffeeVille requires to assess likelihood of risk occurrence so as to identify the reasons or factors that can arises risk to the business and affect operations adversely (Glendon, Clarke, and McKenna, 2016). Internal reports, expert’s opinion, competitors’ analysis, historical company records and so on are several tools available to assess likelihood or occurrence of risk.

Risk likelihood descriptors

Rating

Description

Likelihood of occurrence

1

Almost certain

Risk that incur frequently or very often

2

Likely

Strong possibility that event may occur or may cause loss to the CoffeeVille

3

Possible

Risk contributing event may incur based on casual occurrences in historical period.

4

Not likely

Events that generally do not incur but there is very little possibility of risk occurrences. 

5

Rare

Extremely unlikely but due to certain circumstances or uncertain situation, event might be happen probably.

Risk consequences or likelihood analysis

Risk

Rating

Descriptors

Reasons for risk occurrence

Banking risk

4

Not Likely

CoffeeVille’s cash handling authority is given to a responsible or experienced person who carries out their work accountability in the best manner. Proper cash management, documentation, keeping money in safe and lockers and regular monitoring helps to minimize business risk due to cash theft and stolen activities.

Manager’s travel risk

3

Possible

Physical injuries can be caused to manager while travelling at various destinations for the business purpose like marketing and advertisement and others (Bromiley and et.al., 2015).

By-law compliance risk

5

Rare

CoffeeVille follow all the legislations and regulatory framework like taxation policies, environmental principles, minimum wages, equal opportunity law, debt covenants and many others. Moreover, it is not involved in illegal and restrictive business practices which might impact return adversely.

Loss of brand recognition

1

Almost certain

Many-times, staff do not wear proper uniforms or do not carry out functions accordingly to the set operational processes and activities, which in turn, may results in loss of brand recognition risk.

                       

Assess consequences of risk occurrence

After identifying business risk, manager has to forecast its potential consequences on business operations and activities so as to judge its future impact (Rampini, Sufi and Viswanathan, 2014). Consequences of risk can be measured in different aspects such as financial, reputational, legal, and operational and many others. With reference to CoffeeVilley, consequences of identified risk contributing elements or factors are identified here as under:

Risk

General

Financial

Legal

Reputational

Risk

consequences

Likelihood

Risk matrix

Loss of brand recognition

It may have a significant impact on CoffeeVille’s service delivery process and regular business operations like utilization of resources. 

Alteration in operational processes and system has less impact on financial activities.

Breach of operational duties and process may bring legal consequences at minor level

It may impact reputation adversely to a few extents.

1

1

1

Likely events

Significant level of impact over routine functioning.

To some extent.

Legal consequences exists at medium level

It might have several consequences over reputation.

2

2

4

Travelling risk

It may results in personal injuries to the travelers and as a result, operations can be influenced negatively.

CoffeeVille will be responsible to provide medical treatment and cure services to the manager.

Minor 

It may give rises to internal issues. 

3

3

9

Banking risk

Theft of cash may bring consequences as company will not be able to meet their operational requirement.

Liquidity and financial issues exists at significant level.

To some extent

It is an internal business problem that does not have significant level of impact over brand reputation.

4

4

16

BY-law compliance risk

It may bring organization in controversial issues.

It may results in high cost due to fines and penalties and decline net return.

It is very high because it is directly associated with non-compliance with laws and results in chargeable penalties and lawsuits.

It exists at significant level because penalties, fines and other lawsuits may damage international reputation.

5

5

20

By-law compliance risk

 

 

 

 

 

 

 

Develop a risk matrix to prioritize risk

Risk matrix is used to present the outcome of risk evaluation and its possible consequences, presented below:

 

 

 

Impact

Extreme (5)

5

10

15

20

25

Major (4)

4

8

12

16

20

Moderate (3)

3

6

9

12

15

Minor (2)

2

4

6

8

10

Insignificant (1)

1

2

3

4

5

 

Loss of brand recognition (1)

Likely event

(2)

Manger’s compliance risk

(3)

Banking risk (4)

By-law compliance risk

(5)

Likelihood or occurrence of event

 

Risk impact/Probability chart

Risk priorities

Risk can be prioritized on the basis of risk metrix level, taking into consideration above risk metrix, it can be seen that by-law compliance risk identified extreme level of risk henceforth, it must be prioritized. However, risk for banking risk exists at moderate level so second priority will be given to it. Thereafter, manager’s travelling risk and risk of other likelihood events exists at low level henceforth, considered less preferable over others. While, on the other hand, loss of brand recognition is moderate henceforth, regular monitoring is considered sufficient to minimize the occurrence of such events (Cole and et.al., 2013). After pre-settlement of key priorities, it must be reviewed again within three or six month duration so as to make necessary changes in the priorities to minimize the risk possibility.

Two options for risk treatment and its suitability  

Risk

Risk mitigation strategies

Suitability

Banking risk

 

·         Proper arrangement of CCTV footage

·         Insure overnight cash holding

·         Setting a special monitoring committee like financial controller

CCTV and special committee helps to monitor employee’s activities and functions and cause threat among workers so that they will not stole cash.

Manager’s travel risk

·         Travellers’ safety programs and policy

·         Encourage workers for taking appropriate health precautions   

Safety programs raises awareness among workers so that they will follow necessary precautions.

By-law compliance risk

·         Adhere to debt covenants, taxation policies and regulatory framework

·         External audit program and follow-up policies (Bolton, Chen and Wang, 2013)

Compliance with the laws and regulations and conducting external audit helps to find out failure, omission and wrongful actions helps to follow up debt obligations.

Loss of brand recognition risk

·         On-site management

·         Special trainings to store managers and workers

Training helps to enhance workers skills, capabilities and competencies to a maximum level so that they will follow business policies and will be well-dressed (Christoffersen, 2012).

Excessive use of water

·         Installing native plants to cut down water use

·         Teleconferencing system

·         New process on water consumption and

This will be of highly appropriate to reduce excessive use of water and reduce risk.

           

Explanation of the risk assessment procedure

At the initial step, I identified all the risk contributing factors by generating required information from different sources. Thereafter, its potential consequences whether minor, major, catastrophic, high and extreme has been identified. On the basis of likelihood and potential consequences, risk matrix has been developed. Factors that identified extreme level of risk has given priority, however, all the other elements that are considered less risky has given less priority. After it plan has been revised according to the revised notes from the meeting so as to minimize risk and meet business targets.

Risk Management Action Plan

Risk

Assess risk (Score)

Controls

Monitoring

Action priority (1-5)

Timeliness

Responsible

Banking risk

4

In order to maintain strict control on the banking risk CCTV will be installed in the premises. Shift of employees will changes in every 4 hours. This will ensure that employees will actively do their job.

Through CCTV relevant officer will monitor entire relevant operations that take place in the premises.

With passage of time new CCTV cameras will be installed in the premises.

CCTV camera will be installed in the 1 month.

Financial controller of the firm will be responsible to look after entire operations.

Manager travel injury risk

3

Travel injury risk is possible and in order to prevent this strict instructions will be given to the managers to make use of seat belts while travelling through car.

Driver will ensure that instruction s are perfectly followed by the manager while travelling in the car.

Small amount of money will be given to the driver in order to monitor safety behavior of the manager.

With immediate effect relevant policy will be implemented at ground level.

Manager of top level will be responsible.

By law compliance risk

5

Specific managers will be given responsibility to evaluate the situation and giving legal advice to the top level managers.

Relevant managers will identify the business operations where it is necessary to follow specific rules and regulations.

Managers if think that there is need to comply with specific law will contact to the relevant managers in order to seek advice.

With immediate effect relevant policy will be implemented.

Managers that are responsible for looking after compliance with law will be responsible.

Loss of brand recognition

1

Strict rule will be prepared under which it will be necessary for employees to wear relevant uniform.

Security guard will check uniforms. He will communicate case that is related to the breach in rule to relevant manager.

Salary of those employees will be deducted who will breach company policy.

Same as above.

Security guard and manager will be responsible to look after effective implementation of relevant policy.

 

Risk Treatment

After making risk management action plan, it must be implemented effectively so as to reduce business and carry out operations successfully. With reference to CoffeeVille, if company is facing brand recognizing issues, then this risk can be eliminated by conducting training sessions and developing uniform policy and other employment requirement by which employees are adhere. This policy will assist business to maximize the consequences of decreased brand recognition and results in less risk and improved performance. Moreover, manager will monitor and review the progress of the risk mitigation strategy on a constant basis helps to take necessary actions and initiatives to minimize the risk occurrence. This in turn, company can carry out operations successfully without any hazard.

Conclusion

It can be concluded that Risk management is a crucial part of the Organization and business planning especially for establishing a new business. Furthermore it is necessary to evaluate the qualitative and quantities factors involved as potential threats. External and internal factors influence the risk management vitally and should be critically analyzed and proactive policies should be framed and regulated.

Refrences

Journals and books

Bolton, P., Chen, H. and Wang, N., 2013. Market timing, investment, and risk management. Journal of Financial Economics. 109(1). pp. 40-62.

Bolton, P., Chen, H. and Wang, N., 2013. Market timing, investment, and risk management. Journal of Financial Economics. 109(1). pp. 40-62.

Bromiley, P. and et.al., 2015. Enterprise risk management: Review, critique, and research directions. Long range planning. 48(4). pp. 265-276.

Bromiley, P. and et.al., 2015. Enterprise risk management: Review, critique, and research directions. Long range planning. 48(4). pp. 265-276.

Cheese, P., 2016. Managing risk and building resilient organisations in a riskier world. Journal of Organizational Effectiveness: People and Performance. 3(3). pp.323–331.

Christoffersen, P.F., 2012. Elements of financial risk management. Academic Press.

Christoffersen, P.F., 2012. Elements of financial risk management. Academic Press.

Cole, S. and et.al., 2013. Barriers to household risk management: Evidence from India. American Economic Journal: Applied Economics. 5(1). pp. 104-135.

Cole, S. and et.al., 2013. Barriers to household risk management: Evidence from India. American Economic Journal: Applied Economics. 5(1). pp. 104-135.

Glendon, A.I., Clarke, S. and McKenna, E., 2016. Human safety and risk management. Crc Press.

Glendon, A.I., Clarke, S. and McKenna, E., 2016. Human safety and risk management. Crc Press.

Haimes, Y.Y., 2015. Risk modeling, assessment, and management. John Wiley & Sons.

Hopkin, P., 2014. Fundamentals of risk management: understanding, evaluating and implementing effective risk management. Kogan Page Publishers.

Lam, J., 2014. Enterprise risk management: from incentives to controls. John Wiley & Sons.

Poolsappasit, N., Dewri, R. and Ray, I., 2012. Dynamic security risk management using Bayesian attack graphs. IEEE Transactions on Dependable and Secure Computing. 9(1). pp. 61-74.

Poolsappasit, N., Dewri, R. and Ray, I., 2012. Dynamic security risk management using Bayesian attack graphs. IEEE Transactions on Dependable and Secure Computing. 9(1). pp. 61-74.

Pritchard, C.L. and PMP, P.R., 2014. Risk management: concepts and guidance. CRC Press.

Rampini, A.A., Sufi, A. and Viswanathan, S., 2014. Dynamic risk management. Journal of Financial Economics. 111(2). pp. 271-296.

Rampini, A.A., Sufi, A. and Viswanathan, S., 2014. Dynamic risk management. Journal of Financial Economics. 111(2). pp. 271-296.

Soederberg, S.,2016. Introduction–Risk Management in Global Capitalism, in Susanne Soederberg(ed.).  Risking Capitalism Research in Political Economy. 31.  pp.1–20.

Teller, J., Kock, A. and Gemünden, H.G., 2014. Risk management in project portfolios is more than managing project risks: A contingency perspective on risk management. Project Management Journal. 45(4). pp. 67-80.

Teller, J., Kock, A. and Gemünden, H.G., 2014. Risk management in project portfolios is more than managing project risks: A contingency perspective on risk management. Project Management Journal. 45(4). pp. 67-80.

Tummala, R. and Tobias Schoenherr, T.,  2011. Assessing and managing risks using the Supply Chain Risk Management Process (SCRMP). Supply Chain Management: An International Journal. 16(6). pp.474–483.

Zsidisin, G. A. and et. al.,2016). Identifying and managing supply quality risk. The International Journal of Logistics Management. 27(3). pp.908-930.

Online

The Risk Management Process. 2016. [Online]. Available through: <http://scu.edu.au/risk_management/index.php/8/>. [Accessed on 5th December 2016].

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