Risk management within an organization

Introduction

This handbook is written to advise on risk management approaches to risk analyzes and procedures to be followed.

Background to my organization

I will focus on my business in general to address risks. My company is involved in trade in steel products, mainly for construction purposes, and for the sale and purchase of agricultural products such as beans, maize and rice. These products should be started on a regular basis to sell such products abroad. As part of the accounting and financial function, my duties are not only in the proper accounting of such transactions but also as part of the team involved in the new commercial finance project to ensure the smooth flow of such transactions through the opening of LCs, funding and products Delivery. Such a process involves the cooperation of both operations and accounting and finance departments.

Purpose of risk management

Business risk is associated with events that have a negative impact on the company's strategies and objectives. Here, business risk is two factors: the likelihood of an event occurring and the severity of the consequences (Bowden, Lane and Martin, 2001). There are a number of risks that are more specific to my body and appear as follows:

1. Strategic risk, eg bad marketing strategy and poor purchasing strategy, due to poor design (Bowden et al., 2001). The poor quality of marketing and the sale of various steel and agricultural products prove the failure of the organization.

2nd Financial risk, such as a lack of credit rating, poor receivables and inventory management, poor financial control (Bowden et al., 2001). Inadequate credit rating for potential trade and other debtors and low debtors may not necessarily reflect the company's strategy and objectives.

3rd Operational risk, such as weak practices and routine measures, as a result of bad human actions (Bowden et al., 2001). Inadequacy of the organization's safe practices or the deliberate actions of employees may result in potential operational and financial losses for the company.

4th Technical hazards, such as failure of equipment and infrastructure, and destruction of fire due to failure of physical devices (Bowden et al., 2001). Such risks may occur in my organization unless appropriate measures are taken to prevent these techniques. Unfortunately, many organizations focus too much on the performance and costs of technical risk and over-manage them (Smith and Reinertsen, year unknown).

5th Market risk, such as inadequate market research that does not meet market needs, assuming that the specification is met (Smith and Reinertsen, year unknown). This risk is more important than others but less manageable, as risk is no less objective and quantifiable than technical risk.

As a result of the abovementioned decisions, technological advances and pre-competitive pressures, risk management played a more important role in business existence (Bowden et al., 2001). Risk management is a logical and systematic way of creating a context, identifying risks, analyzing risks, evaluating risks and ultimately managing risks. This approach includes the disclosure and consultation of results and the monitoring and review of risk management. This risk management approach is known as the AS 4360 method (Bowden et al., 2001).

Risk Management

1. Definition of context

This can be related to strategic, organizational and risk management contexts (Bowden et al., 2001). The strategic context encompasses the relationship between the organization and its parameters in the financial, operational, competitive and social context (Bowden et al., 2001). In my organization, we are dealing with our financial goals (ie $ 20 million sales revenue, with a profit margin of at least 12% a year), high quality and good customer satisfaction products, and a good market position in steel, one of the leading suppliers in the regional construction industry. The strategic context also requires the organization to identify stalkers, including owners, employees, customers, suppliers, and the local community (Bowden et al., 2001). In addition, the organization should be responsible for shareholders and the media, as we are a local securities company.

The organizational context addresses the broader goals, objectives and strategies of the company as a whole (Bowden et al., 2001). In this context, some key performance indicators (KPIs) and critical success factors (CSFs) need to be developed and implemented to suit different aspects of business. Some of the frequently used KPIs in my organization are:

1. Revenue and profit target: These are the above.
2. Customer Satisfaction: We send quarterly surveys to our suppliers and customers to ensure their customer satisfaction of at least 90%.
3. Updating the warehouse and timely delivery of the goods: Suppliers are stocking up and picking up enough stocks and customers have to complete 98% of all orders in time.
4. Timely submission of monthly accounting and sales records to the head office: The deadline for submitting such reports is usually on the 5th day of each month, which must be strictly observed.

In a broader sense, such KPIs are also linked to my CSF, which includes:

1. Maintaining a healthy position in our markets: We have already mentioned this.
2. Supporting senior management is open to marketing and financing ideas: Managers and senior management's two-week meeting with lower management potential ideas and idea ideas and possible financing of banks for individual products.
3. Appropriate funds and resources are available: Funds must have leasing companies that are converted into trust receipts and that need to be settled within certain orders, with adequate workforce and technology to work properly.

With these KPIs and CSFs in mind, the various activities of the group can be separated into smaller groups and activities to make a better analysis more logical (Bowden et al., 2001). In my organizations, sales teams are divided into smaller groups that are responsible for various steel and agricultural aspects. This is done in the same way as the Treasury, which is responsible for smaller groups responsible for claims, liabilities and other administrative tasks.

2nd Identifying Risks

This process is used to identify events that may affect the organization as a whole. In such a scenario all causes and potential situations must be recognized (Bowden et al., 2001). Then we combine risks, both threats and opportunities, with key criteria that will have a direct impact on the body (Bowden et al., 2001). It is also necessary to approach these risks with proactive and reactive responses (Bowden et al., 2001). There are a number of tools to help identify risks, sometimes through idea-building, experience-based controls and judgments.

There are a number of tools in my organization to identify risks. The Treasury's quarterly audit list is used for the various risks that may include the amount of tax agreement agreed with the tax authorities and the amount of tax credits, the amount of claims and stock updates, as well as their effectiveness. The provisions on such items are based on prior experience. In the Marketing and Operations section, weekly meetings have a leading role in brainstorming and system analysis to identify potential records of competition, price changes and customer tastes, as well as secure stock security. It is also advisable to introduce a product design with a product manager, where the priority of such risks has been highlighted and input, processes and outputs have to be examined more deeply (Bowden et al., 2001).

It was found that a test market will be useful if there is a high degree of uncertainty about the final sale of the new product than the date of introduction (Cooper, unknown year). My organization is currently examining the potential new sales of liquor and diesel in overseas markets. However, these potential sales can not be considered as new products in existing markets. Because speed and competitive environment are important facts, the test market can not be used in our script (Cooper, unknown year).

Besides launching potential new products, there are a number of pitfalls for my body:

1. Lack of market orientation. These are potential risks, taking into account inadequate market analysis and without understanding customer needs and wishes.
2. Poor quality of implementation. For my organization, the quality or quality of flammable new products may be defective because they do not meet customers' needs.
3. Moves too fast. The too fast way to launch such products can cause too many errors in the process and jeopardize the quality and timing of promotional activities (Cooper, unknown year).

3rd Risk Analysis

This step involves estimating the likelihood and probability of potential risk events. These are often evaluated using the current controls (Bowden et al., 2001). Such controls are needed to ensure efficient operation, reliable reporting systems and compliance with rules and regulations (Bowden et al., 2001). Existing controls in my organization include previous records, market analysis of merchants in different countries, published literature in the form of accounting and marketing magazines, and internal and external auditors. reports.

Various techniques are used for probability and differentiation, previously structured interviews, multidisciplinary expert groups, questions and computer modeling assessments (Bowden et al., 2001).

Decision tree technology can also be applied if the expected net present value (NPV) of the cash flows associated with each exit is shown (Vlahos, 2001). This technique is useful for the following reasons:

1. It improves our understanding of each output and promotes the assumptions.
2. Useful for documenting and communicating thoughts about insecurity and for creating alternatives for better value enhancement.
4. Leaders can monitor each stage of the project and make a proper analysis of the decisions made at each point.
4. Outputs can serve as potential inputs for the projected NPVs (Vlahos, 2001).

I recommend this method to my organization in two ways:

1. This can be used by the marketing department's decisions, based on which products for potential markets are available.
2. The Ministry of Finance also considers different financing methods (eg direct cash financing, LCs or trust revenues) useful for building a commercial financing project.

There are two types of risk analysis, primarily qualitative and quantitative (Bowden et al., 2001).

Quality Technique

The qualitative method uses words or descriptive scales and is created in the form of a rank structure between Rare and Nearly Certain. This method deals with the prolongation of probabilities and consequences (Bowden et al., 2001). In the case of construction projects that can be applied to my organization, the consequences are insignificant (without injuries and minimal financial losses), moderate (medical and moderate loss) can have catastrophic (mortal, significant) financial losses. Such a quality table may be useful with different probability and risk matrices in the following scenarios:

Initial filtering guide for identifying potential risks of further analysis.
2. If the level of risk does not justify the time and effort needed for more analysis.
3. Insufficient quantitative data, which uses quantitative analysis.

For quality analysis, manage management and staff across risk management matrices for different levels of risk events. All likelihood and consequence criteria must be taken into account in order to classify events into the appropriate category (Bowden et al., 2001).

However, there are many disadvantages to this technique:

1. It may not be very accurate as events of the same category may have significantly different risk levels.
2. The comparison of the risk can not be a common ground, that is, on a dollar basis or in the number of deaths.
4. There are no clear reasons for the "measurement" risks
4. There may be different interpretations of the significance of the various consequences, so the catastrophic word can mean a lot to humans, while others may catch it lightly.
5. It is difficult to translate the results from this technique to conform to its quantitative method (Bowden et al., 2001).

Thinking of the above-mentioned pitfalls, I think it would be better to consider quality techniques as much as the initial screening test that needs to be used in parallel with the quantitative technique.

Quantitative Technique

This approach takes the product of probability and differentiation and as a result it expresses itself as a real variable (Bowden et al., 2001). This technique is more reliable because it is related to numerical values, frequency estimation is based on event frequency (Bowden et al., 2001).

There are a number of risk factors: technology, people, systems, organizational factors, and external factors (Bowden et al., 2001). In my organization, some risk factors can include the computer versions of accounting and sales systems, the competence and educational level of employees, the updating of new ideas accepted by lower management and the amount of pollution generated by production.

Quantitative analysis is further broken down into criteria for probability and consequence. The probability criteria are expressed in frequency rather than probability, thus assuring that the risks are compared on a similar basis (Bowden et al., 2001). With similar minor events that are likely to occur, it is likely that an event occurs. Examples of such events for my organization may include the following:

1. 20 deliveries that are not time-consuming (more than 30 minutes) to customers causing losses of $ 1,000 for shipping costs.
2. 5 low-quality products are delivered to customers, fees.

Taking into account the consequential criteria, it may lead to death or serious loss, that is, financial or depreciation losses. For two examples of the probability criteria described above, the related consistent criteria are as follows:

1. Free deliveries for the next trip.
2. Discounts corresponding to the items of goods sold.

The following criteria can be expressed quantitatively in terms of default or failure to observe certain KPIs, reflecting the organization's priorities in adopting varying degrees of risk. For my organization, free shipments and discounts have jeopardized not only revenue and profit goals but also customer satisfaction (which are significant KPIs). As such, the consequence criteria can be expressed as an average or expected value (Bowden et al., 2001). This is in line with the Monte Carlo method, which can be used to obtain a breakdown of the project or product value associated with commercial operations (Vlahos, 2001).

4th Risk Assessment

The risk assessment identifies which risks should be assessed and calculated with the product of probability and consequence (Bowden et al., 2001). The risks are comparable to the previously established criteria. Various software such as the Monte Carlo approach, sensitivity analysis and probability distribution can be used to address the major risks of evaluation (Bowden et al., 2001).

5th Risk management

There are a number of methods to address the risks: avoidance, acceptance, reduction and transfer of risks (Bowden et al., 2001).

first Avoiding Risks. Avoiding such risks in my organization may not necessarily lead to spectacularly flammable products such as liqueur or diesel (which are paid for new products) due to the auction and currency fluctuations.
2. Acceptance of risks. Certain risks may be inevitable. In my organization, we are carrying out huge sales transactions in Myanmar, which is now experiencing great military and government coup. Here Myanmar sales may be volatile. These are potential risks that have already been taken into account in our business considerations.
3. Reducing risks. Exchange rate fluctuations are approaching when my organization trades with foreign partners. Here LCs and hedges are often implemented in order to alleviate such risks to products bought and sold in other countries.
4. Transfer risks. For my organization, this covers the insurance coverage of the stocks that are included in our concessions.

Another popular treatment of risks includes audit compliance programs, contractual obligations and terms, preventive maintenance, quality assurance, and emergency planning (Bowden et al., 2001). Such risk management is also maintained within my organization.

Different options for managing risks need to be evaluated and risk management plans need to be designed and prepared (Bowden et al., 2001). Such a plan should take account of detailed implementation, risk and potential risk assessment in terms of priorities and proposed proactive and reactive contingency plans. (Bowden et al., 2001).

The risk management schedule and the action plan shall include the following:

1. The various tasks and responsibilities of implementing the plan. The plan should give priority to a project leader and various members who are responsible for one aspect of the project reporting to the manager.
2. Resources To Use.
3. The distribution structure of the activity
4. Budget appropriation
5. Schedule of implementation
6. Mechanism and frequency of appropriate compliance of the management plan (Bowden et al., 2001).

6th Communication and Consulting

At this stage, an earthquakeer must understand the project or product situation. For better opinions and communication for better coordination, consult professionals and experts (Bowden et al., 2001).

Such an approach is necessary for several reasons:

1. To demonstrate that the process is systematically linked.
2. Register of risks and appropriate organizational records.
3. In order for appropriate decision-makers to receive appropriate risk management and action plans for approval and implementation.
4. Providing Accounting.
5. Facilitate further verification and review.
6. Ensuring the audit trail.
7. Sharing information (Bowden et al., 2001).

This report includes:

1. Summary
2. Project scope
3. The methodology of the study
4. Contextual questions of the project including the limitations
5. Selected Success Factors
6. KPIs for each selected success factor
7. Targeting and Tolerance
8. Assumptions
9. Ten Best Risk for Each CSF for Projects or Product Designs
10. Vulnerabilities in Project Phases
Risk Management in Currency
12. Primary and Secondary Leaders Causing Individual Risks
13. Existing Controls
14. Tables and Numbers (Bowden et al., 2001)

7. Steps: Supervision and Review [19659002] The final step requires the development and application of mechanisms to ensure a continuous review of risks, ie project managers need to ensure a consistent update of current situations (Bowden et al., 2001). The effectiveness of the risk management process should be consistently monitored and revised (Bowden et al., 2001).

Conclusion

Risk should be treated actively. Risk management involves identifying high-risk areas as early as possible, as far as possible, with the best technical or marketing talent, solving the problem, solving problems as quickly as possible, and providing a contingency plan if something can not be solved (Smith and Reinertsen, unknown year).

Reference List

Bowden, A., Lane, M., and Martin, J. (2001) Three-way lower risk management. Wiley.

Cooper. (unknown year). New Products: Problems and Pitfalls. Pg 22-49.

Cooper. (unknown year). For testing or testing. Pg 123-129.

Smith, P. and Reinertsen, D. (unknown year). Risk management. Pg 207-21.

Vlahos, K. (2001). Preparing for risky decisions. Pg 47-52.

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