陈颖 Risk Management
I. Risk Management
It is a process to reward, assess, prioritize, reduce and control risks of different kinds. Risk management is an important part of planning for businesses. The process of risk management is designed to reduce or eliminate the risk of certain kinds of events happening or having an impact on the business
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II. Risk Management’s Relevance to the Business
Risk management makes certain that a business locates and comprehends the dangers that it is open to. It also ensures the business makes and implements effective plans for preventing losses or lowering the impact should the loss occur.
With rapid economic development and the progressively more intense competition, business is facing the constant change, and these will bring risk to the enterprise development.
Risk management is needed in the manufacturing course and has become the indispensable part of food production and processing. Based on the analysis of risk management situation of the business, the necessity and approaches are also expounded. Risk management in building industry is erected based on the effective methods of risk management are presented.
Here are the benefits of risk management:
A. Increases awareness – The greatest danger to any organization is not recognizing a threat until it is too late. In fact, this could possibly be very costly with regards to money, security, internal morale and reputation.
B. Enhances responsibility – Having recognized possible threats, an organization can then allocate the most appropriate staff or even external experts to eliminate them.
C. Boosts corporate communication – This is because risks are not going to be dealt with by individuals only; it usually demands interdepartmental teams.
D. Identifies new opportunities – For instance, where troubles in treating risks occur, an organization is given an important opportunity for reviewing and strengthening internal procedures and policy. Risk management also provides the opportunity of exploring new methods of doing business and suitable alternatives if a problem occurs.
III. The Difference between ‘Negative Risk’ and ‘Positive Risk’
Risk is the future uncertainty which have the impact of the realization of the target. As a result, see from the results, the impact may be good or not for the realization of our stated goals. That is, the existence of the risk may make the result better than the established target or not. The so-called positive or negative are judged by the results, the risk itself have neither good nor bad. We can define the negative risks as a threat, and define the positive risks as an opportunity.
Negative risks and Positive risks are closely related. The important reason why they can’t be separated is the analysis of the positive and negative are often combined together, the positive and negative are two aspects of the same situation and the two sides of the same risk. In considering the risk, people must take account of the two factors.
And they are also difference. Negative risks are unwanted and potentially can cause serious problems and derail the project. On the other hand, positive risks are opportunities and are desired by both the Project Manager and the stakeholders, and may positively affect the project.
A. Negative risks of Food Production and Processing
Unreliable power supply, pollution, personnel security crisis, store and distribution, the extra cost from transport, package which is not meet market expectation, food safety risk, noise, inadequate ventilation, flow of dust and potential for explosion, poor hygiene, high quality use of equipment, reliance on a major customer, squeezing margins, new sources for contingency planning, identify illegal immigrant applicants, high staff turnover rate
B. Positive risk of Food Production and Processing
Raw material supply crisis include price and quality, quality of employees, privacy protection, change levy, cash flow and late payment policies, minimum wage guidelines raised
IV. The process for developing and implementing risk management:
V. A Process for Evaluating and Improving Risk Management Plans
A risk management plan can never be perfect. Critical evaluation of a risk management plan at every stage is very necessary especially at an early stage.
We use the below mentioned steps to help in analyzing and evaluating a risk management plan:
A. Risk Register
We ensure keep a note of all the events and activities of a risk management plan. Check out the problems and assess if they have a negative impact on the whole process. Make a mark of those that have serious implications.
B. Match the Outcomes of a Risk Management Plans with its Objectives
Check if the possible outcomes of a risk management plan are in tandem with its pre-defined objectives. If it produces desired results, it does not need to be changed. But if it fails to produce what is required can be a really serious issue.
C. Evaluate If All the Activities in the Plan are Effective
We make a thorough investigation of each activity of a risk management plan. Checking out the efficiency of all the activities and discovering the flaws in implementation. According to results, we analyze the whole plan systematically.
D. Evaluate the Business Environment
Ensure a thorough study and critical evaluation of business environment where a risk management plan is to be implemented. We allocate staffs to assess, analyze and decide what exactly is required.
E. Make Possible Changes in Faulty Activities
After evaluating the effectiveness and efficiency of all the activities, try to make possible changes in the action plan to get desired results. It may be very time consuming but is necessary for successful implementation of your risk management plan.
F. Review the Changed Activities
After making changes in already existing activities and events of a risk management plan, we go for a final review. Try to note down the possible outcomes of the changed activity and match them with the main objectives of the risk management plan.
After evaluation, we still need to improve the risk management plans through the following steps:
A. Ask the questions to get the feedback
B. Create the right culture
C. Clarify responsibilities and rules
D. Use suitable reward systems
E. Focus on the business objectives
F. Recognize the limitations of risk assessments
G. Put business managers in the driver’s seat
H. Demand integrated management information
I. Make sure rules are enforceable
J. Align internal audit with the business
VI. Examples
Risk 1: Unreliable power supply
According to classification, it is a negative risk and systemic risk. This can happen which is determined by its likelihood. The premises crisis ‘total scores reached 25, this means it accounted for most of all risks. The low power will bring much problem such as could not return to normal store business, food spoilage and so on. This shows none of the functions work once the electricity is dead. We must address risks early enough through following methods. Even the short circuit will cause enormous losses and power failure could happen anywhere. Our company can’t afford this result and pay more attention to this risk.
At first, we should have a good consultation with Power Company to introduce that our demand for power resources has also increased rapidly and we are facing to unreliable power supply. Then we appointed time for Electrical maintenance and inspection to avoid power failure. We consider that use things such renewable energy, wind energy and solar instead of traditional electricity. In addition, the automatic switch device of standby power supply is an effective method to solve this problem.
Risk 2: Privacy protection
Nowadays the data mining brings great benefits to us, but at the same time it will inevitably produce the issue of privacy disclosure. This means it is frequently happened in the daily life. The result is privacy breaches, identity theft and fraud if we can’t protect privacy prefect. To our business, we will lose customers’ loyalty and trust and failing into a credit crisis.
Due to classification, Privacy protection is a positive risk and legal risk. The protection crisis ‘total scores reached 30 and relates directly to customers’ interest. The incidence rates can be low under our control. The most important thing for us to do is prepare some alternative scheme.
As an international business, we have our own database that record every customer’s information including their name, phone number, address and so on. Choice a suitable information system which can meet our enterprises demands to manage all the important information. What’s more, we need high quality employees to implement this task. The related training program is placed on the docket.
We show our hardline stance to protect privacy and promise that we will not pass your details onto third parties.
Risk 3: High staff turnover rate
In terms of the classification, it is a negative risk and internal risk. Its occurrence can be determined by its likelihood. The probability is low.
Staff turnover is not a problem, but a symptom. The impact and severity of high staff turnover will induce replacement cost and training costs, increase workload, cause stress and tension, decline employee morale and decrease productivity.
The total score of the risk is 20. The evaluation shows that the level of this risk ranks low.
When aiming to keep good staff, creating a pleasing workplace plays an important role in job satisfaction. A pleasing workplace includes everything from having the right tools available to provide basic comfort, such as proper lighting and noise control, etc.
Furthermore, career plans for employees are also important. Career plans for those who want to move upward in the company undoubtedly improve morale and boost engagement.
Besides, paying employees for training cannot be neglected.
To review the process, the food industry should check the quit rate, staff recruitment and training program frequently
Risk 4: Raw material supply crisis include price and quality
On the basis of the classification, it is a positive risk and external risk. Its occurrence can be determined by its likelihood. The probability is medium.
If the price of raw material supply becomes lower, the costs can be reduced and the fund can be take full advantage of other operations. With good quality of food, the business can gain customer loyalty and good reputation so that more profits can be achieved.
The total score of the risk is 40. The evaluation shows that the level of this risk ranks medium.
The industry chooses an optimum mix of vendors who can provide the best prices and terms. This process usually means that the less able suppliers who cannot provide a quality service at the terms and prices required are discarded. This is by far the most common of the various purchasing strategies.
To review the process, the food industry should monitor whether the price and quality the supplier provided are reasonable or not.
Evaluation
As a trial scheme will be used in three months and the result will be evaluated by decision maker whether continue to use or improve original scheme. The groups in the food industry will give the feedback to the leader. There are kinds of indicators about risks such as KPI, the percentage of staff turnover, the comparison with last a few years and so on.
VII.References
http://benefitof.net/benefits-of-risk-management/
http://www.whatisriskmanagement.net/
http://www.mybusinessprocess.net/risk-management-process/
http://club.topsage.com/forum.php?mod=viewthread&tid=2500749&mobile=yes
http://www.corporatecomplianceinsights.com/key-elements-of-the-risk-management-process/