Scope of Risk
Discuss about the Manage Risk for Financial Operations and Supply Chain Risks.
In today’s business world, proper management of risk is considered as a vital aspect for gaining the business success. Risk management refers to the process to identify, assess and control the threat to the capital and earnings of the capital. In organization, the presence of variety of sources can be seen for the risks; some of them are human resource related risk, risk related to the financial operations, supply chain risks, OHS risk, risk related to compliance and others. Thus, the companies are needed to take into consideration all of these risks while developing risk management plan (Pritchard and PMP 2014).
The scope of risk is the process to set the context of risk management in the organizations and both the internal as well as external context needs to be considered. The information of the case study indicates towards the inefficiency in the internal control related to monitoring recording and cash handling. At the same time, lack of efficiency can be seen in different aspects like OHS, financial aspects and others. All these aspects together provide the scope for risk management in PriceBeat.
In PriceBeat, the main objective of risk management is to identify the risk areas in the business operations of the companies, to develop the risk management plan after analyzing the identified business risks and to monitor them to get the results. In this context, the main success factor for the risk management of PriceBeat is the analysis of the internal as well as external environment of the company as the identification of the risks largely depends on them (Lam 2014).
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Internal Stakeholders |
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Name |
Role |
Issues or Concerns |
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Management Employees |
It is the role of the management of PriceBeat to develop the risk management plan Employees are required to play their part in the risk management process effectively (Wolke 2017). |
The managers are facing difficulties in conducting and attending meetings due to long distance. |
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External Stakeholders |
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Name |
Role |
Issues or Concerns |
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Customers Government |
Customers are needed to cooperate with the company in managing the external risks of the company. PriceBeat is needed to comply with all the laws and legislations introduced by the Government. |
The customers are not with the products of the company. PriceBeat has major compliance issues with the regulations of the government (Wolke 2017). |
Political: As per the provided case study, the company has majorly failed in complying with the major legislative requirements like OHS, water wastage, lack of policies and others.
Economic: There has not been any major economic progress in PriceBeat as the company has failed to open more stores.
Social: The increasing amount of population in the area due to the amount of retirees is a major social factor.
Technological: PriceBeat will be able in using more efficient ERP system due to NBN.
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Strengths |
Weaknesses |
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· The location of the store of PriceBeat is strength as it provides easy access of the stores to the customers. |
· The long distance between Taralgon to Melbourne is a weakness. · Ineffective ERP system is another weakness. · Lack of written procedures is a major weakness. · Another weakness is the inability of the company to attract the customers. · Lack of established process to deal with the issues of OHS is a weakness. |
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Opportunities |
Threats |
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· Opening of new stores provides the company with major expansion opportunity for PriceBeat. |
· Lack of internal control is a threat. · Non-compliance with the required standards can create threat for the company. |
In PriceBeat, the risk analysis will be done with the help of checklists. The following discussion shows the risk analysis with the help of a checklist:
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Description |
Risk Present |
Specific Risks |
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Financial Risk |
ü |
o Ineffectiveness of ERP system can lead to delay for the customers. o Lack of everyday banking creates the risk of theft of cash. o Lack of cash registration can lead to the risk of cash theft. o Lack of correct computation of superannuation increases the risks of wrong payment of wages (Bromiley et al. 2015). |
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Human Resource Risk |
ü |
o As separate employees are responsible for payment, inventory and delivery, it can lead to the risk of lack of coordination. |
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Risk Related to the Wastage of Water |
ü |
o The absence of double flush system leads to the risk of the wastage of water. |
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Security Risk |
ü |
o Lack of security increases the risk of break-ins. o The lack of computer security increases the risk of data theft (Olson and Wu 2015). |
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Marketing Risk |
ü |
o Lack of sales promotion lead to the marketing risk in the company. |
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OHS Risk |
ü |
o Lack of established process in OHS increases the risk of injury |
In PriceBeat, the main purpose for the development of the risk management standards is to make the company to align all the strategic management and operational tasks along with the functions and processes with the risk management objectives of the organization (Brustbauer 2016).
Risk Management Objectives and Success Factors
The current risk management standards of PriceBeat have four major elements. The first element involves in the identification of the hazards in the organization that can harm the business operation of the company. The next element involves in the identification of the parties or stakeholders that can be affected with the risks. The next element involves in the assessment of the identified risks so that actions can be taken to reduce them. The last element involves in recording the major findings from the risks management process (Brustbauer 2016).
PriceBeat is needed to comply with all the required legislative and regulatory requirements in the development of risk management strategy. The legislation and regulatory requirements for risk management are legislations related to disaster, emergencies, land use planning, business permits, safety standards, operating procedures, emergency procedures, manufacturing procedures and others (Hopkin 2017).
PriceBeat is needed to develop the required policies, procedures and processes for the purpose of risk management. Some of the required procedures, policies and processes are precaution of equipments related to safety training and inspection; the maintenance of detailed records; screening and hiring of the employees; development of contingency plan for emergency cases; ethics in workplace; reporting of incidents, accident reporting procedures and others (Hopkin 2017).
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Risks |
Low |
Medium |
High |
Extreme |
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Financial Risk |
ü |
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Human Resource Risk |
ü |
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Risk Related to the Wastage of Water |
ü |
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Security Risk |
ü |
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Marketing Risk |
ü |
|||
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OHS Risk |
ü |
It needs to be mentioned that these six types of risks have different consequences. The financial risks will have major consequence on PriceBeat as there can be major thefts of cash. The consequence of human resource risk will make the employees inefficient. PriceBeat can suffer from major legislative consequences from the government due to the presence of the risk of wastage of water. The consequence of security risk will lea d to the break-in in the company and the theft of important data. Development of ineffective marketing strategy will be the consequences of marketing risk. The employees will have to suffer from major health issues due to the OHS risk (Burtonshaw-Gunn 2017).
There will be eight steps in the risk treatment plan. The first step will be the implementation of risk action plan. The second step will be the communication of plan. The third step will be seeking support from senior management. The next step will be communication with internal as well as external stakeholders. Documentation of the risk management plan will be te next step. To provide training is the last process (Sadgrove 2016).
Ensuring the effective communication of risk treatment plan is an essential part in the risk management process of the company. In this process, the company is required to distinguish the stakeholders in internal as well as external stakeholders. After that, PriceBeat is required to develop different communication strategies and tools for both the internal as well as external stakeholders. For example, management can communicate the risk treatment plan with the internal stakeholders by conducting meetings (Marcelino-Sádaba et al. 2014).
After this, it is necessary for PriceBeat to make the proper documentation of the risk assessment process. For this reason, PriceBeat is needed to develop a detailed risk management report where the company will record all the information as well as findings of the risk management process (Sadgrove 2016).
Lastly, PriceBeat is needed to organize various aspects like review of risks, team meetings, progress reports and others to monitor the progress of the risk assessment process (Burtonshaw-Gunn 2017).
Conclusion
From the above discussion, it can be observed that the companies have to consider different stages at the time of the development of the risk management plan. Two major steps in the risk management process are review of the risk management plan and the analysis of the risk management plan. The identification as well as analysis of the risks is done in the review part. After that, the development, implementation and monitoring the risk management plan is done in the next step.
References
Bromiley, P., McShane, M., Nair, A. and Rustambekov, E., 2015. Enterprise risk management: Review, critique, and research directions. Long range planning, 48(4), pp.265-276.
Brustbauer, J., 2016. Enterprise risk management in SMEs: Towards a structural model. International Small Business Journal, 34(1), pp.70-85.
Burtonshaw-Gunn, S.A., 2017. Risk and financial management in construction. Routledge.
Hopkin, P., 2017. 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.
Marcelino-Sádaba, S., Pérez-Ezcurdia, A., Lazcano, A.M.E. and Villanueva, P., 2014. Project risk management methodology for small firms. International journal of project management, 32(2), pp.327-340.
Olson, D.L. and Wu, D.D., 2015. Enterprise risk management(Vol. 3). World Scientific Publishing Company.
Pritchard, C.L. and PMP, P.R., 2014. Risk management: concepts and guidance. CRC Press.
Sadgrove, K., 2016. The complete guide to business risk management. Routledge.
Wolke, T., 2017. Risk Management. Walter de Gruyter GmbH & Co KG.
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