About the Organization
Risk management is considered as process which identifies, assess, and prioritize the risk which is also associated with coordination and includes economic application of resources, for the purpose of minimizing and monitoring the impact of event which are not fortunate. It also helps in maximizing the realization of opportunities. The main objective of risk management is to make sure that any uncertain event does not adversely affect the goals of the business.
There are number of sources which possess risk and these sources include financial markets, threats introduced from failure of projects, legal liabilities, credit risk, accidents, natural disasters, etc. it must be noted that two types of events that are negative event and positive event. Negative event includes risks, but positive events are classified as opportunities. Various authorizes developed the standards related to risk management such as Project Management Institute, the National Institute of Standards and Technology, actuarial societies, and ISO standards. Methods and goal of the organization are changed on the basis of risk management method. It must be noted that in ideal risk management process, it is necessary to follow the prioritize process (IRM, n.d.).
This paper states various concepts of risk management such as risk perception of organization and its effect on risk management, aims of risk control, assessment of risk by using the appropriate tools, measures related to risk treatment, etc. for the purpose of understanding all these aspects of risk management, we are choosing Singtel. Lastly, paper is concluded with brief conclusion.
Singtel group is the leading communication group of the Asia, and this organization provides the diverse range of services which includes mobile, data, internet, T.V., infocoms technology (ICT), and digital solutions. This company has operating experience of more than 130 years. Headquarters of singtel is established in Singapore, and this company play very important role in the development of country in the form of major communication hub.
Identification and management of risk reduced the uncertainty which is associated with the business strategy, and also allowed the organization to get the opportunities that may rise. In Singtel board of directors of the company is responsible to manage the risk in organization by determine the risk appetite and tolerance. Risk management team is responsible to make risk profile, consider the risk management framework in the organization, review the key risk of organization, and also ensuring that policies and procedures related to risk are working effectively. Board manages the risk in association with Risk Committee and the Audit Committee, and it also reviews the policies and procedures of risk management. It must be noted that Risk management committee of the Singtel supports the board and RC in terms of risk governance, and also sets the strategies for managing the risk of organization.
Risk Management Team of Singtel
Risk management approach of singtel includes three key principles, and these principles are culture, structure, and process (Singtel, 2012).
On the basis of these principles, risk committee of Singtel applied risk management framework. This framework includes continuous process related to risk identification, monitoring, management and reporting of risks for the purpose of providing assurance to the board as well as stakeholders of the organization. Under this framework risk committee of the Singtel review the policies and procedures of risk management, and if required make changes in the policies (Singtel, 2015).
Routine work solution includes the simple management process which helps in achieving the long term as well as short term goals of the company. Singtel is an organization which has team of people who are delivering large number of services to the people. Routine work process of singtel includes following work:
- Resources of corporate are used in such manner as it meets the needs of consumers at lower cost, and this process includes the production planning, logistic systems, quality systems, process, labor allocation, etc.
- Processes are used in such manner as it helps in managing the technical system and also help in achieving the business objectives.
- Management of people at workplace.
For the purpose of managing the risk related to operation process, singtel frame the team of IT experts who are responsible to manage the economic risk of the organization and its impact on organization, operation managers, and other experts of operation process such as cost analyst, market operators, etc. Risk committee of the organization is responsible to ensure that all these experts are conducting their process in appropriate manner.
SingTel Group Risk Management provides their support to the Risk Management Committee (RMC), and RMC provides its support to the Board / Risk Committee (RC) in regards of business risk associated with the strategy of the business (Singtel, 2017).
In Singapore, provisions allowed the competitors of singtel to access to the networks of Singtel, and because of this access prices of Singtel products and services had been declined. In some segment market share of the company was also affected.
In Australia, competitors of Singtel made large investments, and these investments are now sunking the cost of the organization. At that time company thinks that its Australian arm – Optus facing the risk related to irrational pricing being introduced by such competitors. Singtel also feels that situation get worse as the deployment of the Australian NBN (National Broadband Network) will lead to the introduction of new competitors (Cnb, n.d.).
Singtel made investments in various telecom In Australia, and singtel called these companies as its regional associates. It must be noted that growth of these regional associates relies on the increase in data usage of mobiles, but the associates related to Singtel face tough price competition while providing mobile data services and this competition is given by smaller-scale competitors, which result in less profitability and also loss of market share in Australia. For the purpose of manging this risk, singtel tries to improve its efficiency in operation process and ensures innovation in its products and services. It can be said that Singtel tries to manage its cost and provide new products and services to its customer for the purpose of retaining the customer loyalty (Nga, 2016).
Risk Management Framework and Approach
It must be noted that Singtel also face other type of competitor risk also in its group enterprise segment, as competitors of Singtel are generally multinational IT (information technology) and telecommunications companies, and in Australia enterprise market is dominant by incumbent. In enterprise market telecommunication companies are competing in terms of price and service quality. The price related to these services is reduced in last few years because of the pricing competition and increase in capacity. For the purpose of addressing these issues, singtel is mainly focusing on offering comprehensive and effective infocom technology (ICT) solutions to the consumers for increasing their engagement. Company includes various solution in this context such as cloud computing, cyber security and solutions, etc (Singtel, 2016).
Operational risk and control assessments are the first process which is used by the organization to conduct operational risk management. The process of operational risk management is considered as similar to the management process. As this process also includes identification, assessment, measurement, mitigation, monitoring, and reporting of risk. There are number of techniques which can be used under risk assessment:
For the purpose of identifying the risk various techniques are used by Singtel such as consider the all processes and list down the potential sources of risk. These techniques allowed the singtel to open for communication and discussions which help the company in revealing individual risks, risk interdependencies, and areas of control or risk management weakness. Singtel can used some other techniques also such as critical self-assessment, actuarial models, scenario analysis, external data collection, and comparative analysis (Singtel, n.d., Chartered Accountant, n.d.).
After identifying the risk, organization must assess its exposure on qualitative and quantitative basis. In this Quantitative assessments deals with the direct financial loss which might be caused because of the actualization of a risk. On the other hand, Quantitative assessments are required which might be result in direct financial loss. It must be noted that quantitative assessment deals with all other losses which might be occurred with the actualization of the risk. In other words, it directly relates with the level of severity of the risk. Assessment should consider the factors which are discussed in the quantitative assessment and some other factors also which includes mitigating controls, potential damages to reputation. Following are some ways through which risk can be assessed:
- Frequency of occurrence- this deals with the question, how often risk can be occurred? For the purpose of determining the frequency of occurrence organization must consider those events which actually happened and might be happened in future. It is necessary for organization to consider those events also which are external to the firm. In case of singtel, competitive risk faced by organization can be mitigating by considering the actual events and future events.
- Typical damage- organization must consider the estimated financial loss faced by the company, and if such event is occurred in pats then average damage it resulted in.
- Exceptional damage- organization must consider the severe estimated financial loss, and in case of exceptional damage must consider the largest loss would be if this event occurs (Blunden, 2014).
Internal control helps the organization in understanding the risk they are exposed to, and also put controls for the purpose of counter threats and meet the objectives of the organization. Therefore, risk control is considered as important aspect of operation process, management, and corporate governance. Professional accountants play important role in the organization by achieving the targeted, wide approach of organization related to risk management, and also ensure internal control. Risk control results in enhancing and protecting the value of the trust. Following are some control techniques which can be used by organization (POMS, n.d.):
- Diversification: first technique which can be used by the Singtel is the diversification, as it includes the allocation of business resources in different lines of business which offer number of products and services in different industries. If company uses this technique then significant revenue loss from one line of business will not cause any severe harm to the organization. it also ensures long-term organization sustainability and profitability.
- Loss prevention- loss prevention is the technique which limits but not eliminates the loss. In other words, it avoids the risk completely. This technique accepts the risk but try to minimize the loss occurred from that risk. This can be understood through example which states that storing the inventory in warehouse impose the risk of theft. However, there is no way to eliminate this risk, but it can be possible to reduce the risk by putting security guard, cameras, and other security devices (Phillipines, 2015).
- Loss reduction- loss reduction is considered as technique which not only accepts the risk, but also the fact that this risk might result in some loss to the organization also. Under this technique organization tries to reduce the loss in case of some type of threat. This can be understood through example, company can store some kind of flammable material in a warehouse. As per the management of the company, it is necessary to take this risk and decides to install state-of-the-art water sprinklers in the warehouse. If a fire occurs, the amount of loss will be minimized (IFAC, n.d.).
Routine Work Process and Appropriate Team
Operational risk is considered as the risk which is related to the in adequate people, processes, systems, and external forces. Operational risk are managed in similar way as any other risk is managed as it includes assessment and evaluation of both internal as well as external environment.
As sated above, operational risk also includes the competitive risk. It must be noted that if there is lack of proper system then such improper system can arise operation risk in the organization. Competitive risk is also considered as part of operation risk and Singtel is facing this risk from last few years. However, there are number of advantages of operational risk which are stated below:
- Operational risk forces the organization to provide their services to the consumer in effective way and also in efficient manner. As competition increases, it is necessary for organization to provide better services to the consumers as compared to their competitors. As stated, Singtel is mainly focusing on offering comprehensive and effective infocom technology (ICT) solutions to the consumers for increasing their engagement. Company includes various solutions in this context such as cloud computing, cyber security and solutions, etc.
- Operational risk also provides the benefit of innovative products, as it encourages the innovation in products because of competition.
Disadvantage of Operation Risk:
- Operation risk imposes threat to the profitability of the business by increasing the cost of the operation process. In other words, it directly impacts the financial stability of the organization (Cnb, n.d.).
- It also imposes threat on the reputation of the company.
Risk treatment is an action which is taken to manage the risk. Risk management processes include all the steps to identify, assess, and treat the risk. Singtel can adopt this risk treatment in its process which helps the organization in dealing with the risk in better way.
- Acceptance- by this treatment organization chooses to face the risk instead of avoiding the risk, and it is also known as risk retention. Generally, it is stated that it is not possible to earn profit in business or enjoy an active life without choosing to take on risk. For example, an investor may accept the risk that a company will go bankrupt when they purchase its bonds.
- Sharing- risk sharing is considered as distribution of risk to multiple organizations nad individuals This is done for a variety of reasons including insurance products and self-insurance strategies.
Conclusion:
After considering the above facts it can be said that Singtel established a systematic risk review process for the purpose of identifying, assessing, managing, and monitor the risk throughout the organization. The main objective of this committee is to identifying, managing and reporting to the board the key risks faced by the organization. RC is also obliged to ensure that framework related to risk management is effectively implemented within the units of the business.
Recently company faced risk related to competitors such as competitors of Singtel are generally multinational IT (information technology) and telecommunications companies, and in Australia enterprise market is dominant by incumbent. In enterprise market telecommunication companies are competing in terms of price and service quality. The price related to these services is reduced in last few years because of the pricing competition and increase in capacity. Operational risk forces the organization to provide their services to the consumer in effective way and also in efficient manner. As competition increases, it is necessary for organization to provide better services to the consumers as compared to their competitors. As stated, Singtel is mainly focusing on offering comprehensive and effective infocom technology (ICT) solutions to the consumers for increasing their engagement. Company includes various solutions in this context such as cloud computing, cyber security and solutions, etc.
It must be noted that if there is lack of proper system then such improper system can arise operation risk in the organization. Competitive risk is also considered as part of operation risk and Singtel is facing this risk from last few years. Therefore, it is clear from the above facts that Singtel must use different risk treatments and proper assessment to deal with these resources.
References:
Blunden, T. (2014). Operational Risk (3): Risk & Control Assessments. Retrieved on 6th November 2017 from: https://www.chasecooper.com/press-release/published/102-operational-risk-3-risk-a-control-assessments.html.
Chartered Accoountant. Treat Risks. Retrieved on 6th November 2017 from: https://survey.charteredaccountantsanz.com/risk_management/midsize-firms/treat.aspx.
Cnb. Operational risk and its impacts on financial stability. Retrieved on 6th November 2017 from: https://www.cnb.cz/en/financial_stability/fs_reports/fsr_2007/FSR_2007_article_4.pdf.
IFAC. Risk Management & Internal Control. Retrieved on 6th November 2017 from: https://www.ifac.org/global-knowledge-gateway/risk-management-internal-control?overview.
IRM. About Risk Management. Retrieved on 6th November 2017 from: https://www.theirm.org/the-risk-profession/risk-management.aspx.
Nga, L. (2016). The Competitive Risks That Singapore Telecommunications Limited Is Facing, And How It Plans To Address Them. Retrieved on 6th November 2017 from: https://www.fool.sg/2016/12/28/the-competitive-risks-that-singapore-telecommunications-limited-is-facing-and-how-it-plans-to-address-them/.
Phillipines, T. (2015). The Impact of Operational Risk on Enterprise Risk: A Guide. Retrieved on 6th November 2017 from: https://www.linkedin.com/pulse/impact-operational-risk-enterprise-guide-terrance-m-phillips-mba.
POMS. The 6 fundamental techniques of risk control. Retrieved on 6th November 2017 from: https://www.pomsassoc.com/6-fundamental-techniques-risk-control/.
Singtel, (2012). Risk management philosophy and approach. Retrieved on 6th November 2017 from: https://info.singtel.com/annualreport/2012/pdf/risk-management-philosophy-and-approach.pdf.
Singtel, (2015). Risk Management Philosophy Approach. https://info.singtel.com/annualreport/2015/sustainability/risk-management-philosophy-approach.php.
Singtel, (2016). Risk Management Philosophy and Approach. Retrieved on 6th November 2017 from: https://info.singtel.com/annualreport/2016/files/16_Risk_Management.pdf.
Singtel, (2017). Manager, Group Risk Management (BCM). Retrieved on 6th November 2017 from: https://groupcareers.singtel.com/job/Manager%2C-Group-Risk-Management-%28BCM%29-Sing/415882400/.
Singtel, Summary: Risk Management Policy. Retrieved on 6th November 2017 from: https://www.singtel.com/content/dam/singtel/corporate/Risk_management_policy.pdf.
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