Views received from scholarly articles
Risks are an integral part of our society. Risks are present in all the organizations irrespective of their nature, type or size. Every organization needs to have a risk management team. This team assures that the company operates well and there are no risks that the company would face in the future (Hopkin 2018). In case the company has any chance to face some risks, the risks management team carries out risk management using various strategies. The risks are considered as extreme events and sit on the tail of the distribution. This has very less probability bit a high cost. Risk management can help the company to get rid of the risks by following five stages that are considered as parts of risk management (Sadgrove 2016). These stages are risk identification, risk measurement, risk management, risk monitoring and risk reporting.
This paper requires choosing an organization that has faced failure o risk management and analyzing the risks that the company suffered from. The paper discusses the systemic risks and cascade risks (McNeil, Frey and Embrechts 2015). System risks discuss the ones that have occurred due to various loopholes in its systemic structure and cascade risks describe the risks that are results of the systemic risks.
According to Lam, (2014) strategic risk can be defined as the uncertainty of the loss of a particular organization. The loss might be profit as well as non-profit. In other definition by it has been discussing that strategic risk has no specific definition because the organizations are not able to define and understand properly. Strategic risks have chances to arise due to political impediments, regulatory or technological innovation. The risk might occur when an organization does not properly concentrate on the risks that might be faced by it due to various loopholes in its working principles (McNeil, Frey and Embrechts 2015). The company might also face risks due to the implementation of a new technology or strategies in its working principles. Hence it can be said that it is not compulsory that a company would face risks because of its mistakes or ignorance of the risks, it might also cause when the company intends to do something good. Failure of risks management plans might cause due to numerous reasons which include improper execution of the stages under risk management, the mistake occurred in a single stage or improper carrying out of the stages (Haimes 2015). The Basel community has defined that the operational risk is a risk which is caused due to direct or indirect loss that results from failed or inadequate internal processes, systems and people or various external events. Operational risks are a result of loopholes in internal problems like fraud employees, segregation of various duties, corporate leadership, product flaws and information risk. Risks might occur in numerous perspectives, it can be said that risk management is not possible to manage separately (Aven 2016). The risk management strategies should be integrated into a particular holistic manner. These mentioned factors are among the major causes that contribute to emerging enterprise risk management.
Chosen project
According to Giannakis and Papadopoulos, (2016) every organization faces some or the other risks. Small enterprises as well as multinational companies face various risks depending on the situation and their working background. The risks faced by various organizations depend on numerous factors; these factors are strategic risks, operational risks, technology risk, political risk, financial risk, reputational risk, human capital risk and legal risk (Kendrick 2015). This literature mainly concerns mainly four kinds of risks. They are a financial risk, operational risk, strategic risk and hazard risk. Usually risk occurs due to the failure of planning, leading, controlling and organizing. According to Olson and Wu, (2015) the major cause that results in failure of risk management strategies include “Tone of the organization” and poor governance, few indicators of the tone of organization and dysfunction in the governance are process indicators, organizational indicators and behavioral indicators. Some more reasons that lead to the failure of risk management strategies are reckless risk taking, inability of implement effective enterprise risk management, nonexistent, inefficient and effective risk assessment, non integrating risk management with strategy, lack of enterprise risk management expertise in the organizations, governance gaps over material risks and many more. As per Wolke, (2017) there are six factors that have been reported for forcing organizations to practice enterprise risk management. The first factor relates to various complicated risks. Along with facing four major risks, the organizations also faced other risks like various risks in advanced technology, globalization, acceleration pace of the business, increase in financial sophistication and uncertainty of terrorist activity (Liu et al., 2015). Risks usually do not occur by itself, they are a result of a change in the organization which is difficult for it to cope up or adjusts with or some mistake that has occurred unintentionally by any member or factor of the organization.
A system which is known for suffering failed risk management strategies is Maggi. Maggi is considered one of the leading brands that manufacture packaged food. This paper discusses the failure of a gross risk management and the operational risk has the chances of opening the lid for other industries as well (Syahirah 2017). The failure of risk management strategies in Maggi has to lead to other enterprises who take risk management very seriously. In order to access the risk management in Maggi which is a brand sponsored by Nestle the details that are available on the website of the brand has been accesses properly. The assessment is carried out by reading their Annual report, code of conduct, a report of various audits that have been carried out by the brand and many more. The company faces numerous risks due to poor risk management strategies. These risks are systemic risks as well as cascading risks. The risks faced by the company have been discussed below in details.
- The risk management committee of the brand includes three members but none of them has a risk hat. This means that among all the members belonging to the risk management team no one was expert in managing risks (Sujata, Thenuan and Subrahmanyam 2016). The company did not have any plan for managing risks. This has resulted in the company not being aware of the evolving risks which have resulted in causing more loss to the company.
- The basic and the first failure of the company was misleading the customers with a message “No added MSG”, this proved to be a risk because they did not mention if MSG was coming from various natural ingredients. A single rumor regarding the harmful ingredient has caused the major problem for the company (Garicano and Rayo 2016). The company did not notice this risk could occur and hence the risk has slipped between the loopholes which have to lead to the failure of risk identification.
- The content named “Lead” that was said to be found in Maggi is a result of a failure in risk monitoring. The company did not test the manufactured samples for carrying out quality control (Sujata, Thenuan and Subrahmanyam 2016). The products were sent for the purpose of consumption when they were statistically credible.
The reason that the company was not aware of the risks that have been mentioned above, it took time to react in the first instance, this has occurred in the failure of the communication among the members of the company (Garicano and Rayo 2016). The risks mentioned above have resulted in numerous cascade risks. These risks are as follows
- Reputation:Reputational risk in any company is considered as the mother of all the other risks, once the reputation is broken it can never be joined. The failure of previously mentioned operational risks has to lead to un-repairable risk on the reputation of the company and decreases its reputation to naught (Sujata, Thenuan and Subrahmanyam 2016). The rumors that have been spread against the company has lead to customers boycott the products manufactured by Maggi. The customers turned furious and stopped purchasing their products. As a result, the whole sellers and retailers stopped purchasing as well because it would be a waste for them.
- Stakeholders:The stakeholders started questioning regarding their position in the company. They turned against the brand in just a few moments (Garicano and Rayo 2016). Numerous business partners of the company withdrew their partnership from the company.
- Revenue:The failure of risk management has resulted in a decrease in the annual revenue of the company. This has occurred due to the spoilt reputation of the company.
The systemic risks from which the company suffered are as follows
The main risks that are stated in the project management of Maggi business organization include risks that include improper functioning of the management process of higher authorities. These include misleading the global audience regarding the content of the product.
- The main issue that is present in the commencement of the business management of Maggi is that the constituent elements were not well stated in the packaging. Maggi falsely claimed the fact that there has been no added MSG in the product. This is one of the main reason that Maggi has been gaining importance in the global market (Garg 2015). Due to the fact MSG has not added in Maggi the acceptance of the product was high. Despite the fact that MSG was gathered in natural means Maggi suffered from the fact that a mistrust among the clients grew in a large extent. This hampered the market that was established by the business organization (Roy, Tata and Parsad 2018).
In case I was the project manager, I would have stated that MSG is added in the product but the MSG that is added is natural and the amount that is provided is not at all harmful in nature. Another aspect that I would have taken into consideration is using an alternative of MSG (Sujata, Thenuan and Subrahmanyam 2016). Sea salt is considered to be an alternative to MSG. in case I was the project manager I would have used sea salt in place of MSG. This would have kept the track record much more efficient and no trust issue would have arisen.
- Another issue that is taken into consideration is that the business management of the product can be performed with the highest efficiency. This is one of the main reasons that affected the functionality of the brand. No risk management plan was initially made (Dhanesh and Sriramesh 2018).
In case I was the project manager, I would have conducted the risk assessment and analysis in the first instance and this would have led to better management of the project (McNeil, Frey and Embrechts 2015). In case the risk management plan was made, the main prosecution that would have been taken into consideration is that the risks that might approach can be easily estimated and well mitigated. This results in better management of the product.
- The competition provided by the other brands is also treated as one of the major threat for the business organization as the turn-over of the business organization is completely dependent on the competition that it faces in the projection of the management (Desai 2016).
In case I was the project manager, the main aspect that will be taken into consideration is bringing in innovation in the product. The main instance that is taken into consideration is that the management of the project will be performed with the innovation as the main process requires better management of the project. In case innovation is brought in the project the main advantage that will be enjoyed is that the global audience will be capable enough to distinguish the product of Maggi from other brands (Sujata, Thenuan and Subrahmanyam 2016). This is one of the main reasons that is taken into consideration. With the help of the management of innovation the taste of the product will definitely be other from the other competitors of the business organization. This is considered to be one of the main reasons that might give Maggi an edge over the other brands who have been competing with the brand. Introducing new flavors will definitely attract an audience as the taste that will be provided by the brand will be other than the taste that will be provided by the other competitive brands.
The consequences that will be present will lead to better management of the products and this is one of the main reasons that will help in better commencing of the project.
Conclusion:
From the above discussion, it can be concluded that there are several risks in the commencement of the project of Maggi. These issues must be resolved in order to have a better commencement of the project. In case this management of the issues has performed the management of the business organization will be more efficient in nature. Recommendations that are stated in the report will help in managing the project with higher accuracy. This report has provided a brief introduction of the topic which helps in the understanding of the scenario that Maggi is going through. This report also provides a review and summary of the literature that will help in the better commencement of the research. This report also provides a risk management system in order to provide better management of the system. This report also provides a leadership functioning management and helps in better understanding of the recommendation that must be provided as this would increase the proficiency of the project management. This report also provides recommendations that must be followed in order to complete the project in a better manner with higher accuracy.
References:
Aven, T., 2016. Risk assessment and risk management: Review of recent advances on their foundation. European Journal of Operational Research, 253(1), pp.1-13.
Desai, P., 2016. Predicament Management During Product Recall of Maggi. IBMRD’s Journal of Management & Research, 5(2), pp.21-26.
Dhanesh, G.S. and Sriramesh, K., 2018. Culture and Crisis Communication: Nestle India’s Maggi Noodles Case. Journal of International Management, 24(3), pp.204-214.
Garg, M., 2015. Impact of Maggi row in India. International Journal of Management and Social Sciences Research, 4(7), pp.44-52.
Garicano, L. and Rayo, L., 2016. Why organizations fail: models and cases. Journal of Economic Literature, 54(1), pp.137-92.
Giannakis, M. and Papadopoulos, T., 2016. Supply chain sustainability: A risk management approach. International Journal of Production Economics, 171, pp.455-470.
Haimes, Y.Y., 2015. Risk modeling, assessment, and management. John Wiley & Sons.
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Lam, J., 2014. Enterprise risk management: from incentives to controls. John Wiley & Sons.
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Pai, V.S., 2018. Challenges MNCs Face in Emerging Markets: The Nestlé Experience. Vision, 22(2), pp.222-231.
Roy, V., Tata, S.V. and Parsad, C., 2018. Consumer response to brand involved in food safety scandal: An exploratory study based on a recent scandal in India. Journal of Consumer Behaviour, 17(1), pp.25-33.
Sadgrove, K., 2016. The complete guide to business risk management. Routledge.
Sujata, J., Thenuan, P. and Subrahmanyam, Y.V., 2016. Competitive Analysis of Social Media and Incident Management. International Journal of Marketing and Technology, 6(6), pp.87-102.
Syahirah, N., 2017. Firm Risk and Performance of Consumer Industry: Nestle Malaysia.
Vargas-Hernández, J.G., 2017. Reflections on Organisational Management of Interculturality. Reflections, 10(2).
Wolke, T., 2017. Risk Management. Walter de Gruyter GmbH & Co KG.
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