Risk Management Approach of BizOps Enterprises
A risk is the chance of something happening that will have an impact on objectives. It is often measured in terms of the likelihood of the risk occurring and the impact, whether positive or negative, that might result if the risk did occur. Risk management is the development of a system of policies, processes and procedures that access and manage all the risks that might occur within a workplace. It provides practical, hands-on solutions to managing the overall exposure to risk. In the present task, BizOps has been selected as chosen organization.
Kerzner (2013) stated that risk management should apply across all areas of an organization’s operations, including: – the strategic level involving the whole organization (management) – the operational level (teams) and specific activities (projects) – specific risk areas (emergencies) and individual actions.
The following steps outline the approach of BizOps enterprises to risk management:
- Identify the most significant risks arising from operations on an on-going basis.
- Prioritize risks based on the likelihood of occurrence and potential impact.
- Implement strategies to mitigate risks
- Monitor effectiveness of risk management efforts.
Stock control, otherwise known as inventory control, is used to show how much stock BizOps enterprise has at any one time, and how BizOps enterprises keep track of it. It applies to every item BizOps enterprises uses to produce a product or service, from raw materials to finished goods. It covers stock at every stage of the production process, from purchase and delivery to using and re-ordering the stock. Efficient stock control allows having the right amount of stock in the right place at the right time (Burke 2013). It ensures that capital is not tied up unnecessarily, and protects production if problems arise with the supply chain of BizOps enterprises for the project.
There are four main types of stock:
- raw materials and components – ready to use in production
- work in progress – stocks of unfinished goods in production
- finished goods ready for sale
- consumables – for example, fuel and stationery
There are several methods for controlling stock, all designed to provide an efficient system for deciding what, when and how much to order. The organization may opt for one method or a mixture of two or more if BizOps enterprises have various types of stock. For further information, see the page in this guide on types of stock.
Minimum stock level – It is required identify a minimum stock level, and re-order when stock reaches that level. This is known as the Re-order Level.
Stock review – It is important to have regular reviews of stock.
Just In Time (JIT) – this aims to reduce costs by cutting stock to a minimum. Items are delivered when they are needed and used immediately. There is a risk of running out of stock, so BizOps enterprises need to be confident that BizOps enterprises r suppliers can deliver on demand.
Types of Stock and Methods for Controlling Stock
These methods can be used alongside other processes to refine the stock control system. For example:
Re-order lead time – allows for the time between placing an order and receiving it.
Economic Order Quantity (EOQ) – a standard formula used to arrive at a balance between holding too much or too little stock. It’s quite a complex calculation, so BizOps enterprises may find it easier to use stock control software.
Batch control – managing the production of goods in batches. BizOps enterprises need to make sure that BizOps enterprises have the right number of components to cover BizOps enterprises r needs until the next batch.
First in, first out – a system to ensure that perishable stock is used efficiently so that it doesn’t deteriorate. Stock is identified by date received and moves on through each stage of production in strict order.
Keeping stock secure depends on knowing what BizOps enterprises have, where it is located and how much it is worth – so good records are essential (Larson and Gray 2013). Stock that is portable, does not feature the business’ logo, or is easy to sell on, is at particular risk.
Thieves and shoplifters
A thief coming in from outside is an obvious threat. Check the security around BizOps enterprises r premises to keep the risk to a minimum (Fleming and Koppelman 2016). In a store, thieves may steal in groups – some providing a distraction while others take goods. Teach BizOps enterprises r staff to be alert and to recognize behavior like this. Set up a clear policy and make sure staff is trained in dealing with thieves.
Offering to help a customer if BizOps enterprises are suspicious will often prevent a theft. Avoid using confrontational words like “steal” if BizOps enterprises do have to approach a suspected thief, and avoid getting into a dangerous situation.
Protect stock
Identify and mark expensive portable equipment (such as computers). If possible, fit valuable stock with security tags – such as Radio Frequency Identification tags – which will sound an alarm if they are moved. It is a good idea to dispose of packaging securely -leaving boxes in view could be an advertisement to thieves.
- Take regular inventories.
- Put CCTV in parking lots and other key locations.
Theft by staff
Theft by employees can sometimes be a problem. To prevent this:
- Set up procedures to prevent theft. Staff with financial responsibilities should not be in charge of stock records.
- Restrict access to warehouses, stockrooms and stationery cupboards.
- Regularly change staff controlling stock to avoid collusion or bad practice.
- Wrong time estimation
- Resources are not tracked properly. All resources like staff, systems, skills of individuals etc.
- Failure to identify complex functionalities and time required to develop those functionalities.
- Unexpected project scope expansions.
Budget Risk:
- Wrong budget estimation.
- Cost overruns
- Project scope expansion
Operational Risks:
Risks of loss due to improper process implementation have failed system or some external events risks.
Causes of Operational risks:
- Failure to address priority conflicts
- Failure to resolve the responsibilities
- Insufficient resources
- No proper subject training
- No resource planning
- No communication in team.
Technical risks:
Technical risks generally leads to failure of functionality and performance.
Causes of technical risks are:
- Continuous changing requirements
- No advanced technology available or the existing technology is in initial stages.
- Product is complex to implement.
- Difficult project modules integration.
Ways to Keep Stock Secure
Programmatic Risks:
These are the external risks beyond the operational limits. These are all uncertain risks are outside the control of the program.
These external events can be:
- Running out of fund.
- Market development
- Changing customer product strategy and priority
- Government rule changes.
Risks are identified, classified and managed before actual execution of program. These risks are classified in different categories.
Categories of risks:
Schedule Risk:
Project schedule get slip when project tasks and schedule release risks are not addressed properly.
Risk Monitoring and Control is the process of identifying, analyzing, and planning for newly identified risks, monitoring previously identified risks, and reevaluating existing risks to verify the planned risks response strategies for their effectiveness.
Activities involved in Risk Monitoring include:
- Establish periodic reviews and schedule them in the project plan.
- Ensure that all requirements of the Risk Management Plan are being implemented.
- Assess currently defined risks as defined in the Risk Register.
- Evaluate effectiveness of actions taken.
- Identify status of actions to be taken.
- Validate previous risk assessments (likelihood and impact).
- Validate previous assumptions and state any new assumptions.
- Identify new risks.
- Track risk response.
- Communicate risk management status and risk response follow-through as appropriate.
Activities involved in Risk Control include:
- Validate risk mitigation strategies and alternatives.
- Take corrective action when actual events occur.
- Assess impact on the project of actions taken (cost, time, and resources).
- Identify new risks resulting from risk mitigation actions.
- Ensure the Project Plan (including Risk Management Plan) is maintained.
- Ensure change control addresses risks associated with the proposed change.
- Revise risk management documents to capture results of mitigation actions.
- Update Risk Register.
- Communicate risk management status and risk response follow-through as appropriate.
- Establish communications as appropriate.
Identify risks that may affect project outcome, document them in the project’s Risk Register (Log). The Risk Register usually includes the following:
- Unique identifier for each risk.
- Description of each potential risk event and how it could affect the project.
- Assessment of the likelihood of occurrence and the impact/seriousness if it does.
- Grading of each risk according to a Risk Scoring Matrix.
- Who is responsible for managing the risk?
- Strategies proposed for dealing with the risk (preventative and contingency).
- (In larger projects) A sizing for each risk response/mitigation strategy.
- After being first identified, the risks are analyzed to determine how they could affect the project (Boud et al. 2014). Negative risks, for example, can impact a project in several basic ways: objectives reduced or delayed, schedule extended, cost increased, or quality reduced.
- The scoring (grading) of the risks in the Risk Registeris facilitated by use of a Risk Scoring Matrix (aka, Probability and Impact Matrix). Mir and Pinnington (2014) commented that risks are first analyzed and evaluated in terms of probability (likelihood) of occurrence and the impact (seriousness) if they should occur. The probability of the risk occurring is assessed and given a rating of Very Low (VL), Low (L), Medium (M), High (H), or Very High (VH) likelihood. Separately the impact upon the project if the risk were to occur is given a rating of Very Low (VL), Low (L), and Medium (M), High (H), or Very High (VH) seriousness (Phillips 2013). Then using these ratings in conjunction with the Risk Scoring Matrix, the risks can be graded to provide a measure of the project’s risk exposure for each.
- The table below is an example of a simple Risk Scoring Matrix that provides a standard method to calculate gradings based upon combination of probability and impact ratings.
|
Score |
Definition |
|
High |
An event that is extremely or very likely to occur and whose occurrence will impact the project’s cost (and/or schedule) so severely that the project will be terminated or will cause significant cost (and/or schedule) increases (e.g., increases of more than 5 percent) on the project; this risk should be escalated (where possible) and reviewed frequently |
|
Medium |
An event that has a 50-50 chance of occurring and, if it occurs, will cause noticeable cost (and/or schedule) increases (e.g., increases of not more than 5 percent) on the project; this risk should be reviewed regularly |
|
Low |
An event that is unlikely or very unlikely to occur and, if it occurs, will cause small or no cost (and/or schedule) increase that, in most cases, can be absorbed by the project |
Determine the level of treatment plans required for each risk level. For example, for risks rated as ‘high’, a treatment plan must be developed. However for risks rated as ‘low’ and ‘very low’ that have improvement opportunities, development of a treatment plan may be at the discretion of the partner or partners (Nicholas and Steyn 2017). Effective risk treatment relies on attaining commitment from key practice stakeholders and developing realistic objectives and timelines for implementation.
For each risk identified in the risk assessment, detail the following:
Specify the treatment option agreed – avoid, reduce, share/transfer or accept.
Document the treatment plan – outline the approach to be used to treat the risk. Any relationships or interdependencies with other risks should also be highlighted.
Assign an appropriate owner – who is accountable for monitoring and reporting on progress of the treatment plan implementation. Where the treatment plan owner and the risk owner are different, the risk owner has ultimate accountability for ensuring the agreed treatment plan is implemented.
Specify a target resolution date – where risk treatments have long lead times, consider the development of interim measures. For example, it is unlikely to be acceptable for a residual risk to be rated ‘high’ and to have a risk treatment with a resolution timeframe of two years.
Martinelli and Milosevic (2016) stated that management may wish to define expectations of the detail of treatment plans required for each risk level. For example, for risks rated as ‘high’, a treatment plan must be developed. However for risks rated as ‘low’ and ‘very low’ that have improvement opportunities, development of a treatment plan may be at the discretion of the risk owner.
Risk treatment involves developing a range of options for mitigating the risk, assessing those options, and then preparing and implementing action plans. The highest rated risks should be addressed as a matter of urgency (Sears et al. 2015). Selecting the most appropriate risk treatment means balancing the costs of implementing each activity against the benefits derived. In general, the cost of managing the risks needs to be commensurate with the benefits obtained. When making cost versus benefit judgements the wider context should also be taken into account.
Depending on the type and nature of the risk, the following options are available:
Avoid – deciding not to proceed with the activity that introduced the unacceptable risk, choosing an alternative more acceptable activity that meets business objectives, or choosing an alternative less risky approach or process.
Reduce – implementing a strategy that is designed to reduce the likelihood or consequence of the risk to an acceptable level, where elimination is considered to be excessive in terms of time or expense.
Share or Transfer – implementing a strategy that shares or transfers the risk to another party or parties, such as outsourcing the management of physical assets, developing contracts with service providers or insuring against the risk (Hwang and Ng 2013). The third-party accepting the risk should be aware of and agree to accept this obligation.
Accept – making an informed decision that the risk rating is at an acceptable level or that the cost of the treatment outweighs the benefit. This option may also be relevant in situations where a residual risk remains after other treatment options have been put in place. No further action is taken to treat the risk, however, ongoing monitoring is recommended.
Jacobs and Chase (2013) asserted that KPI is a type of performance measurement that helps BizOps enterprises understand how BizOps enterprises r organization or department is performing. A good KPI should act as a compass, helping BizOps enterprises and BizOps enterprises r team understand whether BizOps enterprises ’re taking the right path toward BizOps enterprises r strategic goals.
- Profit: This goes without saying, but it is still important to note, as this is one of the most important performance indicators out there.
- Cost: Measure cost effectiveness and find the best ways to reduce and manage BizOps enterprises r costs.
- LOB Revenue Vs. Target: This is a comparison between BizOps enterprises are actual revenue and BizOps enterprises r projected revenue (Svejvig and Andersen 2015). Charting and analyzing the discrepancies between these two numbers will help BizOps enterprises identify how BizOps enterprises r department is performing.
- Cost Of Goods Sold: By tallying all production costs for the product BizOps enterprises r company is selling, BizOps enterprises can get a better idea of both what BizOps enterprises r product markup should look like and what BizOps enterprises r actual profit margin is. This is a key in determining how to outsell BizOps enterprises r competition.
- Day Sales Outstanding (DSO): Take BizOps enterprises r accounts receivable and divide them by the number of total credit sales. Take that number and multiply it by the number of days in the timeframe BizOps enterprises are examining.
- Sales by Region: Through analyzing which regions are meeting sales objectives, BizOps enterprises can provide better feedback for regions that are underperforming.
- LOB Expenses Vs. Budget: Compare BizOps enterprises r actual overhead with BizOps enterprises r forecasted budget (Pemsel and Wiewiora 2013). Understanding where BizOps enterprises deviated from BizOps enterprises’ plan that can help BizOps enterprises create a more effective departmental budget in the future.
The audit strategy sets the scope, timing and direction of the audit. It allows the auditor to determine the following:
- the resources to deploy for specific audit areas (e.g. experience level, external experts);
- the amount of resources to allocate (e.g. number of team members);
- when the resources are to be deployed; and
- How the resources are managed, directed and supervised, including the timings of meetings debriefs and reviews.
Characteristics of the engagement
- What is the financial reporting framework for the financial statements?
- Are there industry specific requirements? e.g. listed companies and charities;
- The number and locations of premises, branches, subsidiaries etc;
- The nature of the client and the need for specialized knowledge;
- The reporting currency;
- The effect of IT on audit procedures, including availability of data.
Reporting objectives, timing of the audit, and nature of communication
- The timetable for interim and final reporting;
- The organization of meetings with management;
- The expected types and timings of auditor’s reports/communications;
- The expected nature and timing of communication amongst team members; and
- Whether there are any expected communications with third parties.
Significant factors and preliminary engagement activities
- Materiality;
- Results of risk assessment;
- Professional scepticism;
- Results of previous audits;
- Evidence of management’s commitment to internal controls;
- Volume of transactions;
- Significant business developments/changes;
- Significant industry developments; and
- Significant financial reporting changes.
Conclusion
From above discussion, it can be concluded that risk management process needs to be analyzing exposure to risk and determining how to best handle such exposure. BizOps’s risk management process undertakes a best practices approach and focuses on understanding the key risks and managing them within acceptable levels. It is a collaborative process where risk response plans are developed in concert with the stakeholders who understand the risks and are best able to manage them.
References
Boud, D., Cohen, R. and Sampson, J. eds., 2014. Peer learning in higher education: Learning from and with each other. Routledge.
Burke, R., 2013. Project management: planning and control techniques. New Jersey, USA.
Fleming, Q.W. and Koppelman, J.M., 2016, December. Earned value project management. Project Management Institute.
Hwang, B.G. and Ng, W.J., 2013. Project management knowledge and skills for green construction: Overcoming challenges. International Journal of Project Management, 31(2), pp.272-284.
Jacobs, R. and Chase, R., 2013. Operations and supply chain management. McGraw-Hill Higher Education.
Kerzner, H., 2013. Project management: a systems approach to planning, scheduling, and controlling. John Wiley & Sons.
Larson, E.W. and Gray, C., 2013. Project Management: The Managerial Process with MS Project. McGraw-Hill.
Martinelli, R.J. and Milosevic, D.Z., 2016. Project management toolbox: tools and techniques for the practicing project manager. John Wiley & Sons.
Mir, F.A. and Pinnington, A.H., 2014. Exploring the value of project management: linking project management performance and project success. International journal of project management, 32(2), pp.202-217.
Nicholas, J.M. and Steyn, H., 2017. Project management for engineering, business and technology. Taylor & Francis.
Pemsel, S. and Wiewiora, A., 2013. Project management office a knowledge broker in project-based organisations. International Journal of Project Management, 31(1), pp.31-42.
Phillips, J., 2013. PMP, Project Management Professional (Certification Study Guides). McGraw-Hill Osborne Media.
Sears, S.K., Sears, G.A., Clough, R.H., Rounds, J.L. and Segner, R.O., 2015. Construction project management. John Wiley & Sons.
Svejvig, P. and Andersen, P., 2015. Rethinking project management: A structured literature review with a critical look at the brave new world. International Journal of Project Management, 33(2), pp.278-290.
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