1. Introduction
This risk management assignment will be focusing on the risks that organisations are facing. They are also trying to mitigate it through some strategies. These will be helpful in succeeding the problems. There is a scope of adaptation which will also be solving the issues. The risks always give a potential for losses and it mainly happens due to uncertainty (Sadgrove 2016). It becomes quite difficult for companies to find out the risks. There are many levels of management in the organisation and keeping a check on each of them is not possible. The leaders do lose some values that were gained earlier. It can be like financial wealth, the status of the organisation and well-being of people. The company sometimes takes the risk because they feel that success can be gained through it. There is some relation between risk and strategy. Further concept of risk, strategy and adaptation will be studied in details.
2. Organisational Risk explored in risk management assignment
When there are some losses due to uncertainty then it is known as organisational risk (Sadgrove 2016). This includes the top level of management. There are some materials included in risks. They are legal, reputational, strategic, security, regulatory and operational risks. There is a broad category in organisational risk. This is applied to events so that the goals and objectives cannot be achieved. There are four main types of risks in the business. They are:
- Strategic Risk (Due to competitors coming in the market)
- Financial Risk (Rise of interest rate on the business loan or non-paying customers)
- Operational Risk ( Key equipment theft or breakdown)
- Compliance and Regulatory Risk (Introducing new legislation or rules)
- Management of employee risk (handling a sufficient number of staffs and their safety)
- Environmental risks (Natural Disasters)
- Risks of health and safety
- Instability in the economy and politics in the foreign markets for exporting goods
- Commercial risks (key customers or suppliers failure)
It is important for organisations to understand the importance of risks. This will allow them to handle the finance and other ramifications. Risks might have positive and negative effects on the company (Hillson and Murray-Webster 2017). It is difficult to define the objectives of the companies without identifying the risks. There are many different ways of identifying the risks in an organisation. The leaders have to break down the big picture in small ones. This will allow them to access all the departments easily. An expert should be consulted like accountant, financial advisors and insurance broker. Both internal and external research will be helpful in knowing the risks well. The feedback from the employees must be taken on a regular basis. It is usually seen that employees are the most valuable resources for finding out the risk. The complaints from the customers should not be taken lightly.
These days' organisations are not following the traditional method of risk management. However, they are following the enterprise method of risk management. It is because the approach is holistic. The overall risk in the organisation is studied properly. This method used in the risk management assignment helps in increasing sustainability and lower risks are focused. The companies are assessing the asset portfolio which includes employees, suppliers, innovative processes and customers (Bromiley et al. 2015). There are certain strategies to mitigate risks.
3. Organisational Strategy
The set of actions that the organisations are taking for achieving their long term goals is known as an organisational strategy (Johnson 2016). These plans are taking a lot of time and many levels of the companies need to be involved in this process. There are certain reasons due to which the strategies of the companies fail. It can be a lack of understanding between the employees, insufficient resources, poor decisions on finance and no proper planning on the projects. Organisational strategies are important. The leaders should ensure that the priorities are set in the correct direction. It is important for everyone to be on the same page. Decision making should be clear and aligned with the business.
At the time of developing the organisational strategies, there should be a clear understanding of the marketplace, customers, competitors, competencies and weaknesses. This will also provide clarity in the mission and vision of the organisation. An analysis can also be done on priority issues. There are four different types of strategies that can be followed (Van Staveren 2018). They are the defender, prospector, reactor and analyser. In the case of strategies, the corporate culture of the companies needs to be considered. For example, the strategies of Google support depend on their constant development and innovation. Pricewaterhouse Copper is having a culture which is there is a band between the employees of various generations. They are also trying to overcome the differences.
4. Relationship between risk and strategy of the organisations
It is stated in this risk management assignment that there is some link between the risk and strategies of the organisations. One of the strategies is to plan on the business accordingly. Both risk management and business planning are not separate activities (Hillson 2017). The companies are making many action plans for managing their risks and enhancing their opportunity. The business planning cycle is having some key activities that also include the audit program of the organisation. Hence, risk management will be identifying these activities and finding ways of controlling it. There are some new controls that can also be implemented.
A careful analysis is always required by the companies to handle the risks. There is a continuous process of feedback taken from the employees (Franzetti 2015). It is difficult to mitigate the risks without an analysis. It will lead the companies to suffer some losses. It is important to protect the operations, profitability and international trade ventures. The strategies can be developed for managing the risks. Hence, the below categories must be considered carefully.
- Avoidance of Risk: There are options available to the organisation from refraining from the activities which might be having some risks. If companies are setting up a subsidiary in the foreign location which was earlier a place of chemical manufacturing then there is a risk. There can be some environmental damages related to it. However, it is difficult for practitioners to use the avoidance formula in each of the cases. It would simply mean giving up on the opportunities that the company was getting. It could also be profitable for working worldwide.
- Reduction of Risk: By finding some methods, risks can be reduced. It is because there are chances of a loss occurring or severity of a loss. One of the common ways discussed in this risk management assignment for responding against the risk is by installing a security system (Teece, Peteraf and Leih 2016). However, the challenge is to ensure between the loss potential from theft and cost and effectiveness of the security system. There are some other ways of handling the risk. It is by adopting some practices. Like for example, in IT companies, software development is risky. But these days the software is developed and delivered in an incremental way. In this way, the performance can be tested before the next step is taken. Outsourcing the functions is another way of reducing risks in organisations. These functions are handled by those who can manage and reduce risks.
- Risk Transferring: It simply means that the risk is transferred to another party who is ready to take the risk. This can be done through some contacts. Like in construction projects when the builder assumes that there is a risk and it is transferred to someone else. They are then searching for some hedging strategies, derivatives and futures contracts. The pooling of risks can be done. Groups may decide to spread the risks among their members. Only one person will not be suffering the loss.
- Retention of risk: Organisations do have a choice of accepting some risks. There might be some losses which will come on the way. This is known to be a viable approach mainly to the small risks. Here the mitigation cost or insurance would be greater than the total losses that would be sustained. All risks cannot be transferred or avoided (Sweeting 2017). Hence, by default, it needs to be retained. It might include some risks that are large and cannot be insured.
There are some examples used in this risk management assignment which are explaining the risk and strategy relationship. It is usually seen that economic changes are mainly related to the political risks of the companies. There are times when the government brings some changes in the policies. The taxes of some particular product, company or industry might increase. The ability to make a profit in companies reduces due to the downturn or the changes. In the year 2000, a risk issue occurred in the telecommunication company named Econet. There was some business risk due to the government of Zimbabwe. It was the unstable economy, high rates of inflation and opaque government. However, the company had a strategy for handling the situation. They diversified and entered the markets of Africa. They were focusing on handling the high rates of inflation in Zimbabwe. So the company was sending their employees and technicians to the new countries where it was operating. This helped in saving a lot of money to the technicians. It also helped the company to retain its best people. This example explained that if there is a risk then some solution is also available. It is not possible to keep these two factors away from each other. It showed that the company handled the situation and also gained some profitability. They did not shy away from looking at the problem.
Uber is one of the biggest companies in the world. They are also facing some risks in their business. They are facing competition from many companies in the world. They are having difficulty in switching the cost between the products. Uber is dropping their prices at the time when they need to hit the gas. The company illustrated in this risk management assignment was having risks because they were unable to match the heavy subsidies and discounts. In the year 2018 Uber had lost $3 billion. This thing is getting worse for them. They are trying to manage the risk by increasing their operational expenses. But they might not be achieving profitability. This is not an uncommon thing for the company. They are trying to add efforts by generating revenue. The drivers in the company are not being known as independent contractors. They are being known as employees. Hence, there are many legal matters coming up globally. The company is using different kinds of technologies and strategies for mitigating the risks coming on their platform. The company is trying to delete the fraudsters. They are using some tactical methods and improving their experiences. The product is also being improved by Uber. They are not compromising on the needs of the users. Uber is having a machine learning model that is collaborating with data science and analytics to provide top services (Franzetti 2015). The risk engine is helping the drivers and an assessment is being run on the frauds. There is a data-driven decision-making system in the company and so they are able to manage the risks. These are the strategies of the company for improving their risk issues and profitability.
5. Adaptation enabling the organisation to achieve strategic objectives
The rapid changes occurring in the global economy demands that the organisation evolves to maintain economic sustainability. Risk adaptation explored in risk management assignment is currently being integrated into the business processes of organizations all over the world to remain abreast and attuned to the identified changes in the global economy. Risk professionals in different companies are tasked with the responsibility of adjusting to an uncertain environment, incorporating the digital changes in risk management and the shifts in the intrinsic culture of the company.
Complex Environment
In this facet, the environment is changing dynamically. Technologies fresh in the market are becoming obsolete even before companies can adopt them. Clients are asking for immediate results and gratifications. There is a new business threat almost every day in terms of innovations introduced by competitors in the market. It is discussed in this risk management assignment that drastic evolvement of technologies is posing veritable challenges to risk professionals of the organisation for the high volumes of data transfers and cleansing needed each time. The risks associated with cyber-attacks as well as the enhanced abilities of hackers are making companies more vulnerable than ever (Zhang, Welch and Miao 2018). The companies in order to adapt to these strategies should conduct and analysis emphasizing the risks and values of technologies before jumping on the board and making rash decisions. Risk professionals tackle thus challenges by measuring the costs and benefits before taking the ultimate decision. If instead of new instalments a strategic up gradation in software can serve the purpose is decided by risk professionals.
Digitisation in Management
In order to tackle the challenges and threats posed by the external environment risk professionals are adopting the strategy of implementing flexible and robust Risk Management Systems to deal with all the facets of risks. With the adoption of Risk Management Systems in the business processes, there is a clear focus on high-value strategic activities (Bloemen et al. 2018). The policy has been crucial in making key stakeholders realise the underlying factors driving the organisation as well as the limited areas in which the company should concentrate. Routine manual processes for instance claims processing are being automated through the new programs. Hence, it is provided in the study of risk management assignment that risk management teams within an organisation are empowered with sufficient time and efforts to concentrate on formulating risk protection and measured mitigation strategies. Dashboards and reports automated and being attuned to real-time are providing companies with the best possible information empowering the decision-making process. The increase in access to data has resulted in enhanced analysis for companies. Visual tools adopted by companies are making them realise the costs and prospective benefits and identifying the specific trouble areas. For instance, Apple took the risk of introducing Air Pods without wireless after calculating the data collated depicting expectations of customers.
Changes in Culture
Risk management is being embedded in the culture of organisations rather than being perceived as a separate activity. Collaboration between risk teams and key stakeholders of the organisation are being arranged and even multiple risks in the supply chain of the business are being considered(Goldstein et al. 2018). The various structures of contemporary businesses including operations, marketing, legal and finance are incorporating the methods of risk management to tackle the dynamic changes occurring in the industry.
6. Conclusionrisk management assignment
There are risks in the organisation. However, it is important to identify them and take some acts. This is focusing on the relationship between risk and strategy. Both of them are some link with each other. Risk management is possible only when companies are making some strategic plans. This will also help them in focusing on their goals and objectives. Firstly, a brief introduction is given on the topic. Then the basics of risk and strategy in the organisation were studied in details. After this, the relationship between risk and strategy was reflected and was supported by an example. It is also seen that adaptation is necessary for the organisation. This is because it is helping the leader to achieve the strategic objectives of the company. In this way, a lot of knowledge on risk management, strategic planning and adaptation was gained.
